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

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly report under section 13 or 15(d) of the Securities Exchange Act
     of 1934 for the quarterly period ended SEPTEMBER 30, 2004

[ ]  Transition report under section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the transition period from_____________ to____________

Commission file number 001-15643
                       ---------

                         CYBER MERCHANTS EXCHANGE, INC.
                         ------------------------------
       (Exact name of small business issuer as specified in its charter)

                 CALIFORNIA                         95-4597370
                 ----------                         ----------
       (State or other jurisdiction of           (I.R.S. Employer
       incorporation or organization)           Identification No.)

    4349 BALDWIN AVE., UNIT A, EL MONTE, CA            91731
    ---------------------------------------            -----
   (Address of principal executive offices)         (Zip Code)

                     Issuer's telephone number (626)636-2530
                                               -------------

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

             Number of shares outstanding of the issuer's classes of
                     common equity, as of October 24, 2003:

                  7,472,673 SHARES OF COMMON STOCK (ONE CLASS)
                  --------------------------------------------

Transitional Small Business Disclosure Format: Yes __ No X

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                                TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----
PART I  - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

         Condensed Balance Sheets as of September 30, 2004
         (unaudited) and June 30, 2004 ........................................3

         Condensed Statements of Operations for the Three Months Ended
         September 30, 2004 and 2003 (unaudited)...............................4

         Condensed Statements of Cash Flows for the Three Months Ended
         September 30, 2004 and 2003 (unaudited)...............................5

         Notes to Condensed Financial Statements (unaudited)...................6

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
         PLAN OF OPERATION....................................................10

      ITEM 3. CONTROLS AND PROCEDURES.........................................14

PART II - OTHER INFORMATION...................................................14

     ITEM 1.  LEGAL PROCEEDINGS...............................................14

     ITEM 2. CHANGES IN SECURITIES............................................15

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................15

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............15

     ITEM 5.  OTHER INFORMATION...............................................15

     ITEM 6.  EXHIBITS........................................................15

SIGNATURES....................................................................15

                                       2

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CYBER MERCHANTS EXCHANGE, INC.
                            CONDENSED BALANCE SHEETS

                                                     Sep. 30,         June 30,
                                                       2004            2004
                                                   ------------    ------------
                                                   (Unaudited)
ASSETS
Current assets:
   Cash                                            $     33,913    $     26,964
   Accounts receivable, net                               8,218          16,062
   Employee advances                                      3,670              --
   Prepaid expenses                                       5,076          58,401
                                                   ------------    ------------

                                                         50,877         101,427
Total current assets
Other assets                                             11,368          11,388
                                                   ------------    ------------
Total assets
                                                   $     62,245    $    112,815
                                                   ============    ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

   Accounts payable and accrued expenses           $    421,701    $    220,770
   Customer deposits                                     14,180              --
   Deferred revenue                                      13,800         164,745
   Line-of-credit from stockholder                       30,000         252,000
                                                   ------------    ------------
   Total current liabilities                            479,681         637,515

Stockholders' deficit:
   Common stock, no par value;
     40,000,000 shares authorized;
     7,472,673 shares issued and outstanding          9,995,387       9,995,387
   Additional paid-in capital                         3,631,061       3,631,061
   Accumulated deficit                              (14,043,884)    (14,151,148)
                                                   ------------    ------------

Total stockholders' deficit                            (417,436)       (524,700)
                                                   ------------    ------------
Total liabilities and stockholders' deficit        $     62,245    $    112,815
                                                   ============    ============

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS

                                       3

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                      September 30
                                                               -------------------------
                                                                   2004          2003
                                                               -----------   -----------
<S>                                                            <C>           <C>
                                                               (Unaudited)   (Unaudited)
Revenues:
   Transaction sales                                           $    17,940   $   755,215
   Cost of goods sold                                                3,931       694,462
                                                               -----------   -----------
   Net revenues from transaction sales                              14,009        60,753
   Tradeshow revenue                                               931,170     1,048,104
   Subscriber fees                                                      --         1,020
                                                               -----------   -----------

Net revenues                                                       945,179     1,109,877

Operating expenses:
   General and administrative expenses                             662,669       647,493
   Payroll and related                                             171,374       207,878
   Depreciation and amortization                                        --         5,566
                                                               -----------   -----------
Total operating expenses                                           834,043       860,937
                                                               -----------   -----------

Income from operations                                             111,136       248,940

Other expense (income):
   Interest expense, net of interest income                          3,072        (5,571)
   Equity in losses on investments in overseas joint ventures           --         9,342
                                                               -----------   -----------
Total other expense (income):                                        3,072        (3,771)
                                                               -----------   -----------

Income before income taxes                                         108,064       245,169

Income taxes                                                           800           800
                                                               -----------   -----------

Net income:                                                    $   107,264   $   244,369
                                                               ===========   ===========
Net income attributable to common stockholders per share
   Basic                                                       $      0.01   $      0.03
                                                               ===========   ===========
   Diluted                                                     $      0.01   $      0.03
                                                               ===========   ===========
Weighted-average number of common shares outstanding
   Basic                                                         7,472,673     7,472,673
                                                               ===========   ===========
   Diluted                                                       7,472,673     7,608,273
                                                               ===========   ===========
</TABLE>

           SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.

                                       4

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                  September 30
                                                                             ----------------------
                                                                                2004         2003
                                                                             ---------    ---------
<S>                                                                         <C>          <C>
                                                                            (Unaudited)  (Unaudited)
Cash flows from operating activities:
   Net income                                                                $ 107,264    $ 244,369
   Adjustments to reconcile net income to net cash provided by operating
    activities:
     Depreciation and amortization                                                  --        5,566
     Equity in losses on investments in overseas joint ventures                     --        9,342
      Changes in assets and liabilities:
         Accounts receivable, net                                                7,844     (372,337)
            Inventory                                                               --      115,399
            Employee advances                                                   (3,670)          --
            Prepaid expenses                                                    53,325      (52,734)
         Accounts payable and accrued expenses                                 200,931      339,689
            Customer deposits                                                   14,180           --
         Deferred revenue                                                     (150,945)    (179,930)
                                                                             ---------    ---------

Net cash provided by operating activities                                      228,949      109,364
                                                                             ---------    ---------
Cash flows from financing activities:
   Proceeds from borrowings on line-of-credit from stockholder                  30,000           --
    Repayments of borrowings on line-of-credit from stockholder               (252,000)          --
                                                                             ---------    ---------
Net cash used in financing activities                                         (222,000)          --
                                                                             ---------    ---------
Net increase in cash                                                             6,949      109,364
Cash, beginning of period                                                       26,964       65,720
                                                                             ---------    ---------
Cash, end of period                                                          $  33,913    $ 175,084
                                                                             =========    =========
Supplemental disclosure of cash flow information:
    Cash paid during the period for:
      Interest                                                                   5,404            3
                                                                             =========    =========
      Income taxes                                                           $     800          800
                                                                             =========    =========
</TABLE>

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS

                                       5

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF REPORTING

BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim  financial  information  and with the  instructions  to Form
10-QSB and Article 10 of Regulation S-B. Accordingly, they do not include all of
the  information  and  footnotes  required by  accounting  principles  generally
accepted in the United States of America for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
adjustments)  considered  necessary for fair  presentation  have been  included.
Operating  results for the  three-month  period ended September 30, 2004 are not
necessarily  indicative  of the results that may be expected for the year ending
June 30, 2005. For further  information,  refer to the financial  statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for the
year ended June 30, 2004.

At September 30, 2004, the Company has an accumulated  deficit of  approximately
$14 million,  negative working capital of  approximately  $428,800 and a lack of
profitable  operational  history.  The  Company  hopes to  continue  to increase
revenues  from the  continued  growth of their  ASAP  Show.  In the  absence  of
significant  increases  in  revenues,  the  Company  intends to fund  operations
through  additional  debt and  equity  financing  arrangements.  The  successful
outcome of future  activities cannot be determined at this time and there are no
assurances that if achieved,  the Company will have sufficient  funds to execute
its intended business plan or generate positive operating results.

Management believes that the Company will require approximately $500,000 in cash
to fund operations for the remaining  portion of the fiscal year ending June 30,
2005 based on the $390,000 cash used in operating activities for the fiscal year
ended June 30,  2004.  Management  believes  it can reduce cash needs for fiscal
2005 to $300,000 based upon expense  reductions  and increased  revenue from the
ASAP show.  Management  intends to fund the $500,000 with unused portions of the
line-of-credit  from  stockholder,  additional  stockholder  loans,  third party
loans,  and  unregistered  sales of the  Company's  restricted  common  stock to
investors.  At September 30, 2004, the Company had $470,000  available to borrow
under a line-of-credit from stockholder.

REVENUE RECOGNITION

Net revenues include amounts earned under  transaction  sales,  trade show booth
sales and subscription fees.

TRANSACTION SALES

Transaction  revenues are recorded in accordance  with the Emerging  Issues Task
Force ("EITF") 99-19, "Reporting  Revenue Gross as a Principal  versus net as an
Agent". The Company recognizes net revenues from product  transaction sales when
title to the product passes to the customer.  For all product  transactions with
its customers, the Company acts as a principal, takes title to all products sold
upon shipment,  and bears inventory risk for return products that the Company is
not able to return to the

                                       6

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

supplier,   although  these  risks  are  mitigated  through   arrangements  with
factories,  shippers and suppliers. For financial reporting purposes the Company
presents the details of gross  transaction  sales and related  costs of sales in
the accompanying statements of operations.

ASAP TRADE SHOW

The ASAP trade show generates revenue through exhibitor booths sales,  corporate
sponsorship,  and advertising.  Such revenue is typically  collected in advance,
deferred and then  recognized at the time of the related trade show. The Company
conducts two trade shows per year, currently in February and August.

SUBSCRIPTION FEES

The Company also recognizes revenue from monthly  subscription fees.  Subscriber
fees represent revenue generated through one-time, non-refundable setup fees and
monthly hosting fees. Subscription and subscriber fees are recognized as revenue
after the services have been provided.

The  Securities and Exchange  Commission  issued Staff  Accounting  Bulletin 104
("SAB 104"),  "Revenue  Recognition" which outlines the basic criteria that must
be met to recognize revenue and provide guidance for presentation of revenue and
for disclosure related to revenue recognition  policies in financial  statements
filed with Securities and Exchange Commission. Management believes the Company's
revenue recognition policies conform to SAB 104.

                                       7

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

INDEMNITIES AND GUARANTEES
--------------------------

During the normal course of business,  the Company has made certain  indemnities
and  guarantees  under which it may be required to make  payments in relation to
certain  transactions.  These  indemnities  include certain  agreements with the
Company's  officers,  under which the Company may be required to indemnify  such
person  for  liabilities  arising  out of  their  employment  relationship.  The
duration of these  indemnities  and guarantees  varies and, in certain cases, is
indefinite.  The majority of these indemnities and guarantees do not provide for
any  limitation of the maximum  potential  future  payments the Company could be
obligated to make. Except as noted above, historically, the Company has not been
obligated to make significant  payments for these obligations and no liabilities
have been recorded for these  indemnities  and  guarantees  in the  accompanying
balance sheet.

STOCK BASED COMPENSATION

At September 30, 2004, the Company has three stock-based  employee  compensation
plans (the "Plans").  The Company  accounts for the Plans under the  recognition
and  measurement  principles  of  APB  25,  and  related   interpretations.   No
stock-based  compensation cost has been recognized in net income.  Stock options
granted  under the Plans have  exercise  prices equal to the market value of the
underlying  common stock on the dates of grant. The following table  illustrates
the effect on net income and net income per share if the Company had applied the
fair value recognition provisions of Statement of Financial Accounting Standards
("SFAS") 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                    2004          2003
                                                                -----------    -----------
<S>                                                                             <C>
Net income:
      As reported                                               $   107,264    $  244,369
       Deduct: Total stock based employee compensation
                    expense determined under fair value based
                     method for all awards, net of tax              (10,000)      (19,466)
                                                                -----------    -----------
        Pro forma                                               $    97,264    $  224,903
                                                                ===========    ===========
Income per share, as reported
      Basic                                                     $      0.01    $      0.03
      Diluted                                                   $      0.01    $      0.03
Income per share, pro forma
      Basic                                                     $      0.01    $      0.03
      Diluted                                                   $      0.01    $      0.03

</TABLE>

BASIC AND DILUTED EARNINGS PER COMMON SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted earnings per common share computations:

                                                            2003         2004
                                                        ----------   ----------
Numerator for basic and diluted earnings per share:
     Net income                                         $  107,264   $  244,369
                                                        ----------   ----------
Denominator for basic and diluted earnings per share:
     Weighted average shares (basic)                     7,472,673    7,472,673
     Common stock equivalents                                   --      135,600
                                                        ----------   ----------
         Weighted average shares (dilutive)              7,472,673    7,608,273
Net income available to common shareholders
         per common share:
     Basic                                              $     0.01   $     0.03
                                                        ==========   ==========
     Diluted                                            $     0.01   $     0.03
                                                        ==========   ==========

                                       8

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

NOTE 2 - BUSINESS SEGMENTS

Reportable  business  segments as of and for the period ended September 30, 2004
and 2003 are as follows:

                                     2004           2003
                                 -----------    -----------
Net sales:
      Transaction sales          $    14,009    $    60,753
       ASAP Show                     931,170      1,048,104
     Other                                --          1,020
                                 -----------    -----------
                                 $   945,179    $ 1,109,877
                                 ===========    ===========
Operation profit (loss):
      Transaction sales          $   (50,193)   $  (115,062)
     ASAP Show                       161,329        364,152
      Other                               --           (150)
                                 -----------    -----------
                                 $   111,136    $   248,940
                                 ===========    ===========
Depreciation and amortization:
     Transaction sales           $        --    $     5,566
      ASAP Show                           --             --
      Other                               --             --
                                 -----------    -----------
                                 $        --    $     5,566
                                 ===========    ===========
Identifiable assets:
       Transaction sales         $    62,245      1,623,457
       ASAP Show                          --             --
        Other                             --             --
                                 -----------    -----------
                                 $    62,245    $ 1,623,457
                                 ===========    ===========
Capital expenditures
       Transaction sales         $        --    $        --
       ASAP Show                          --             --
        Other                             --             --
                                 -----------    -----------
                                 $        --    $        --
                                 ===========    ===========

Net sales as reflected above consist of sales to unaffiliated  customers only as
there were no significant intersegment sales for the periods ended September 30,
2004 and 2003.

There were no  significant  concentrations  on net segment sales for the periods
ended September 30, 2004 and 2003.

                                       9

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

Transaction  apparel  sales are made to China  while  ASAP show  revenue  relate
exclusively to the Company's Las Vegas, Nevada trade show.

NOTE 3 - LINE-OF-CREDIT FROM SHAREHOLDER

The Company has a revolving  line-of-credit  (the "Line")  from Frank Yuan,  the
Company's Chief Executive Officer and a significant Company  shareholder,  which
expires on  September 1, 2005 and  provides  for  borrowings  up to a maximum of
$500,000,  as amended.  The Line bears an interest  rate of 8.0% per annum.  The
balance at September  30, 2004 was $30,000,  and there was no accrued and unpaid
interest during the three months ended September 30, 2004.

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

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the financial  statements and the
related notes thereto included  elsewhere in this quarterly report for the three
months  ended  September  30,  2004.  This  quarterly  report  contains  certain
forward-looking  statements  and the Company's  future  operating  results could
differ materially from those discussed herein.  Certain statements  contained in
this Report,  including,  without  limitation,  statements  containing the words
"believes,"  "anticipates," "expects" and the like, constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
Such forward-looking  statements involve known and unknown risks,  uncertainties
and  other  factors  which  may  cause  the  actual   results,   performance  or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  These  factors are  discussed  in more  detail in the Risk  Factors
section of the Company's  Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2004.  Given these  uncertainties,  readers are  cautioned not to place
undue reliance on such  forward-looking  statements.  The Company  disclaims any
obligation to update any such factors or to announce publicly the results of any
revisions  of  the  forward-looking  statements  contained  or  incorporated  by
reference herein to reflect future events or developments.

STATUS OF OPERATIONS

BACKGROUND

Cyber  Merchants   Exchange  ("C-Me"  or  the  "Company")  is  an  international
electronic trading,  financing,  logistics and trade show organizer  corporation
that is initially targeting the apparel industry.  C-Me has set the standard for
apparel  global  electronic  trading  and built  the  model  for  other  leading
industries  by adhering to a simple  formula for  success.  The  following  four
interlocking  services make the Company unique: 1) ASAP Global Sourcing Show - a
trade show for U.S. buyers to meet hundreds of garment exhibitors under one roof
- held twice a year in Las  Vegas,  NV. 2) C-Me  builds  private  extranets,  or
Internet Sourcing Networks ("ISN"), for its retail partners. The ISN matches and
pushes merchandise to the appropriate buyers computer desktop.  3) C-Me's Global
Financial  Platform  ("GFP":  Patent  Pending)  allows  U.S.  buyers to purchase
overseas  merchandise  without  the need of  issuing  a  Letter  of  Credit.  4)
Logistics warehouse,  shipping, and billing services for overseas manufacturers.
The Company  presently

                                       10

<PAGE>

has  representatives  located in 25 countries  throughout Asia,  Africa, and the
Middle East to facilitate international transactions.

SERVICES

ASAP GLOBAL SOURCING SHOW

The Apparel  Sourcing  Association  Pavilion  ("Global  Sourcing  Show" or "ASAP
Show") is bringing a totally new concept to the trade show  industry,  with many
exhibitors following such concept.  C-Me has the perfect opportunity to make the
ASAP Show  successful  because of the Company's  global  presence and management
expertise in the apparel  industry.  In addition,  there were no trade shows for
the producing  countries to exhibit in the U.S.A.  to gain container load orders
until the ASAP show was  launched.  Many  people  are more  reluctant  to travel
overseas now than ever before. Therefore, the ASAP Show is even more crucial for
buyers and overseas manufacturers.

The ASAP show segment derives revenue principally from the sale of exhibit space
and  conference  attendance  fees  generated  at its  events.  In  fiscal  2004,
approximately  95% of our trade shows and conferences  revenue was from the sale
of exhibit space. Events are generally held on a semi-annual basis in Las Vegas,
Nevada.  At many of our trade shows,  a portion of exhibit space is reserved and
partial  payment is received as much as 90 days in advance.  Booth fees that are
collected in advance of the related ASAP show are recorded on our balance  sheet
as deferred revenue. Revenue and related direct event expenses are recognized in
the month in which the event is held.

Costs  incurred  by the ASAP show  segment  include  facility  rent,  outsourced
services such as  registration,  booth rental,  electrical  services,  security,
decorator  and attendee and  exhibitor  promotion.  All show  promotion  related
expenses such as advertisements,  traveling,  staff salaries and related payroll
expenses are treated as monthly period  expenses.  The deposit for the ASAP show
facility is capitalized and then expensed in the month the event occurs.

ELECTRONIC COMMERCE, A NEW WAVE OF INTERNATIONAL TRADE

C-Me has utilized the  convenient and powerful  Internet to communicate  between
buyers and sellers internationally.  The ISN was built with the buyer in mind to
make it user  friendly to gain global  apparel stock lot  information.  C-Me has
successfully represented, Fruit of the Loom, Kellwood, Factory 2-U Stores, Value
City, and others to be their buyer's  agent.  The ASAP Show helps promote C-Me's
ISN transaction model to these buyers.  In addition,  the Company sometimes acts
as a principal  to purchase  merchandise  for presale  orders.  The Company also
represents some reputable  overseas  manufacturers with  non-refundable  monthly
retainer payments as their U.S. sales agents.

GLOBAL FINANCIAL PLATFORM

C-Me developed a patent-pending  global financial platform,  levied with CIT - a
factoring accounts  receivable  guarantee service.  This process allows overseas
sellers to gain cash  advances  through  their local bank and eliminate the need
for Letters of Credit to sell international merchandise.

LOGISTICS, WAREHOUSE, SHIPPING AND INVOICE SERVICES

Logistics,  warehousing,  shipping and billing  services  are also  provided for
overseas manufacturers.

REVENUE MODEL

                                       11

<PAGE>

The ASAP Show

Currently, the ASAP Show charges $58 per square foot to exhibitors. The cost per
square foot is considered  costly in the U.S.  trade show  industry.  The reason
ASAP exhibitors are willing to pay this high price is because C-Me's  management
partners with overseas governments to subsidize up to 50%-100% of the exhibition
costs.  C-Me's management  expertise in the apparel  industry,  unique marketing
concepts,  services,  educational  seminars and  relationships  with the foreign
trade promotion bureaus and associations set the Company apart from competitors.

E-commerce Transactions

The Company charges a minimum of 5%-10% commission when representing U.S. buyers
who wish to utilize C-Me as their  buying agent to source their goods  overseas.
C-Me can also act as the principal to purchase the pre-sold  merchandise  with a
minimum profit margin of 20%. The demands for C-Me's  sourcing  abilities by the
U.S.  apparel  buyers  have  arrived at stages  where C-Me must  select the U.S.
Apparel buyers it wants to represent.

Global Financial Platform

C-Me developed a patent-pending  global financial platform,  levied with CIT - a
factoring accounts  receivable  guarantee service.  This process allows overseas
sellers to gain cash  advances  through  their local bank and eliminate the need
for Letters of Credit to sell international merchandise.

CIT charges 1.5% of the invoice value as their non-recourse  factoring fee while
C-Me charges 0.5%.  The overseas  bank charges  interest for their cash advances
made to the  seller.  The  potential  of  eliminating  the  Letter  of Credit to
purchase overseas merchandise business represents billions of dollars per year.

Logistics, Warehousing, Shipping and Billing

The Company charges  standard public  warehouse  charges for freight in and out,
warehouse storage,  shipping and billing charges for its exhibitors and overseas
manufacturers.

RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

REVENUE

Gross  revenues on  transaction  sales for the three months ended  September 30,
2004 were  $17,940,  a decrease of $737,275 or 98%  compared to $755,215 for the
same  period  last  fiscal  year.  The  reason for the  significant  drop in the
transaction sales is because the Company puts its resources and efforts into the
ASAP show production and promotion.  The Company  anticipates  that  transaction
sales will remain a same small  percentage  of the  Company's  overall  business
direction.

                                       12

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

The gross profit from transaction sales for the three months ended September 30,
2004 was $14,009 a decrease of $46,744,  or 77% compared to $60,753 for the same
period  last fiscal  year.  The gross  profit  margin is  approximately  78% for
transaction sales.

The ASAP Show division  gross  revenue for the three months ended  September 30,
2004 was $931,170,  a decrease of $116,934 or 11% compared to $1,048,104 for the
same period last fiscal  year.  This  decrease  was due to a slight  decrease in
number of exhibitors  for the ASAP show in August 2004 compared to the same show
in August  2003.  Another  reason for  decreasing  exhibitors  is because  MAGIC
started  its MAGIC  Sourcing  Zone,  which is a direct  competing  show to ASAP.
Management   believes  the  competing  show  will  make  it  difficult  to  have
significant growth.

There were no subscriber  fees for the three months ended  September 30, 2004, a
decrease  of $1,020 or 100%  compared  to $1,020 for the same period last fiscal
year,  due to the shift in focus on the revenue  received  from the users of the
Company's VTS, ISN and Web design services  revenue  generated  through the ASAP
Show.

OPERATING EXPENSES

Operating expenses decreased by $26,894, or 3%, to $834,043 for the three months
ended  September  30,  2004,  as compared  to $860,937  for the same period last
fiscal year. The decrease in operating expenses is primarily due to the decrease
of payroll and its related costs, and travel and professional  expenses,  net of
an increase in the ASAP Show and its related costs. Payroll decreased by $36,504
to  $171,374  for the three  months  ended  September  30,  2004 as  compared to
$207,878 for the same period last fiscal year. The ASAP Show expenses  increased
by $81,889 to $769,841 (including  allocated payroll) for the three months ended
September 30, 2004 as compared to $683,952 (including allocated payroll) for the
same period last fiscal year.

NET INCOME

The  Company  recorded  a net  income of  $107,264  for the three  months  ended
September  30, 2004,  a decrease of $137,105 in profits; as compared to $244,369
for the same period last fiscal year.  The decrease in profit is mainly due to a
decrease  of  profit  from the  ASAP  show of  $202,823  net of a  reduction  on
operating loss from transaction sales of $64,869.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital improved from a deficit of $536,088 as of June
30, 2004 to $428,804 as of September 30, 2004,  primarily due to net  repayments
of line-of-credit  from stockholder of $222,000 and deferred revenue recognition
of  approximately  $151,000,  net of increase  in  accounts  payable and accrued
expenses of approximately $201,000.  During the current fiscal year, the Company
had  average  monthly  general  and  administrative  expenses  of  approximately
$133,000  (excluding ASAP Show  production  expenses) as compared to $110,000 in

                                       13
<PAGE>

the same period of last fiscal  year.  Management  anticipates  maintaining  its
monthly expenses in the range of $125,000 to $135,000 in the foreseeable future.
The Company  will focus its efforts on the  semi-annual  ASAP show in Las Vegas,
plus on producing four additional  shows in four different  cities in China, and
Material World Global Pavilion  ("Material  World") show in March 2005 in Miami,
to generate  more  revenue.  As of September  30, 2004,  the Company has current
assets of approximately  $51,000. With the net revenue from the ASAP show, China
shows, and Material World and continuing  support from its major  shareholder to
provide a revolving  line-of-credit,  management  believes the Company will have
enough net working capital to sustain its business through June 2005 and beyond.

<PAGE>

The Company has a revolving  line-of-credit  (the "Line")  from Frank Yuan,  the
Company's CEO and a significant shareholder,  which expires on September 1, 2005
and provides for  borrowings up to a maximum of $500,000,  as amended.  The Line
carries an interest rate of 8.0% per annum. The balance as of September 30, 2004
was $30,000.

The Company believes it has sufficient access to capital to operate its business
over the next 12 months. Depending on market acceptance of the Company's current
business  model,  the  Company  may  raise  additional  funds,  either  in  debt
instruments or equity securities, to augment future growth of the business.

The  forecast  of the  period  of time  through  which the  Company's  financial
resources  will be  adequate  to support  its  operations  is a  forward-looking
statement that involves risks and  uncertainties.  The Company's  actual funding
requirements may differ materially as a result of a number of factors, including
unknown  expenses  associated  with  the cost of  continuing  to  implement  the
Company's  international  electronic  trading  business and ASAP Show  business.
There can be no assurance  that  financing  adequate to carry out the  Company's
business plan will be available on terms acceptable to the Company, or at all.

The Company has no commitments to make capital  expenditures for the fiscal year
ending  June 30,  2005.  Over the next two to five years,  the Company  plans to
utilize a combination of internally  generated funds from operations,  potential
debt and equity financing to fund its long-term growth.

                                       14

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

ITEM 3.   EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The  management of the Company  including  Mr. Frank S. Yuan as Chief  Executive
Officer and as Chief Financial  Officer have evaluated the Company's  disclosure
controls and procedures. Under rules promulgated by the SEC, disclosure controls
and procedures are defined as those  "controls or other  procedures of an issuer
that are  designed to ensure that  information  required to be  disclosed by the
issuer  in the  reports  filed or  submitted  by it under  the  Exchange  Act is
recorded, processed,  summarized and reported, within the time periods specified
in the  Commission's  rules and forms." Based on the evaluation of the Company's
disclosure  controls and  procedures,  it was determined  that such controls and
procedures  were  effective as of September 30, 2004, the date of the conclusion
of the evaluation.

Further,  there were no significant changes in the internal controls or in other
factors that could significantly affect these controls after September 30, 2004,
the  date  of the  conclusion  of the  evaluation  of  disclosure  controls  and
procedures.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

None.

                                   SIGNATURES

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

                                       15

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

CYBER MERCHANTS EXCHANGE, INC. d.b.a. C-ME.com
(Registrant)

Date: 11/15/2004     /s/ Frank S. Yuan
     -----------     ------------------------------------------------
                     Frank S. Yuan, Chairman, Chief Executive Officer

                                       16