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 December 31, 2003

[ ]  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 January 27, 2004:

                  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 December 31, 2003 (unaudited)
            and June 30, 2003 .................................................3

         Condensed Statements of Operations for the Six Months Ended
         December 31, 2003 and 2002 (unaudited)................................4

         Condensed Statements of Operations for the Three Months Ended
         December 31, 2003 and 2002 (unaudited)................................5

         Condensed Statements of Cash Flows for the Six Months Ended
         December 31, 2003 and 2002 (unaudited)................................6

         Notes to Condensed Financial Statements (unaudited)...................7

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
         PLAN OF OPERATION....................................................12

     ITEM 3. CONTROLS AND PROCEDURES..........................................17

PART II - OTHER INFORMATION...................................................17

     ITEM 1.  LEGAL PROCEEDINGS...............................................17

     ITEM 2.  CHANGES IN SECURITIES...........................................17

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................17

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...........18

     ITEM 5.  OTHER INFORMATION...............................................18

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K................................18

SIGNATURES....................................................................19


                                       2
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CYBER MERCHANTS EXCHANGE, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   Dec. 31,        June 30,
                                                                     2003            2003
                                                                 ------------    ------------
                                                                 (Unaudited)
<S>                                                              <C>             <C>
ASSETS
Current assets:
   Cash                                                          $     33,532    $     65,720
   Certificate of deposit                                             100,000         100,000
   Accounts receivable, net                                           112,573          89,801
   Inventory                                                           20,543         189,365
   Prepaid expenses                                                    61,122          26,372
                                                                 ------------    ------------

                                                                      327,770         471,258

Total current assets
Property and equipment, net                                                --           6,902
Investments in overseas joint ventures, net                                --         729,801
Other assets                                                           11,368          11,368
                                                                 ------------    ------------

Total noncurrent assets                                                11,368         748,071
                                                                 ------------    ------------
Total assets
                                                                 $    339,138    $  1,219,329
                                                                 ============    ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
   Accounts payable and accrued expenses                         $    261,261    $    273,127
   Loan payable, bank                                                  70,035              --
   Deferred revenue                                                    42,741         206,939
                                                                 ------------    ------------
   Total current liabilities                                          374,037         480,066
Stockholders' (deficit) equity:
   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       3,624,461
   Accumulated deficit                                            (13,661,347)    (12,880,585)
                                                                 ------------    ------------

Total stockholders' (deficit) equity                                  (34,899)        739,263
                                                                 ------------    ------------
Total liabilities and stockholders' (deficit) equity             $    339,138    $  1,219,329
                                                                 ============    ============
</TABLE>

            See accompanying notes to condensed financial statements


                                       3
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                                December 31
                                                                         --------------------------
                                                                             2003           2002
                                                                         -----------    -----------
                                                                         (Unaudited)    (Unaudited)
<S>                                                                      <C>            <C>
Revenues:
   Transaction sales                                                     $ 1,319,855    $ 1,332,340
   Cost of goods sold                                                      1,103,444      1,177,669
                                                                         -----------    -----------
   Net revenues from transaction sales                                       216,411        154,671
   Tradeshow revenue                                                       1,048,104        412,506
   Subscriber fees                                                             1,110          3,225
                                                                         -----------    -----------

Net revenues                                                               1,265,625        570,402

Operating expenses:
   General and administrative                                                897,522        777,502
   Payroll and related                                                       415,029        418,707
   Stock-based compensation                                                    6,600             --
   Depreciation and amortization                                               6,902         12,951
                                                                         -----------    -----------

Total operating expenses                                                   1,326,053      1,209,160
                                                                         -----------    -----------

Loss from operations                                                         (60,428)      (638,758)

Other income (expense):
   Interest income, net of interest expense                                   10,267         23,773
   Equity in losses on investments in overseas joint ventures                 (9,342)      (124,290)
   Impairment writedown on investments in overseas joint ventures           (720,459)            --
   Amortization of software sales                                                 --        166,666
                                                                         -----------    -----------
Total other income (expense):                                               (719,534)        66,149
                                                                         -----------    -----------

Loss before income taxes                                                    (779,962)      (572,609)

Income taxes                                                                     800            800
                                                                         -----------    -----------
Net loss                                                                 $  (780,762)   $  (573,409)
                                                                         ===========    ===========
Net loss per share available to common stockholders
   Basic and diluted                                                     $     (0.10)   $     (0.08)
                                                                         ===========    ===========
Weighted-average number of common shares outstanding
   Basic and diluted                                                       7,472,673      7,472,673
                                                                         ===========    ===========
</TABLE>

            See accompanying notes to condensed financial statements.


                                       4
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                           December 31,
                                                                   --------------------------
                                                                       2003           2002
                                                                   -----------    -----------
                                                                   (Unaudited)    (Unaudited)
<S>                                                                <C>            <C>
Revenues:
   Transaction sales                                               $   564,640    $   543,320
   Cost of goods sold                                                  408,982        466,508
                                                                   -----------    -----------
   Net revenues from transaction sales                                 155,658         76,812
   Tradeshow revenues                                                       --          4,500
   Subscriber fees                                                          90          1,375
                                                                   -----------    -----------

Net revenues                                                           155,748         82,687

Operating expenses:
   General and administrative                                          241,204        239,590
   Payroll and related                                                 215,976        205,046
   Stock-based compensation                                              6,600             --
   Depreciation and amortization                                         1,336          5,578
                                                                   -----------    -----------

Total operating expenses                                               465,116        450,214
                                                                   -----------    -----------

Loss from operations                                                  (309,368)      (367,527)

Other income (expenses):
   Interest income, net of interest expense                              4,696         11,119
   Equity in losses on investments in overseas joint ventures               --        (54,803)
   Impairment writedown on investments in overseas joint ventures     (720,459)            --
   Amortization of software sales                                           --         83,333
                                                                   -----------    -----------
Total other income (expenses)                                         (715,763)        39,649
                                                                   -----------    -----------

Net income                                                          (1,025,131)      (327,878)
                                                                   ===========    ===========
Net loss per share available to common stockholders
   Basic and diluted                                               $     (0.14)   $     (0.04)
                                                                   ===========    ===========
Weighted-average number of common shares outstanding
   Basic and diluted                                                 7,472,673      7,472,673
                                                                   ===========    ===========
</TABLE>

            See accompanying notes to condensed financial statements.


                                       5
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                Six Months Ended
                                                                   December 31
                                                              ----------------------
                                                                2003         2002
                                                              ---------    ---------
                                                             (Unaudited)  (Unaudited)
<S>                                                           <C>          <C>
Cash flows from operating activities:
   Net (loss)                                                 $(780,762)   $(573,409)
   Adjustments to reconcile net loss to net cash
        used in operating activities:
     Depreciation and amortization                                6,902       12,951
     Amortization of software sales                                  --     (166,666)
     Stock Compensation Expense                                   6,600           --
     Impairment write-down on investments in
        overseas joint ventures                                 720,459           --
     Equity in losses on investments in
        overseas joint ventures                                   9,342      124,290
      Changes in assets and liabilities:
         Accounts receivable, net                               (22,772)    (395,303)
            Interest receivable                                      --       (9,000)
            Inventory                                           168,822     (320,014)
            Prepaid expenses                                    (34,750)      93,214
         Other assets                                                --        3,618
         Accounts payable and accrued expenses                  (11,866)     319,395
         Deferred revenue                                      (164,198)          --
                                                              ---------    ---------

Net cash used in operating activities                          (102,223)    (910,924)
                                                              ---------    ---------
Cash flows from investing activities:
   Collection of related party note and
     interest receivable                                             --      407,000
                                                              ---------    ---------
Net cash provided by investing activities                            --      407,000
                                                              ---------    ---------
Cash flows from financing activities:
   Proceeds from loan payable, bank                              70,035           --
                                                              ---------    ---------
Net cash provided by financing activities                        70,035           --
                                                              ---------    ---------
Net decrease in cash                                            (32,188)    (503,924)

Cash, beginning of period                                        65,720      709,791
                                                              ---------    ---------
Cash, end of period                                           $  33,532    $ 205,867
                                                              =========    =========
</TABLE>

            See accompanying notes to condensed financial statements


                                       6
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Certain  statements  contained in this Report,  including,  without  limitation,
statements containing the words, "believes," "anticipates," "expects," and other
words of similar  import,  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 Cyber
Merchants  Exchange,  Inc. to be materially  different from any future  results,
performance,  or  achievements  expressed  or  implied  by such  forward-looking
statements. These factors include, but are not limited to, the factors discussed
under the caption  "Company  Risks"  elsewhere in Item 1 of this  Report.  Given
these  uncertainties,  readers are cautioned not to place undue reliance on such
forward-looking  statements.   Cyber  Merchants  Exchange,  Inc.  disclaims  any
obligation to update any such factors or to announce publicly the results of any
revision  of  the  forward-looking   statements  contained  or  incorporated  by
reference herein to reflect future events or developments.

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 and six-month period ended December 31, 2003 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending June 30, 2004. 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, 2003.

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 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,  net  of  factoring  fees.  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 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.


                                       7
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Asap Trade Show
---------------

The ASAP trade show generates revenue through exhibitor booths sales,  corporate
sponsorship,  and  advertising.  Such revenue is  recognized  at the time of the
related trade show.

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.

In December 1999, the Security and Exchange  Commission  issued Staff Accounting
Bulletin  101  ("SAB  101"),  "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 Security and Exchange  Commission.
Management  believes the Company's revenue  recognition  policies conform to SAB
101.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to provide  guidance  on the  identification  of entities  for which  control is
achieved through means other than voting rights ("variable interest entities" or
"VIEs")  and  how  to  determine  when  and  which  business  enterprise  should
consolidate the VIE. This new model for  consolidation  applies to an entity for
which  either:  (1) the  equity  investors  (if any) do not  have a  controlling
financial  interest;  or (2) the equity  investment at risk is  insufficient  to
finance that  entity's  activities  without  receiving  additional  subordinated
financial support from other parties. In addition, FIN No. 46 requires that both
the primary  beneficiary and all other  enterprises with a significant  variable
interest in a VIE make additional disclosures.  As amended in December 2003, the
effective  dates of FIN No.  46 for  public  entities  that are  small  business
issuers,   as  defined   ("SBIs"),   are  as  follows:   (a)  For  interests  in
special-purpose entities: periods ended after December 15, 2003; and (b) For all
other VIEs:  periods ending after December 31, 2004. The December 2003 amendment
of FIN No. 46 also includes  transition  provisions that govern how an SBI which
previously  adopted the pronouncement (as it was originally issued) must account
for  consolidated  VIEs. The Company is evaluating the effects of FIN No. 46 (as
amended) on its consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial instruments with characteristics of both liabilities and equity and is
effective (except for certain mandatorily redeemable  noncontrolling  interests)
for  financial  instruments  entered into or modified  after May 31,  2003.  The
Company adopted SFAS No. 150 on June 1, 2003.


                                       8
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

The  adoption  of this  pronouncement  did not  have a  material  impact  on the
Company's results of operations or financial condition.

Other  recent  accounting  pronouncements  issued  by the  FASB  (including  its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and the  Securities  and  Exchange  Commission  did not or are not
believed by  management to have a material  impact on the  Company's  present or
future consolidated financial statements.

STOCK BASED COMPENSATION

At December 31, 2003, 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 interpretation. No stock-based
compensation  cost is  recognized in net loss.  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 loss per share if the Company had applied the fair value  recognition
provisions of SFAS 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                   2003         2002
                                                                ---------    ---------
<S>                                                             <C>          <C>
Net loss:
      As reported                                               $(780,762)   $(573,409)
       Deduct: Total stock based employee compensation
                    expense determined under fair value based
                    method for all awards                         (40,000)     (20,000)
                                                                ---------    ---------
        Pro forma                                               $(820,762)   $(593,409)
                                                                =========    =========
Loss per common share, as reported
      Basic and diluted                                         $   (0.10)   $   (0.08)

Loss per common share, pro forma
      Basic and diluted                                         $   (0.11)   $   (0.08)
</TABLE>

The  above  pro  forma  effects  of  applying  SFAS  123  are  not   necessarily
representative of the impact on reported net loss for future


                                       9
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

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          2002
                                                      -----------   -----------
Numerator for basic and diluted earnings per share:
     Net (loss)                                       $  (780,762)  $  (573,409)
                                                      -----------   -----------

Denominator for basic and diluted earnings per share:
     Weighted average shares (basic and diluted)        7,472,673     7,472,673
                                                      -----------   -----------
Loss charged to common shareholders per common share:
     Basic and diluted                                $     (0.10)  $     (0.08)
                                                      ===========   ===========

IMPAIRMENT WRITE-DOWN ON INVESTMENTS IN OVERSEAS JOINT VENTURES

The  Company  recorded an  impairment  charge  related to two joint  ventures it
entered  into in 1999 in  Taiwan  and 2000 in  China,  C-Me  Taiwan  and  Global
Purchasing Dotcom, respectively. The Company invested in the joint ventures with
proceeds  received  from the sale of its' ISN software to the  respective  joint
ventures.  The  revenue  from  the  software  sold was  amortized  over a 3-year
straight-line  amortization  method and offset by negative  goodwill.  These two
joint  ventures  had net  losses  since  inception  and were  formed  during the
Internet  boom with a business  model to attract  paid  subscribers  to join the
company's ISN services.  Since the  Company's  core business  model changed from
attracting paid  subscribers for it's ISN services to organizing trade shows and
transaction  sales,  it was determined by the management that the investment was
permanently  impaired and as a result,  the Company has written off the asset in
accordance to SFAS 144.

INVENTORY

Inventory consists entirely of ready-to-wear garments and is stated at the lower
of standard cost or market.  Cost is determined on a weighted average basis that
approximates the first-in,  first-out method. Market is determined by comparison
with recent purchases or net realizable value.


                                       10
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Such net  realizable  value is based on  management's  forecast for sales of the
Company's  inventory  in the ensuing  years.  The  industry in which the Company
operates is characterized  by style and fashion  changes,  should demand for the
Company's  inventory  prove  to be  significantly  less  than  anticipated,  the
ultimate  realizable value of the Company's  inventories  could be substantially
less than the amount shown on the accompanying balance sheet.

NOTE 2 - BUSINESS SEGMENTS

Reportable business segments for the period ended December 31, 2003 and 2002 are
as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                    3 Months         6 Months         3 Months         6 Months
                              Ended 12/31/03   Ended 12/31/03   Ended 12/31/02   Ended 12/31/02
                              --------------   --------------   --------------   --------------
<S>                              <C>              <C>              <C>              <C>
Revenues:
      Transaction sales          $   155,658      $   216,411      $    76,812      $   154,671
       ASAP Show                          --        1,048,104            4,500          412,506
     Other                                90            1,110            1,375            3,225
                                 -----------      -----------      -----------      -----------
                                 $   155,748      $ 1,265,625      $    82,687      $   570,402
                                 ===========      ===========      ===========      ===========
Loss from operations:
      Transaction sales          $   126,295      $    11,233      $  (127,282)     $  (437,513)
     ASAP Show                      (434,178)         (70,026)        (234,451)        (195,196)
      Other                           (1,485)          (1,635)          (5,794)          (6,049)
                                 -----------      -----------      -----------      -----------
                                 $  (309,368)     $   (60,428)     $  (367,527)     $  (638,758)
                                 ===========      ===========      ===========      ===========
Depreciation and amortization:
     Transaction sales           $     1,336      $     6,902      $     5,578      $    12,951
      ASAP Show                           --               --               --               --
      Other                               --               --               --               --
                                 -----------      -----------      -----------      -----------
                                 $     1,336      $     6,902      $     5,578      $    12,951
                                 ===========      ===========      ===========      ===========
Identifiable assets:
       Transaction sales         $   339,138          339,138      $        --      $        --
       ASAP Show                          --               --               --               --
        Other                             --               --               --               --
                                 -----------      -----------      -----------      -----------
                                 $   339,138      $   339,138      $        --      $        --
                                 ===========      ===========      ===========      ===========
</TABLE>


                                       11
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

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
and six months ended December 31, 2003. 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, 2003.  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 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 global ready-made  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 ("L/C"). 4)
Logistics   warehouse,   shipping,   and  billing   service  for  the   overseas
manufacturers. The company presently has representatives located in 25 countries
throughout  Asia,  Africa,  and  the  Middle  East to  facilitate  international
transactions.

SERVICES

ASAP Global Sourcing Show
-------------------------

There's  definitely no shortage of trade shows in the United States. 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.  The Global  Sourcing Show is not an easy task. But C-Me
has the  perfect  opportunity  to make it  successful  because of the  Company's
global presence and marketing  teams.  In addition,  garment and textile exports
are the primary  export product for


                                       12
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

developing  countries.  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. Most people are now reluctant to travel overseas than ever before. The
ASAP Show is even more  crucial for buyers and  attendees.  The ASAP Show is the
perfect event for buyers and overseas manufacturers to meet and conduct business
under one roof  during the world's  largest  apparel  trade week.  The ASAP show
segment  derives  revenue  principally  from  the  sale  of  exhibit  space  and
conference  attendance fees generated at its events. In 2003,  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.  The  sale of  exhibit  space  is
generally  impacted by the on-going  quality and quantity of  attendance,  venue
selection and availability,  industry life cycle and general market  conditions.
Revenue and related  direct event  expenses are recognized in the month in which
the event is held.  Booth fees are  collected in advance and are recorded on our
balance sheet as deferred revenue.

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.  Staff  salaries and related
payroll expenses are treated as monthly period expenses.  All other direct costs
are 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 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.  The  benefit  of
eliminating  Letters  of Credit to  purchase  international  merchandise  is the
ultimate dream for U.S. buyers.

Logistics, Warehouse, Shipping and Invoice Services
---------------------------------------------------

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

REVENUE MODEL

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


                                       13
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

high  price  is  because  C-Me's   management   always  partners  with  overseas
governments  to subsidize up to 50-100% of the exhibition  costs.  C-Me's unique
marketing  concepts,  services,  educational  seminars and relationships 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 principle 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 pick and choose whom
they want to represent.

Global Financial Platform

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  chares for freight in and out,
warehouse storage,  shipping and billing charges for its exhibitors and overseas
manufacturers.

RESULTS OF OPERATION

SIX MONTHS ENDED DECEMBER 31, 2003 AND 2002

REVENUE

Gross revenues on  transaction  sales for the six months ended December 31, 2003
were $1,319,855, a decrease of $12,485 or 1% compared to $1,332,340 for the same
period  last  fiscal  year.  The  Company  expects  the  volume  of gross  sales
transactions  to maintain  and grow,  as it  continues  to utilize its  overseas
sourcing network and its external sales force.

The gross profit from  transaction  sales for the six months ended  December 31,
2003 was  $216,411 an increase of $61,740,  or 40%  compared to $154,671 for the
same period last fiscal year. The Company's Management is constantly seeking for
higher profit margins in transaction sales.

The ASAP Show division  gross revenue for the six months ended December 31, 2003
was  $1,048,104,  an increase of $635,598 or 154%  compared to $412,506  for the
same period last fiscal year.  This increase was due to an increase in number of
exhibitors to approximately 200 for ASAP show in August 2003 from  approximately
120 for the same show in August 2002.


                                       14
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Subscriber  fees for the six months  ended  December  31,  2003 were  $1,110,  a
decrease of $2,115 or 66% compared to 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 to transaction  sales and revenue  generated through
the ASAP Show.

OPERATING COSTS AND EXPENSES

Operating  expenses  increased by $116,893,  or 10%, to  $1,326,053  for the six
months ended  December 31, 2003, as compared to  $1,209,160  for the same period
last fiscal year.  The increase in  operating  expenses is primarily  due to the
increase  in the ASAP  Show  and its  related  costs.  The  ASAP  Show  expenses
increased by $523,432 to $1,118,131  for the six months ended  December 31, 2003
as compared to $594,699 for the same period last fiscal year.

Stock  compensation  expenses of  approximately  $6,600 were  recognized for the
six-month  ended December 31, 2003 due to issuance of warrants for 30,000 shares
of common stock.

NET LOSS

The Company  recorded a net loss of $780,762 for the six months  ended  December
31,  2003,  an increase  of  $207,353 in net loss;  as compared to a net loss of
$573,409  for the same  period  last fiscal  year.  The  increase in net loss is
mainly due to impairment write-down on investments in overseas joint ventures of
$720,459,  net of a  reduction  of equity in losses on  investments  in overseas
joint ventures of $114,948,  net of an increase in net revenues of $695,223,  an
increase in operating expenses of $116,893,  less no recognition on amortization
of software sales of $166,666.  Loss per share as of December 31, 2003 was $0.10
as compared to $0.08 as of December 31, 2002, due to an increase in net loss.

IMPAIRMENT WRITE-DOWN ON INVESTMENTS IN OVERSEAS JOINT VENTURES

The  Company  recorded an  impairment  charge  related to two joint  ventures it
entered  into in 1999 in  Taiwan  and 2000 in  China,  C-Me  Taiwan  and  Global
Purchasing Dotcom, respectively. The Company invested in the joint ventures with
proceeds  received  from the sale of its' ISN software to the  respective  joint
ventures.  The  revenue  from  the  software  sold was  amortized  over a 3-year
straight-line  amortization  method and offset by negative  goodwill.  These two
joint  ventures  had net  losses  since  inception  and were  formed  during the
Internet  boom with a business  model to attract  paid  subscribers  to join the
company's ISN services.  Since the  Company's  core business  model changed from
attracting paid  subscribers for it's ISN services to organizing trade shows and
transaction  sales,  it was determined by the management that the investment was
permanently  impaired and as a result,  the Company has written off the asset in
accordance to SFAS 144.

                                       15
<PAGE>

THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002

REVENUE

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Net gross revenues on transaction  sales for the three months ended December 31,
2003 were $564,640, a decrease of $21,320 or 4% compared to the same period last
fiscal year. The gross profit from transaction  sales for the three months ended
December  31, 2003 was  $155,658,  an increase of $78,846,  or 103%  compared to
$76,812 for the same period last fiscal year. The Company  expects the volume of
gross sales  transactions and the gross profit margin percentage to maintain and
grow, as it continues to utilize its overseas  sourcing network and its external
sales force.

There was no ASAP Show revenue generated for the three months ended December 31,
2003, since the ASAP Shows are held twice a year in February and August.

Subscriber  fees for the three  months  ended  December  31,  2003  were $90,  a
decrease  of $1,285 or 93%  compared  to $1,375 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 to  transaction  sales and revenue
generated through the ASAP Show.

OPERATING COSTS AND EXPENSES

Operating expenses increased by $14,902,  or 3% to $465,116 for the three months
ended December 31, 2003, as compared to $450,214 for the same period last fiscal
year. The increase in operating expenses is primarily due to the increase in the
ASAP Show and its related costs. The ASAP Show expenses increased by $127,211 to
$361,549 for the three  months  ended  December 31, 2003 as compared to $234,338
for the same period last fiscal year.

Stock  compensation  expenses of  approximately  $6,600 were  recognized for the
three  months  ended  December  31, 2003 due to issuance of warrants  for 30,000
shares of common stock.

NET LOSS

The  Company  recorded  a net loss of  $1,025,131  for the  three  months  ended
December  31,  2003,  an increase of $697,253 in net loss;  as compared to a net
loss of $327,878 for the same period last fiscal year.  The increase in net loss
is mainly due to impairment write-down on investments in overseas joint ventures
of $720,459,  less no recognition on  amortization  of software sales of $83,333
and an increase of operating expenses of $58,159.  Loss per share as of December
31,  2003 was  $0.14 as  compared  to $0.04  as of  December  31,  2002 due to a
decrease in net loss.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital  decreased from a deficit of $8,808 as of June
30,  2003 to $46,267 as of  December  31,  2003,  primarily  due to cash used in
operations of approximately  $102,000, net of an increase in prepaid expenses of
approximately  $34,000.  During the current fiscal year, the Company had average
monthly general and administrative expenses of approximately $152,000 (excluding
ASAP Show  production  expenses)  as  compared to $160,000 in the same period of
last fiscal year. The Company will


                                       16
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

keep  implementing  its  cost-minimizing  plan,  which  includes,  reduction  of
professional consulting fees, investor relations and marketing costs.

The  convertible  stock offering led  by C.K. Cooper & Company on April 17, 2003
has not had any commitments or investments as of the date of the filing.

The Company  believes it has  sufficient  cash 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 and operation  revenue 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 and the continued success of the Company's business model. 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,  2004.  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.

ITEM 3.   EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the  participation  of our management,  including
our Chief  Executive  Officer ("CEO") and Chief Financial  Officer  ("CFO"),  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and  procedures  (as defined in Rule  13a-15(e) and 15d-15(e) of the 34
Act) as of a date (the  "Evaluation  Date")  within 90 days  prior to the filing
date of this report. Based upon that evaluation, the CEO and CFO concluded that,
as of December 31, 2003, our disclosure  controls and procedures  were effective
in timely  alerting  them to the  material  information  relating  to us (or our
consolidated  subsidiaries) required to be included in our periodic filings with
the SEC. Based on their most recent  evaluation as of the  Evaluation  Date, the
CEO and the CFO have also concluded  that there are no significant  deficiencies
in the design or operation of internal  control over financial  reporting  which
are  reasonably  likely to  adversely  affect the  Company's  ability to record,
process,  summarize  and report  financial  information,  and such officers have
identified no material weaknesses in internal controls.

There were no  significant  changes made in our internal  control over financial
reporting during the quarter ended December 31, 2003 that are reasonably  likely
to significantly affect these controls.  Thus, no corrective actions with regard
to significant deficiencies or material weaknesses were necessary.

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.

                                       17
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS'

At the 2003 Annual  Meeting of the Company's  Stockholders  held on December 12,
2003 (the "Meeting"),  two proposals were submitted. No other proposals were put
before the meeting. The proposals and voting results were as follows:

         --
         To elect six  directors  of the  Company to serve until the 2004 Annual
         Meeting of Stockholders or until their  successors are duly elected and
         qualified:

                                              FOR                 WITHHELD
         Frank S. Yuan                      4,909,661               245
         Charles H. Rice                    4,909,661               245
         James Vandeberg                    4,909,661               245
         Deborah Shamaley                   4,909,661               245
         Donald C. McNabb, Sr               4,909,661               245
         Mary McNabb                        4,909,661               245

         --
         To ratify the selection of Squar,  Milner,  Reehl & Williamson,  LLP as
         the Company's independent auditors for the fiscal year ending 2004:

         FOR: 4,909,661             AGAINST: 245              ABSTAIN: 0

         --
         No other matters were  submitted to the Company's  shareholders  at the
         annual meeting.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None.

(b) Reports on 8-K

None

                                       18
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                                   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.

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

Date:    02/17/2004             /a/ Frank S. Yuan
----------------------------   -------------------------------------------------
                               Frank S. Yuan, Chairman, Chief Executive Officer


                                       19