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

                                   FORM 10-QSB

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

                For the Quarterly Period Ended: February 28, 2006

                        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             (IRS Employer Identification No.)
incorporation or organization)

             936A Beachland Boulevard Suite 13, Vero Beach, FL 32963
                    (Address of principal executive offices)

                                 (772) 231-7544
                           (Issuer's telephone number)

Check  whether  the  registrant  (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
|_|.

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_|.

As of March 31,  2006,  there were  10,119,040  shares of common  stock,  no par
value, outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|.

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

<S>                                                                                                  <C>
           Condensed Balance Sheet as of February 28, 2006 (unaudited)                               1

           Condensed Statements of Operations for the three month period ended
           February 28, 2006 and the period from August 25, 2005 ("Inception")
           through February 28, 2006
           (unaudited)                                                                               2

           Condensed Statement of Cash Flows for the period from August 25, 2005
           ("Inception") through February 28, 2006
           (unaudited)                                                                               3

           Notes to Condensed Financial Statements (unaudited)                                    4-10

   Item 2.      Management's Discussion and Analysis
                  or Plan of Operation                                                           11-24

   Item 3.      Controls and Procedures                                                             25

   PART II.OTHER INFORMATION

   Item 1.        Legal Proceedings                                                                 26

   Item 2.        Changes in Securities                                                             26

   Item 3.        Defaults Upon Senior Securities                                                   26

   Item 4.        Submission of Matters to a Vote of Security Holders                               26

   Item 5.        Other Information                                                                 26

   Item 6.        Exhibits                                                                          26

   Signatures                                                                                       27

   Certifications                                                                                28-30
</TABLE>

<PAGE>

Part I - Financial Information

Item 1.  Financial Statements

Statements  made in this  Form  10-QSB  (the  "Quarterly  Report")  that are not
historical or current facts are  "forward-looking  statements"  made pursuant to
the safe harbor  provisions  of Section 27A of the  Securities  Act of 1933,  as
amended (the "Act"), and Section 21E of the Securities  Exchange Act of 1934, as
amended (the "Exchange  Act").  These  statements often can be identified by the
use  of  terms  such  as  "may",  "will",  "expect",  "believe",   "anticipate",
"estimate",  "approximate",  or  "continue",  or  the  negative  thereof.  Cyber
Merchants  Exchange,  Inc.  (the  "Company")  intends that such  forward-looking
statements  be subject to the safe  harbors  for such  statements.  The  Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking  statements,   which  speak  only  as  of  the  date  made.  Any
forward-looking  statements represent  management's best judgment as to what may
occur in the future. However,  forward-looking  statements are subject to risks,
uncertainties and important factors beyond the control of the Company that could
cause actual results and events to differ materially from historical  results of
operations  and events  and those  presently  anticipated  or  projected.  These
factors  include  adverse  economic  conditions,   entry  of  new  and  stronger
competitors,  inadequate capital and unexpected costs. The Company disclaims any
obligation  subsequently  to revise any  forward-looking  statements  to reflect
events or  circumstances  after the date of such  statement  or to  reflect  the
occurrence of anticipated or unanticipated events.

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                        (A Development Stage Enterprise)
                         CONDENSED FINANCIAL STATEMENTS
                     For the period ended February 28, 2006

<PAGE>



                         CYBER MERCHANTS EXCHANGE, INC.
                        (A Development Stage Enterprise)
                             CONDENSED BALANCE SHEET

                                                               February 28, 2006
                                                                   (unaudited)
ASSETS
  Current assets
         Cash                                                   $       81,774
                                                                --------------

         Total current assets                                           81,774
                                                                --------------

                Total assets                                    $       81,774
                                                                ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:
         Accounts payable                                       $        3,850
         Due to former affiliate                                        50,000
                                                                --------------

          Total current liabilities                                     53,850

   Commitments and contingencies

    Stockholders' equity:
         Common stock, no par value; 40,000,000
             shares authorized, 10,119,040 shares issued
             and outstanding                                           100,000
         Deficit accumulated during development stage                  (72,076)
                                                                ---------------

         Total stockholders' equity                                     27,924
                                                                --------------

         Total liabilities and stockholders' equity              $      81,744
                                                                 =============


   The accompanying notes are an integral part of these financial statements.

                                       1
<PAGE>





                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                Period from
                                          Three Months Ended           August 25, 2005 ("Inception")
                                          February 28, 2006             through February 28, 2006
                                          -----------------             --------------------------

<S>                                         <C>                                     <C>
Revenue                                     $            -                          $           -

Operating expenses:
   Non-cash compensation                                 -                                 25,000
   Other general and
     administrative expenses                        22,275                                 47,076
                                             --------------                          -------------

Total operating expenses                           (22,275)                               (72,076)
                                            ---------------                         --------------

Net loss                                    $      (22,275)                         $     (72,076)
                                            ===============                         ==============

Net loss per share:
   basic and diluted                                  (NIL)                         $        (0.01)
                                            ===============                         ==============

Weighted average number of
  shares outstanding,
  basic and diluted                             10,119,040                              6,350,833
                                            ==============                              =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>



                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (unaudited)

                                                           Period from
                                                   August 25, 2005 ("Inception")
                                                    through February 28, 2006
                                                    -------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                         $  (72,076)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Stock issued for services                                         25,000
Changes in:
   Accounts payable                                                   3,850
                                                               ------------

   Net cash used in operating activities                            (43,226)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                           490,000
   Cash disbursed to former affiliate                              (365,000)
                                                                 -----------

Net cash flows from financing activities                            125,000
                                                                 ----------

Net increase in cash                                                 81,774

Cash and cash equivalents, beginning of period                            -
                                                              -------------

Cash and cash equivalents, end of period                        $    81,774
                                                                 ==========

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>


                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                February 28, 2006
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

      The  accompanying   unaudited  condensed  financial  statements  of  Cyber
      Merchants Exchange,  Inc. (the "Company") are presented in accordance with
      the  requirements  for Form  10-QSB and Article 10 of  Regulation  S-X and
      Regulation  S-B.  Accordingly,  they do not include all of the disclosures
      required by accounting  principles generally accepted in the United States
      of America.  In the opinion of management,  all adjustments  (all of which
      were of a normal recurring nature) considered  necessary to fairly present
      the  financial  position,  results  of  operations,  and cash flows of the
      Company on a consistent basis,  have been made.  Operating results for the
      period  ended  February  28, 2006 are not  necessarily  indicative  of the
      results that may be expected for the period ending May 31, 2006.

      The Company recommends that the accompanying  financial statements for the
      interim  period be read in conjunction  with the financial  statements and
      notes thereto included in the Company's annual report on Form 10-KSB,  for
      the period ended May 31, 2005.

      Use of Estimates

      The  preparation  of financial  statements in conformity  with  accounting
      principles  generally  accepted in the United  States of America  requires
      management  to make  estimates  and  assumptions  that affect the reported
      amounts of assets and liabilities and disclosure of contingent  assets and
      liabilities  as of the date of the financial  statements  and the reported
      amounts of revenues  and  expenses  during the  reporting  period.  Actual
      results could differ from those estimates.

      Measurement of Non-cash Compensation

      The  Company  values   non-cash   equity   transactions   in  relation  to
      contemporaneous cash sales of equivalent equity securities.

      Indemnities

      The Company indemnifies its directors,  officers,  employees and agents to
      the maximum extent permitted under the laws of the State of California.

                                       4
<PAGE>


                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
                                February 28, 2006
                                   (Unaudited)

NOTE 2 - ORGANIZATION AND REORGANIZATION

      ORGANIZATION

      Cyber Merchants  Exchange,  Inc. ("the Company") was  incorporated in July
      1996,  under the laws of the State of  California.  However,  based on the
      nature of the Company's reorganization, as discussed below, for accounting
      purposes operations are presented beginning August 25, 2005 ("Inception").
      The Company is a development stage company.

      The Company has no  substantive  operations  at February  28, 2006 and the
      historical  operations  of the Company are  presented  for the period from
      Inception. See Accounting Treatment section, below.

      REORGANIZATION

      The Company's shareholders approved a reorganization of the Company on May
      16, 2005, summarized as follows:

      1.    The Company  transferred of all of its assets and  liabilities  (the
            "Transfer")  to ASAP Show Inc.,  a wholly  owned  subsidiary  of the
            Company ("ASAP"),  effective May 31, 2005 pursuant to a Transfer and
            Assumption Agreement ("Transfer Agreement");
      2.    The  Company  effected  a one for  eight  and  one-half  (1-for-8.5)
            reverse stock split of the Company stock (the "Reverse  Split") with
            special treatment to preserve round lot stockholders, effective July
            18, 2005;
      3.    On August 25,  2005,  the Company  distributed  8,626,480  shares of
            common stock of ASAP,  representing all of the outstanding shares of
            ASAP, to the Company's  shareholders of record on August 18, 2005 on
            a pro rata basis (the "Distribution"); and
      4.    On September 30, 2005, the Company issued 7,104,160 shares of common
            stock to KI Equity Partners II, LLC ("KI Equity") for $415,000, (the
            "Investment")  pursuant to a Securities  Purchase  Agreement ("SPA")
            dated November 19, 2004, and amended August 25, 2005.

   The details of the reorganization transactions above are as follows:

                                       5
<PAGE>


                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
                                February 28, 2006
                                   (Unaudited)

NOTE 2 - ORGANIZATION AND REORGANIZATION

      REORGANIZATION (continued)

      Securities Purchase Agreement

      On November 19, 2004, the Company  entered into a SPA with Keating Reverse
      Merger Fund, LLC ("KRM Fund") and Frank Yuan, the then current Chairman of
      the Board and Chief Executive  Officer of the Company  ("Yuan")  providing
      for the  investment by KRM Fund of $425,000 in the Company in exchange for
      7,000,000  shares of the Company's  common stock.  The SPA was amended and
      restated  effective  August 25, 2005 to,  among other  things,  change the
      Investment  to  $415,000,  change the number of shares to be  purchased to
      7,104,160,  and  substitute KI Equity for KRM Fund.  The  Investment by KI
      Equity was payable to ASAP as a reduction  in the  purchase  consideration
      paid  by  ASAP  under  the  Transfer  Agreement.  To  the  extent  certain
      liabilities assumed by ASAP remained unpaid at closing,  the funds were to
      be used to  satisfy  such  liabilities  with  any  remaining  funds  being
      available to ASAP for working capital to grow its trade show business. The
      Reorganization  will allow the  shareholders of the Company to participate
      in the growth of the trade show  business  through  the  spin-off of ASAP,
      which owns and operates the trade show business (see below). Following the
      Reorganization  and spin off of ASAP,  the Company is majority owned by KI
      Equity and will seek a business combination with an operating company.

      Reverse Split

      The Company had 8,500,000 shares  outstanding at May 31, 2005. The Company
      effected the  one-for-eight  and one-half  share Reverse Split on a record
      date of July 18, 2005.  The Reverse Split allows for special  treatment of
      certain   shareholders   to  preserve  round  lot  (100  shares  or  more)
      shareholders,  which the Company believes will make it more attractive for
      a subsequent combination with an operating company. Under the terms of the
      Reverse Split,  shareholders  holding  between 100 and 850 shares received
      100 shares  after the  Reverse  Split.  The  Reverse  Split did not affect
      shareholders holding less than 100 common shares. No special treatment was
      given to  shareholders  holding more than 850 shares;  however,  they will
      receive a full common share for any fractional  share interest  created by
      the Reverse Split.  Upon giving effect to the Reverse  Split,  the Company
      had 1,014,880 shares outstanding.

                                       6
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
                                February 28, 2006
                                   (Unaudited)

NOTE 2 - ORGANIZATION AND REORGANIZATION

      REORGANIZATION (continued)

      ASAP Show Inc.

      The  Company  formed ASAP on  December  1, 2004.  ASAP was a wholly  owned
      subsidiary  of the Company  prior to the  Distribution  (see  below).  The
      officers and  directors of ASAP are the same as the officers and directors
      of the Company, at that time.

      As a condition  of the  Investment,  the Company and ASAP entered into the
      Transfer Agreement effective May 31, 2005 whereby all of the assets of the
      Company were  transferred  to ASAP and all  liabilities,  obligations  and
      contracts  of the  Company  (known and  unknown,  fixed or  contingent  or
      otherwise)  were assumed by ASAP ("Assumed  Liabilities").  As part of the
      Transfer  Agreement,  the Company  agreed to pay ASAP  $415,000  after the
      Closing of the  Investment  as a reduction of the  purchase  consideration
      paid by ASAP under the Transfer Agreement. All third party consents to the
      assumption  of the  Company's  contracts  by ASAP were  obtained  prior to
      closing of the SPA and the Investment.  ASAP and Frank Yuan have agreed to
      indemnify and hold the Company  harmless  from any loss,  costs or damages
      incurred  by  the  Company  with   respect  to  the  Assumed   Liabilities
      ("Indemnity Claims").  As a condition of the Investment,  the Company must
      have no liabilities,  obligations,  debts,  contracts or agreements of any
      kind or nature at closing.

      Distribution

      On August 25, 2005, the Company  distributed the 8,626,480  shares of ASAP
      to the Company's  shareholders  of record on August 18, 2005 on a pro-rata
      basis (see below).

      On  October 3, 2005,  ASAP  filed a Form  10-SB  with the  Securities  and
      Exchange  Commission  (the "SEC") to register the shares of ASAP's  common
      stock under  Section  12(g) of the  Securities  Exchange  Act of 1934,  as
      amended  ("Exchange  Act"),  which  will  subject  ASAP  to the  reporting
      requirements of the Exchange Act. The Distribution was made to U. S. Stock
      Transfer  Corporation  as depository  agent for ASAP's  shareholders.  The
      depository  agent  will hold the ASAP  shares  until such time as the Form
      10-SB  has  become  effective  and all  comments  from the SEC  have  been
      cleared.  At that time, the certificates  representing ASAP shares will be
      disbursed by the depository agent to ASAP's shareholders.

      The distribution will be taxable to the Company's shareholders.

                                       7
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
                                February 28, 2006
                                   (Unaudited)

NOTE 2 - ORGANIZATION AND REORGANIZATION

      REORGANIZATION (continued)

      Investment

      The closing of the transactions contemplated by the SPA and the Investment
      were  subject  to the  completion  of the  Distribution.  Pursuant  to the
      Investment,  the Company  issued  7,104,160  shares of common  stock to KI
      Equity for $415,000.  The proceeds of the Investment (subject to a $50,000
      reserve  discussed below) were paid to ASAP as a reduction in the purchase
      consideration  paid by ASAP under the Transfer  Agreement and, pursuant to
      the accounting treatment set forth below, such payment has been treated as
      a reduction of stockholders'  equity.  The Company retained $50,000 of the
      above payment in reserve for a period of six months  following the closing
      of the SPA to satisfy any  Indemnity  Claims and has included this balance
      as due to former  affiliate in the accompanying  condensed  balance sheet.
      The Company has  informed  ASAP that the $50,000  reserve  originally  due
      March 30, 2006 will be retained by the Company until the preference  claim
      is  resolved  (see  note 6).  The  closing  of the SPA and the  Investment
      occurred on September 30, 2005.

      Accounting Treatment

      The Company has accounted for the  Reorganization  as a reverse spinoff in
      accordance  with the Emerging  Issues Task Force Issue No. ("EITF") 02-11,
      "Accounting For Reverse Spinoffs." In a reverse spinoff, the legal spinnee
      (ASAP) is treated as though it were the spinnor for  accounting  purposes.
      Reverse  spinoff  accounting is  appropriate as the treatment of the legal
      spinnee as the accounting  spinnor results in the most accurate  depiction
      of the substance of the  transaction for  shareholders  and other users of
      the condensed financial statements.  Under this treatment,  the historical
      financial  statements  of the  Company  will be the  historical  financial
      statements of ASAP. In making its  determination,  the Company  considered
      the following indicators, among others:

      o     The  accounting  spinnor  (legal  spinee,  ASAP) is larger  than the
            accounting spinnee (legal spinnor, the Company);

      o     The fair value of the accounting  spinnor (legal spinnee) is greater
            than that of the accounting spinnee (legal spinnor); and

      o     The accounting spinnor (legal spinnee) retains the senior management
            of the formerly combined entity

                                       8
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
                                February 28, 2006
                                   (Unaudited)

NOTE 3 - STOCKHOLDERS' EQUITY

      On September 30, 2005, the Company issued 7,104,160 shares of common stock
      to KI Equity for $415,000,  pursuant to the SPA described above in Note 2.
      Pursuant to the Transfer  Agreement,  the Company  recorded a reduction in
      stockholders'  equity  for  $415,000  due to  ASAP as a  reduction  of the
      purchase consideration under the Transfer Agreement.

      On October 5, 2005, the Company issued  1,000,000  shares of common stock,
      in restricted  form, to KI Equity at a purchase  price of $0.05 per share,
      for an aggregate  purchase  price of $50,000 in order to provide funds for
      the Company's  working capital needs. Also on October 5, 2005 for services
      rendered,  the Company  issued  250,000 shares of common stock to Kevin R.
      Keating,  the Company's  sole director and officer,  and 250,000 shares of
      common  stock  to a  financial  consultant.  The  stock  is  valued  at an
      aggregate  price of  $25,000,  or $0.05 per  share,  which is the same per
      share  value of the cash  purchases  of common  stock in the  transactions
      mentioned above, which occurred  contemporaneously.  The Company considers
      this  to  be  the  best  estimate  of  the  fair  value  of  the  non-cash
      transaction.  On October 24, 2005,  the Company  issued  500,000 shares of
      common  stock to KI Equity at a  purchase  price of $0.05 per share for an
      aggregate price of $25,000.

      KI  Equity  owns  approximately  85%  of  the  outstanding  shares  of the
      Company's common stock at February 28, 2006.

NOTE 4 - GOING CONCERN

      The  accompanying   condensed  financial  statements  have  been  prepared
      assuming  that the Company will continue as a going  concern.  The Company
      has no  current  operations.  The  Company's  success  is  dependent  upon
      numerous items, certain of which are the successful  acquisition or merger
      with a profitable operating company. Unanticipated problems, expenses, and
      delays are  frequently  encountered in  negotiating  business  mergers and
      acquisitions. No assurance can be given that the Company will successfully
      merge or acquire a profitable company.

      The only foreseeable cash requirements  during the next twelve months will
      relate to maintaining  the corporate  entity,  complying with the periodic
      reporting  requirements of the U.S. Securities and Exchange Commission and
      evaluating and reviewing possible business ventures and opportunities.  In
      order to meet  these cash  requirements,  the  Company  will have to raise
      funds  through  the  issuance  of debt and/or  equity  securities.  If new
      capital is required, the Company may not be able to raise it; or the terms
      of such funds may not be acceptable to the Company.

                                       9
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                February 28, 2006
                                   (Unaudited)

NOTE 5 - RELATED PARTY TRANSACTIONS

      On  October  4,  2005,  the  Company  entered  into a  contract  with Vero
      Management,  L.L.C.  ("Vero") for managerial and administrative  services.
      Vero has not been  engaged to provide,  and Vero does not  render,  legal,
      accounting,  investment  banking or capital formation  services.  Kevin R.
      Keating,  the sole  director of the  Company,  is the manager of Vero.  In
      consideration of the services provided, Vero was paid $1,000 for the month
      of October  2005 and $2,500 each month  thereafter  in which  services are
      rendered.

      Kevin R. Keating is the father of Timothy J.  Keating.  Timothy J. Keating
      is the managing member of KI Equity,  which is the majority shareholder of
      the Company.  Timothy J. Keating is also the  principal  member of Keating
      Investments,  LLC,  which is a 90% owner of  Keating  Securities,  LLC,  a
      registered  broker-dealer.   KI  Equity  owns  approximately  85%  of  the
      outstanding  shares of the Company's common stock as of February 28, 2006.
      Kevin R. Keating is not affiliated  with and has no equity  interest in KI
      Equity, Keating Investments,  LLC or Keating Securities, LLC and disclaims
      any beneficial  interest in the shares of the Company's  stock owned by KI
      Equity . Similarly, Keating Investments,  LLC, Keating Securities, LLC and
      KI Equity disclaim any beneficial  interest in the shares of the Company's
      common stock currently owned by Kevin R. Keating.

NOTE 6 - SUBSEQUENT EVENTS

      On March 7, 2006, a complaint was filed against the Company in a Chapter 7
      bankruptcy proceeding in U.S. Bankruptcy Court in the District of Delaware
      in the matter  captioned In Re:  Factory 2-U Stores,  Inc.  The  complaint
      seeks  to  recover  from  the  Company  $91,572  in  alleged  preferential
      transfers made to the Company by the debtor during the  ninety-day  period
      prior to the  filing of the  debtor's  bankruptcy  petition.  The  Company
      intends to defend  against such  preference  claim by asserting  that such
      transfers  were made in the  ordinary  course of  business  and such other
      available defenses.

      To the extent the Company incurs any losses, costs or damages with respect
      to the preference claim,  including attorneys' fees and related costs, the
      Company believes it may recover such losses,  costs and damages from Frank
      Yuan  and  ASAP  pursuant  to the  indemnification  provisions  under  the
      Transfer  Agreement.  The Company has informed Frank Yuan and ASAP that it
      intends to seek  indemnification  from them with respect to the preference
      claim.  Further,  the  Company has  informed  Frank Yuan and ASAP that the
      $50,000  reserve  originally due to be paid March 30, 2006 under the terms
      of the  Transfer  Agreement  will be retained  by the  Company  until this
      preference claim is resolved to satisfy any potential indemnity claims.

                                       10
<PAGE>

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

Forward-Looking Statements

The following discussion may contain certain  forward-looking  statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Exchange Act of 1934.  Such statements are intended to be covered by
the safe harbors created by such provisions.  These statements include the plans
and objectives of management for future growth of the Company,  including  plans
and objectives  related to the  consummation of acquisitions  and future private
and  public  issuances  of  the  Company's  equity  and  debt  securities.   The
forward-looking  statements  included  herein are based on current  expectations
that  involve  numerous  risks and  uncertainties.  Assumptions  relating to the
foregoing  involve  judgments  with  respect  to,  among  other  things,  future
economic,  competitive and market conditions and future business decisions,  all
of which are difficult or impossible to predict accurately and many of which are
beyond the  control of the  Company.  Although  the  Company  believes  that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and,  therefore,  there can be no assurance that
the  forward-looking  statements  included  in this Form 10-QSB will prove to be
accurate.   In  light  of  the   significant   uncertainties   inherent  in  the
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a  representation  by the Company or any other  person
that the objectives and plans of the Company will be achieved.

The words "we," "us" and "our" refer to the Company. The words or phrases "would
be," "will allow,"  "intends to," "will likely result," "are expected to," "will
continue," "is anticipated,"  "estimate,"  "project," or similar expressions are
intended to identify  "forward-looking  statements." Actual results could differ
materially from those projected in the forward looking statements as a result of
a number of risks and  uncertainties,  including but not limited to: (a) limited
amount of resources  devoted to achieving our business  plan; (b) our failure to
implement  our  business  plan within the time period we  originally  planned to
accomplish; (c) because we are seeking to merge with an operating business which
has not yet been  identified,  you will be unable to  determine  whether we will
ever  become  profitable;  and (d) other risks that are  discussed  in this Form
10-QSB or included in our  previous  filings  with the  Securities  and Exchange
Commission.

Company Background

Cyber Merchants  Exchange,  Inc. ("the Company") was  incorporated in July 1996,
under  the  laws  of  the  State  of  California.  Based  on the  nature  of the
reorganization  discussed  below,  the Company has no substantive  operations at
February 28, 2006. As a result of the Company's  reorganization,  for accounting
purposes, the operations are presented beginning August 25, 2005 ("Inception").

                                       11
<PAGE>

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

Reorganization
The Company's shareholders approved a reorganization of the Company on May 16,
2005, summarized as follows:

      1.    The Company  transferred of all of its assets and  liabilities  (the
            "Transfer")  to ASAP Show Inc.,  a wholly  owned  subsidiary  of the
            Company ("ASAP"),  effective May 31, 2005 pursuant to a Transfer and
            Assumption Agreement ("Transfer Agreement");
      2.    The  Company  effected  a one for  eight  and  one-half  (1-for-8.5)
            reverse stock split of the Company stock (the "Reverse  Split") with
            special treatment to preserve round lot stockholders, effective July
            18, 2005;
      3.    On August 25,  2005,  the Company  distributed  8,626,480  shares of
            common stock of ASAP,  representing all of the outstanding shares of
            ASAP, to the Company's  shareholders of record on August 18, 2005 on
            a pro rata basis (the "Distribution"); and
      4.    On September 30, 2005, the Company issued 7,104,160 shares of common
            stock to KI Equity Partners II, LLC ("KI Equity") for $415,000, (the
            "Investment")  pursuant to a Securities  Purchase  Agreement ("SPA")
            dated November 19, 2004, and amended August 25, 2005.

The details of the reorganization transactions above are as follows:

Securities Purchase Agreement

On November 19, 2004, the Company entered into a SPA with Keating Reverse Merger
Fund,  LLC ("KRM Fund") and Frank Yuan,  the then current  Chairman of the Board
and Chief Executive Officer of the Company ("Yuan") providing for the investment
by KRM Fund of $425,000 in the Company in exchange for  7,000,000  shares of the
Company's  common stock.  The SPA was amended and restated  effective August 25,
2005 to, among other  things,  change the  Investment  to  $415,000,  change the
number of shares to be purchased to 7,104,160,  and substitute KI Equity for KRM
Fund.  The  Investment  by KI Equity was payable to ASAP as a  reduction  in the
purchase consideration paid by ASAP under the Transfer Agreement.  To the extent
certain liabilities  assumed by ASAP remained unpaid at closing,  the funds were
to be used to satisfy such  liabilities with any remaining funds being available
to ASAP for working capital to grow its trade show business.  The Reorganization
will allow the  shareholders  of the Company to participate in the growth of the
trade show  business  through the spin-off of ASAP,  which owns and operates the
trade show business (see below).  Following the  Reorganization  and spin off of
ASAP,  the  Company  is  majority  owned by KI Equity  and will seek a  business
combination with an operating company.

                                       12
<PAGE>

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

Reverse Split

The  Company had  8,500,000  shares  outstanding  at May 31,  2005.  The Company
effected the  one-for-eight and one-half share Reverse Split on a record date of
July 18,  2005.  The  Reverse  Split  allows for  special  treatment  of certain
shareholders to preserve round lot (100 shares or more) shareholders,  which the
Company believes will make it more attractive for a subsequent  combination with
an operating company. Under the terms of the Reverse Split, shareholders holding
between 100 and 850 shares  received  100 shares  after the Reverse  Split.  The
Reverse Split did not affect  shareholders  holding less than 100 common shares.
No special  treatment  was given to  shareholders  holding more than 850 shares;
however, they will receive a full common share for any fractional share interest
created by the Reverse  Split.  Upon giving  effect to the  Reverse  Split,  the
Company had 1,014,880 shares outstanding.

ASAP Show Inc.

The Company formed ASAP on December 1, 2004. ASAP was a wholly owned  subsidiary
of the Company prior to the Distribution (see below). The officers and directors
of ASAP are the same as the officers and directors of the Company, at that time.

As a condition of the Investment, the Company and ASAP entered into the Transfer
Agreement  effective  May 31, 2005 whereby all of the assets of the Company were
transferred  to ASAP  and all  liabilities,  obligations  and  contracts  of the
Company  (known and unknown,  fixed or contingent or otherwise)  were assumed by
ASAP ("Assumed  Liabilities").  As part of the Transfer  Agreement,  the Company
agreed to pay ASAP $415,000  after the Closing of the  Investment as a reduction
of the purchase  consideration  paid by ASAP under the Transfer  Agreement.  All
third party consents to the  assumption of the Company's  contracts by ASAP were
obtained  prior to  closing of the SPA and the  Investment.  ASAP and Frank Yuan
have agreed to indemnify and hold the Company  harmless from any loss,  costs or
damages  incurred  by  the  Company  with  respect  to the  Assumed  Liabilities
("Indemnity Claims"). As a condition of the Investment, the Company must have no
liabilities,  obligations,  debts, contracts or agreements of any kind or nature
at closing.

Distribution

On August 25, 2005, the Company  distributed the 8,626,480 shares of ASAP to the
Company's  shareholders  of record on August 18,  2005 on a pro-rata  basis (see
below).

On October 3, 2005,  ASAP filed a Form 10-SB with the  Securities  and  Exchange
Commission  (the  "SEC") to  register  the shares of ASAP's  common  stock under
Section  12(g) of the  Securities  Exchange Act of 1934,  as amended  ("Exchange
Act"),  which will subject ASAP to the  reporting  requirements  of the Exchange
Act. The Distribution was made to U. S. Stock Transfer Corporation as depository
agent for ASAP's  shareholders.  The depository  agent will hold the ASAP shares
until such time as the Form 10-SB has become effective and all comments from the
SEC have been cleared.  At that time, the certificates  representing ASAP shares
will  be  disbursed  by  the  depository  agent  to  ASAP's  shareholders.   The
distribution will be taxable to the Company's shareholders.

                                       13
<PAGE>

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

Investment

The closing of the transactions  contemplated by the SPA and the Investment were
subject to the completion of the Distribution.  Pursuant to the Investment,  the
Company issued 7,104,160  shares of common stock to KI Equity for $415,000.  The
proceeds of the Investment  (subject to a $50,000 reserve  discussed below) were
paid to ASAP as a reduction in the purchase consideration paid by ASAP under the
Transfer Agreement. The Company retained $50,000 of the above payment to ASAP in
reserve for a period of six months  following  the closing of the SPA to satisfy
any  Indemnity  Claims.  The closing of the SPA and the  Investment  occurred on
September 30, 2005.

On March 7, 2006,  a  complaint  was filed  against  the  Company in a Chapter 7
bankruptcy  proceeding in U.S.  Bankruptcy  Court in the District of Delaware in
the matter  captioned In Re:  Factory 2-U Stores,  Inc. The  complaint  seeks to
recover from the Company $91,572 in alleged  preferential  transfers made to the
Company by the debtor  during the  ninety-day  period prior to the filing of the
debtor's  bankruptcy  petition.  The  Company  intends  to defend  against  such
preference  claim by  asserting  that such  transfers  were made in the ordinary
course of business and such other available defenses.

To the extent the Company  incurs any losses,  costs or damages  with respect to
the preference claim,  including  attorneys' fees and related costs, the Company
believes it may recover such losses,  costs and damages from Frank Yuan and ASAP
pursuant to the  indemnification  provisions under the Transfer  Agreement.  The
Company has informed Frank Yuan and ASAP that it intends to seek indemnification
from them with  respect  to the  preference  claim.  Further,  the  Company  has
informed Frank Yuan and ASAP that the $50,000 reserve  originally due to be paid
March 30, 2006 under the terms of the Transfer Agreement will be retained by the
Company  until  this  preference  claim is  resolved  to satisfy  any  potential
indemnity claims.

Liquidity and Capital Resources

The  Company's  total assets as of February  28, 2006 are  $81,774,  of which is
comprised of cash.  The  Company's  current  liabilities  are $53,850,  of which
$50,000 represents the reserve for Indemnity Claims that is payable to ASAP, the
Company's  former  affiliate,  on March 30, 2006 to the extent not used to cover
Indemnity  Claims.  As discussed  above, the Company has informed Frank Yuan and
ASAP that it will retain the $50,000 reserve beyond March 30, 2006 and until the
preference claim is resolved. The other foreseeable cash requirements during the
next twelve months will relate to maintaining  the corporate  entity,  complying
with the periodic  reporting  requirements  of the U.S.  Securities and Exchange
Commission  and  evaluating  and  reviewing   possible   business  ventures  and
opportunities. In order to meet these cash requirements, the Company may have to
raise funds  through  the  issuance of debt  and/or  equity  securities.  If new
capital is  required,  the  Company may not be able to raise it; or the terms of
such funds may not be acceptable to the Company.

                                       14
<PAGE>

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

On September 30, 2005, the Company issued 7,104,160 shares of common stock to KI
Equity for $415,000,  pursuant to the SPA.  Pursuant to the Transfer  Agreement,
the Company paid  $365,000 to ASAP as a reduction of the purchase  consideration
under the Transfer  Agreement.  The Company  retained $50,000 payable to ASAP in
reserve for a period of six months  following  the closing of the SPA to satisfy
any  Indemnity  Claims.  The Company will retain the $50,000  reserve  until the
preference claim is resolved.

On October 5, 2005,  the Company  issued  1,000,000  shares of common stock,  in
restricted  form,  to KI Equity at a purchase  price of $0.05 per share,  for an
aggregate  purchase price of $50,000 in order to provide funds for the Company's
working  capital  needs.  Also on October  5, 2005 for  services  rendered,  the
Company issued 250,000 shares of common stock to Kevin R. Keating, the Company's
sole  director  and officer,  and 250,000  shares of common stock to a financial
consultant.  The stock is valued at an aggregate price of $25,000,  or $0.05 per
share,  which is the same per share value of the cash  purchases of common stock
in the  transactions  mentioned  above,  which occurred  contemporaneously.  The
Company considers this to be the best estimate of the fair value of the non-cash
transaction.

On October 24, 2005,  the Company  issued  500,000  shares of common stock to KI
Equity at a purchase price of $0.05 per share for an aggregate price of $25,000.

The  following is a summary of the  Company's  cash flows  provided by (used in)
operating, investing, and financing activities:

                                                    Period from August 25, 2005
                                                     through February 28, 2006

        Operating activities                          $         (43,226)
        Investing activities                                          -
        Financing activities                                    125,000
                                                      -----------------

        Net effect on cash                            $          81,774
                                                      =================

Results of Operations

For the period from August 25, 2005 ("Inception")  through February 28, 2006 the
Company had no activities  that produced  revenues  from  operations.  Operating
expenses for the period from Inception  through  February 28, 2006 were $72,076,
of which $25,000 consisted of non-cash compensation paid to our sole officer and
a financial consultant.

                                       15
<PAGE>

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

Going Concern

The accompanying condensed financial statements have been prepared assuming that
the  Company  will  continue  as a going  concern.  The  Company  has no current
operations.  The Company's success is dependent upon numerous items,  certain of
which are the  successful  acquisition  or merger  with a  profitable  operating
company. Unanticipated problems, expenses, and delays are frequently encountered
in negotiating business mergers and acquisitions. No assurance can be given that
the Company will successfully merge or acquire a profitable company.

The only foreseeable cash requirements during the next twelve months will relate
to  maintaining  the corporate  entity,  complying  with the periodic  reporting
requirements of the U.S.  Securities and Exchange  Commission and evaluating and
reviewing possible business ventures and  opportunities.  In order to meet these
cash requirements,  the Company will have to raise funds through the issuance of
debt and/or equity securities.  If new capital is required,  the Company may not
be able to raise  it; or the terms of such  funds may not be  acceptable  to the
Company.

Critical accounting estimates

In preparing the financial statements,  management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the statements of financial condition.

Measurement of Non-cash  Compensation

On October 5, 2005,  the Company  issued an aggregate  of 500,000  shares of its
common stock in lieu of compensation for services to two individuals.  The stock
was  valued at $0.05 per  share,  which is the same value per share as KI Equity
paid in cash for a purchase  of 500,000  shares.  The  Company  values  non-cash
equity  transactions  in relation to  contemporaneous  cash sales of  equivalent
equity securities.

Plan of Operation

Risk Factors

An investment in our common stock involves  investment risks and the possibility
of the loss of an investor's entire  investment.  A prospective  investor should
evaluate  all  information  about us and the  risk  factors  discussed  below in
relation to his financial circumstances before investing in us.

      1. No Current Operating Business.  We currently have no relevant operating
business,  revenues from  operations  or assets.  Our business plan is to seek a
merger or business  combination with an operating  business.  We face all of the
risks  inherent  in the  investigation,  acquisition,  or  involvement  in a new
business  opportunity.  An investor's  purchase of any of our securities must be
regarded as placing funds at a high risk in a new or "start-up" venture with all
of the unforeseen  costs,  expenses,  problems,  and  difficulties to which such
ventures are subject.

                                       16
<PAGE>

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

      2. No Assurance of Success or Profitability. There is no assurance that we
will acquire a suitable and favorable  business  opportunity in a reverse merger
transaction.  In addition, even if we become involved in a business opportunity,
there is no assurance  that the business we acquire  will  generate  revenues or
profits,  or that the value of our common stock will increase as a result of the
acquired business opportunity.

      3.  Possible  Business  - Not  Identified  and Highly  Risky.  We have not
identified and have no commitments to enter into or acquire a specific  business
opportunity and therefore we can disclose the risks and hazards of a business or
opportunity  that we acquire only in a general  manner,  and cannot disclose the
risks and  hazards of any  specific  business or other  opportunity  that we may
enter into. An investor can expect a potential business  opportunity to be quite
risky.  Our  acquisition of or  participation  in a business  opportunity  could
result in a total loss to our investors and  stockholders if the target business
is  unsuccessful.  Further,  any  investment  in us may  continue  to be  highly
illiquid.

      4. Type of Business Acquired. The type of business that may be acquired is
not identified.  Therefore,  our investors and stockholders  have to rely on our
management  to  determine  which  target  business  to  pursue.   There  are  no
controlling  parameters  of the business to be  acquired.  Thus,  ultimately  an
investment will depend on the target business and therefore investors in us will
be  subject  to all the  risks  that  would be  associated  with  that  selected
business.  Our  management may have the right to approve and authorize a reverse
merger  transaction  with a target  company  without  obtaining  the vote of the
majority of our stockholders.

      5. Impracticability of Exhaustive Investigation. We have limited funds and
lack full-time  management  which will likely make it impracticable to conduct a
complete and  exhaustive  investigation  and analysis of a business  opportunity
before we commit our  limited  capital and other  resources  to acquire a target
business. Management decisions,  therefore, likely will be made without detailed
feasibility studies,  independent analysis,  market surveys, and the like which,
if we  had  more  funds  available  to  us,  would  be  desirable.  We  will  be
particularly  dependent in making  decisions  upon  information  provided by the
promoter,  owner,  sponsor,  or others associated with the business  opportunity
seeking to be acquired by us.

      6. Lack of Diversification. Because of our limited financial resources, it
is unlikely that we will be able to diversify our  acquisitions  or  operations.
The inability to diversify our  activities  into more than one area will subject
our  investors and  stockholders  to economic  fluctuations  within a particular
business  or industry  and  therefore  increase  the risks  associated  with the
investment.  We only intend to acquire a single  business  opportunity  and thus
your investment will lack diversification.

                                       17
<PAGE>

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

      7. Possible Reliance upon Unaudited Financial Statements.  We will require
audited  financial  statements from target companies that we propose to acquire.
No assurance can be given, however, that audited financials will be available at
the closing of the reverse merger transaction. In cases where audited financials
are unavailable,  we will have to rely upon unaudited  information received from
target companies' management that has not been verified by outside auditors. We,
at the time of acquisition,  will be subject to the reporting  provisions of the
Securities  Exchange Act of 1934, as amended (the "Exchange Act"), and thus will
be required  to furnish  certain  information  about  significant  acquisitions,
including audited  financial  statements for any business that the shell company
acquires. Consequently,  acquisition prospects that do not have or are unable to
obtain the required audited statements may not be appropriate for acquisition so
long as the reporting  requirements of the Exchange Act are applicable.  But, in
cases  where we have  completed  a reverse  merger  transaction  in  reliance on
unaudited  financial  statements and audited  statements cannot  subsequently be
obtained,  the  continued  ability of the  post-transaction  company to remain a
reporting company and publicly trading will be in jeopardy and may significantly
reduce the value of your investment.

      8. Investment Company Regulation. We do not intend to become classified as
an  "investment   company"  under  the  Investment  Company  Act  of  1940  (the
"Investment  Act").  We believe  that we will not become  subject to  regulation
under the  Investment  Act because (i) we will not be engaged in the business of
investing or trading in securities,  and (ii) any  acquisition  undertaken  will
result in the target company  obtaining a majority  interest in us. Should there
be  a  requirement  to  register  as  an  investment  company,  it  would  cause
significant  registration and compliance  costs. Any violation of the Investment
Act will subject us to materially adverse consequences. Should the SEC find that
we are  subject  to  the  Investment  Act,  and  order  registration  under  the
Investment  Act,  we would  resist  such  finding  and take  steps to avoid such
registration.  Irrespective  of  whether  the SEC or we were to  prevail in such
dispute about whether or not we are an investment company,  however, the damages
and delays would be costly.

      9. Other Regulation.  Any acquisition made by us may be of a business that
is subject to regulation or licensing by federal,  state, or local  authorities.
Foreign  companies may also be  considered,  and be subject to similar  business
regulations  as are  applicable  in the United States and also may be subject to
limitations on ownership by foreign  persons and entities.  Compliance with such
regulations  and  licensing  can be expected to be a  time-consuming,  expensive
process and may limit our other  investment  opportunities.  We intend to pursue
potential business  opportunities in foreign countries,  including China, and as
such, such opportunities will be subject to foreign country laws and regulations
affecting  foreign   investment,   business   operations,   currency   exchange,
repatriation  of profits,  and  taxation,  which will  increase the risk of your
investment.

      10.  Dependence  upon  Management.  We will be heavily  dependent upon the
skills, talents, and abilities of our management to implement our business plan.
Our management  may devote limited time to our affairs,  which may be inadequate
for our  business,  and may delay the  acquisition  of any business  opportunity
considered.   Furthermore,   management   has  little   experience  in  seeking,
investigating,  and  acquiring  businesses  and will  depend  upon  its  limited
business  knowledge in making decisions  regarding our acquisition of a business
opportunity.  Because  investors  will not be able to  evaluate  the  merits  of
possible  business  acquisitions  by  us,  they  should  critically  assess  the
information concerning the management.

                                       18
<PAGE>

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

      11.  Dependence  upon  Outside   Advisors.   To  supplement  the  business
experience of management,  we may be required to employ  accountants,  technical
experts, appraisers,  attorneys, or other consultants or advisors. Some of these
outside  advisors  may be our  affiliates  or  their  affiliated  entities.  The
selection of any such advisors will be made by our management  without any input
from stockholders.

      12. Conflicts of Interest.  Our management has other business interests to
which they will devote primary attention. As a result, conflicts of interest may
arise that can be resolved  only through the exercise by them of their  judgment
as may be consistent  with their  fiduciary  duties.  Our management will try to
resolve conflicts to the best advantage of all concerned, but there may be times
when an acquisition  opportunity is given to another entity to the  disadvantage
of our stockholders and for which there will be no recourse. It is also expected
that  we  will  engage  Keating   Securities,   LLC,  an  affiliate  of  Keating
Investments,  LLC, the managing member of our controlling stockholder, to act as
a financial advisor in connection with the reverse merger  transaction for which
it may earn a cash and/or equity fee.

      13.  Need  for  Additional  Financing.  In all  likelihood  we  will  need
additional  funds  to  take  advantage  of any  available  acquisition  business
opportunity.  Even if we were to obtain  sufficient funds to acquire an interest
in a business  opportunity,  we may not have sufficient capital to fully exploit
the  opportunity.  Our  ultimate  success  will depend upon our ability to raise
additional  capital  at  the  time  of  the  acquisition  and  thereafter.  When
additional  capital may be needed,  there can be no assurance that funds will be
available  from any  source  or,  if  available,  that they can be  obtained  on
acceptable terms.

      14. Borrowing Transactions. There is a possibility that any acquisition of
a business  opportunity by us will require  borrowing  against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business  opportunity.  This leverage could increase our exposure
to larger losses.  There is no assurance that any business  opportunity acquired
through  borrowing and leverage will generate  sufficient  revenues to cover the
related debt and expenses.

      15. No Foreseeable Dividends. We do not intend to pay any dividends. We do
not  foresee  making  any cash  distributions  in the  manner of a  dividend  or
otherwise.

      16. Loss of Control by Present  Management and Stockholders.  It is likely
that any acquisition of an operating  company will result in a change in control
of the then current  directors,  officers and the stockholders.  Therefore,  our
management  prior to the  acquisition  will be  changed  to those of the  target
company and its  stockholders,  who will then control the combined  company.  At
that time, our  stockholders  will be at investment risk for the decisions about
the  business by persons that they may not know or have any ability to influence
through a board seat or by the voting mechanism of stockholders.

                                       19
<PAGE>

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

      17. Dilutive  Effects of Issuing  Additional  Common Stock. In any reverse
merger transaction,  for tax reasons and management  reasons,  the owners of the
target  company  will be issued a large  number of shares of common  stock which
will dilute the ownership interest of our current stockholders.  In addition, at
the time of the reverse merger,  it will be likely that there will be additional
authorized  but  unissued  shares  that  may be  later  issued  by the  then new
management for any purpose without the consent or vote of the stockholders.  The
acquisition  issuance and  additional  issuances  that may occur will dilute the
interests of our stockholders after the reverse merger transaction.

      18.  Thinly-traded  Public  Market.  Our  securities  will be very  thinly
traded,  and the  price if traded  may not  reflect  the  value of the  company.
Moreover,  there may be a reverse  split of the shares which may not reflect the
value of the company  either.  There can be no  assurance  that there will be an
active market for our shares either now or after we complete the reverse merger.
The market  liquidity  will be  dependant  on the  perception  of the  operating
business  and any steps that its  management  might take to bring the company to
the awareness of investors.  There can be no assurance  given that there will be
any  awareness  generated.  Consequently  investors may not be able to liquidate
their  investment  or  liquidate  it at a price that  reflects  the value of the
business.  If a more  active  market  should  develop,  the  price may be highly
volatile.  Because there may be a low price for our  securities,  many brokerage
firms may not be willing to effect  transactions in the  securities.  Even if an
investor finds a broker willing to effect a transaction in the  securities,  the
combination  of brokerage  commissions,  transfer fees,  taxes,  if any, and any
other  selling  costs may  exceed  the  selling  price.  Further,  many  lending
institutions  will not permit the use of such  securities as collateral  for any
loans.

      19.  Possible  Rule  144  Sales.  The  majority  of our  shares  currently
outstanding are "restricted securities" within the meaning of Rule 144 under the
Securities  Act of 1933,  as amended (the "Act").  As restricted  shares,  these
shares may be resold only  pursuant to an  effective  registration  statement or
under  the  requirements  of  Rule  144  or  other  applicable   exemption  from
registration  under the Act and as required under  applicable  state  securities
laws.  Rule  144  provides  in  essence  that a person  who has held  restricted
securities  for a period of one year may, under certain  conditions,  sell every
three months, in brokerage transactions, a number of shares that does not exceed
the  greater of 1.0% of a  company's  outstanding  common  stock or the  average
weekly trading volume during the four calendar weeks prior to the sale. There is
no  limit  on  the  amount  of  restricted  securities  that  may be  sold  by a
non-affiliate after the restricted  securities have been held by the owner for a
period of two years. Current stockholders who own 10% or more of our shares will
likely be deemed an affiliate  until 90 days after a reverse merger is completed
with a target company.  After such 90-day period,  and assuming said shares have
been held for more than two years,  these stockholders may be able to sell their
shares  without  volume  restrictions.  A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
our  shares,  may have a  depressive  effect upon the price of our shares in any
market that may develop.

                                       20
<PAGE>

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

General Business Plan

Our plan of  operation  is to seek a target  company  with  which to merge or to
complete a business  combination.  In any transaction,  we will be the surviving
entity, and our stockholders will retain a percentage  ownership interest in the
post-transaction  company.  The amount of the retained  equity  ownership by our
stockholders will be negotiated by our management and the target company. We may
also be required to pay cash and/or  equity fees to third parties that advise us
in connection with the merger or business combination, commonly refereed to as a
reverse  merger.  These third party advisors may include  certain  affiliates of
ours and their affiliated entities.

Typically in connection with the reverse merger transaction involving us and the
target company, there will be a capital funding event for the target business on
a combined basis either at the time of the reverse merger or shortly thereafter.
This may be a  private  placement  by either us or the  target  company,  if the
funding event is contingent on the closing of the reverse merger. If the funding
event is after  the  reverse  merger,  it will  likely be a public  offering  or
private  placement  of our  securities.  It will  often  be the  case  that  the
liquidity  opportunity for our existing stockholders will be tied to the ability
of the old and new investors of the target  enterprise to have  liquidity in the
market for their financial investment.  Therefore,  our stockholders may have to
continue to hold their  investment or may face competition in being able to sell
their shares in the  post-transaction  business in the public market,  which may
depress the price for such a volume of securities.

We will not restrict our search to any specific business, industry or geographic
location,  and we may participate in a business venture of virtually any kind or
nature.  This  discussion  of our plan for  acquiring an  operating  business is
purposefully  general,  and it is not meant to be  restrictive  of the virtually
unlimited   discretion  to  search  for  and  enter  into   potential   business
opportunities.  We anticipate  that we will be able to  participate  in only one
potential  business venture because of our nominal assets and limited  financial
resources.

We may seek a business  opportunity with entities which have recently  commenced
operations,  or that desire to utilize the public  marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate  purposes.  We may acquire assets
and  establish  wholly  owned  subsidiaries  in  various  businesses  or acquire
existing businesses as subsidiaries.

                                       21
<PAGE>

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

We expect  that the  selection  of a business  opportunity  will be complex  and
risky. Due to general economic  conditions,  rapid technological  advances being
made in some  industries  and  shortages of available  capital,  we believe that
there are  numerous  potential  targets  with  either  sound  business  ideas or
operations  seeking the benefits of a shell  company that has complied  with the
federal  reporting  requirements for public  companies and is publicly  trading.
Such  benefits  may  include  facilitating  or  improving  the  terms  on  which
additional  equity  financing may be sought,  providing  liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable  statutes) for all stockholders and other factors.
Potentially,  available  business  opportunities  may  occur  in many  different
industries and at various stages of development, all of which will make the task
of  comparative  investigation  and  analysis  of  such  business  opportunities
extremely  difficult and complex.  We have,  and will continue to have,  limited
capital  with which to provide  the owners of  business  opportunities  with any
significant cash or other assets. We will,  however,  be able to offer owners of
target candidates the opportunity to acquire a controlling ownership interest in
an  issuer  who has  complied  with the  reporting  requirements  under  federal
securities  laws  without  incurring  the cost and time  required  to conduct an
initial public offering.

The analysis of new business  opportunities  will be undertaken by, or under the
supervision of, our management who will likely engage outside advisors to assist
us in this analysis. Some of these outside advisors may be affiliates of ours or
their affiliated entities.  We intend to concentrate on identifying  preliminary
prospective business opportunities which may be brought to our attention through
present  associations  of our officers and  directors,  or by our  advisors.  In
analyzing prospective business  opportunities,  we will consider such matters as
(i)  available  technical,  financial  and  managerial  resources;  (ii) working
capital and other financial  requirements;  (iii) history of operations,  if any
and prospects for the future;  (iv) nature of present and expected  competition;
(v) quality,  experience  and depth of management  services;  (vi) potential for
further  research,  development or exploration;  (vii) specific risk factors not
now foreseeable but that may be anticipated to impact the proposed activities of
the company;  (viii)  potential  for growth or  expansion;  (ix)  potential  for
profit; (x) public  recognition and acceptance of products,  services or trades;
(xi) name identification;  and (xii) other factors that we consider relevant. As
part of our investigation of the business opportunity, we or our advisors expect
to meet personally with or interview management and key personnel.

We may also have to compensate certain advisors,  finders and investment banking
firms for services  rendered in  connection  with the  identification  of target
operating  companies and the negotiation and completion of the transaction.  Due
to  our  limited  resources,  it  is  expect  that  all  or a  portion  of  this
compensation  will be in the form of our common  stock or from cash  provided by
the target company or the funding event. Additional issuance of our common stock
will  have a  further  dilutive  effect on the  percentage  of  shares  held our
stockholders. Keating Securities, LLC, an affiliate of Keating Investments, LLC,
the managing member of our controlling stockholder, will also act as a financial
advisor in connection  with the reverse  merger  transaction  and will be paid a
cash and/or equity fee upon the successful closing of the reverse merger.

We will not  acquire  or merge  with any  company  for which  audited  financial
statements  cannot be obtained within a reasonable  period of time after closing
of the proposed transaction.

                                       22
<PAGE>

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

Acquisition Opportunities

In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation,  reorganization, joint venture, or licensing
agreement with another company or entity. We may also acquire stock or assets of
an existing business. Our management may have the right to approve and authorize
a reverse merger transaction with a target company without obtaining the vote of
the majority of our stockholders. Further, upon consummation of a reverse merger
transaction, it is probable that our present management and stockholders will no
longer be in control of us. In addition, our management, as part of the terms of
the reverse merger transaction,  may resign and may be replaced by new directors
without a vote of our  stockholders.  Any and all sales of shares of our  common
stock may only be made in  compliance  with the  securities  laws of the  United
States and any applicable state.

It is anticipated  that certain  securities  issued by us in connection with the
reverse  merger would be issued in reliance upon  exemptions  from  registration
under application federal and state securities laws. In some circumstances, as a
negotiated element of the reverse merger transaction,  we will be asked to agree
to register all or a part of such securities  immediately  after the transaction
is consummated or at specified times thereafter. In such a case, we will attempt
to negotiate the registration of some or all of our current  outstanding  shares
which are  restricted,  but there is no guarantee that this will be accomplished
or,  if  accomplished,   that  the  registration   rights  identical.   If  such
registration  occurs, it will be undertaken by the surviving entity after it has
successfully  consummated  a  reverse  merger  and is no  longer  considered  an
inactive  company.  The issuance of substantial  additional  securities by us in
connection  with the reverse  merger and their  potential  sale into any trading
market which may develop in our securities  may have a depressive  effect on the
value of our securities in the future. There is no assurance that such a trading
market will develop.

While the actual terms of a reverse merger transaction  cannot be predicted,  it
is expected that the parties to any business  transaction will find it desirable
to avoid the  creation of a taxable  event and thereby  structure  the  business
transaction in a so-called "tax-free" reorganization under Sections 368(a)(1) or
351 of the  Internal  Revenue  Code (the  "Code").  In order to obtain  tax-free
treatment  under the Code,  it may be  necessary  for the owners of the acquired
business to own 80 percent or more of the voting stock of the surviving  entity.
In such event, the equity interest retained by our current stockholders would be
less than 20  percent  of the issued  and  outstanding  shares of the  surviving
entity. This would result in significant dilution in the equity interests of our
stockholders.

In addition to the tax considerations  discussed above, it is likely that in any
reverse merger,  and depending upon,  among other things,  the target  company's
assets and  liabilities,  the equity  interests  of our  stockholders  after the
transaction  will be a small  percentage of the  post-transaction  company.  The
percentage  ownership  may be subject to  significant  reduction in the event we
acquire a target company with significant assets and expectations of growth.

                                       23
<PAGE>

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

We will  participate in a business  opportunity  only after the  negotiation and
execution  of  appropriate  written  agreements.   Although  the  terms  of  the
acquisition  agreements cannot be predicted,  generally such agreements will (i)
require  specific  representations  and  warranties by all of the parties;  (ii)
specify certain events of default and remedies therefor;  (iii) detail the terms
of closing and the  conditions  which must be  satisfied  by each of the parties
prior to and after closing; (iv) outline the manner of bearing costs,  including
costs   associated   with  our   attorneys  and   accountants;   (v)  set  forth
indemnification provisions; and (vi) include miscellaneous other terms.

As stated  above,  we will not  acquire or merge with any  entity  which  cannot
provide independent  audited financial  statements within a reasonable period of
time after closing of the proposed  transaction.  Included in these requirements
is the affirmative duty to file independent audited financial statements as part
of a  Current  Report  on Form  8-K,  required  to be  filed  with  the SEC upon
consummation of a merger or acquisition, as well as audited financial statements
included in an Annual Report on Form 10-K (or Form 10-KSB,  as  applicable).  If
such audited financial  statements are not available at closing,  or within time
parameters necessary to insure compliance with the reporting  requirements under
federal securities laws, or if the audited financial  statements provided do not
conform to the  representations  made by the  business to be  acquired,  we will
attempt to negotiate a provision in the definitive closing documents to void the
transaction.  However,  there  is no  guarantee  that we will be  successful  in
including  such a provision  and,  in such case,  the  continued  ability of the
post-transaction  company to remain a reporting company and publicly trading may
be in jeopardy.

We are an insignificant  participant among the firms which engage in the reverse
merger of shell companies into an operating business. There are many established
venture capital and financial concerns that have significantly greater financial
and personnel  resources and  technical  expertise  than we have. In view of our
limited  financial  resources  and  limited  management  availability,  we  will
continue  to  be at a  significant  competitive  disadvantage  compared  to  our
competitors.  As a result,  we may not be able to find suitable target companies
with which to complete a reverse merger transaction.

                                       24
<PAGE>


ITEM 3.       CONTROLS AND PROCEDURES

As of the end of the period  covered by this  report,  the Company  conducted an
evaluation,  under  the  supervision  and with the  participation  of the  Chief
Executive  Officer and Chief  Financial  Officer,  of the  Company's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
1934 Act.  Based on this  evaluation,  the  Chief  Executive  Officer  and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures are effective to ensure that information  required to be disclosed by
the Company in reports that it files or submits  under the 1934 Act is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
Securities and Exchange  Commission rules and forms.  There was no change in the
Company's  internal  control over financial  reporting during the Company's most
recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.

                                       25
<PAGE>


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

            On March 7, 2006,  a  complaint  was filed  against the Company in a
            Chapter 7  bankruptcy  proceeding  in U.S.  Bankruptcy  Court in the
            District  of  Delaware in the matter  captioned  In Re:  Factory 2-U
            Stores, Inc. The complaint seeks to recover from the Company $91,572
            in alleged preferential  transfers made to the Company by the debtor
            during the  ninety-day  period  prior to the filing of the  debtor's
            bankruptcy  petition.  The Company  intends to defend  against  such
            preference  claim by asserting  that such transfers were made in the
            ordinary course of business and such other available defenses.

            To the extent the Company  incurs any losses,  costs or damages with
            respect  to the  preference  claim,  including  attorneys'  fees and
            related  costs,  the Company  believes it may recover  such  losses,
            costs  and  damages  from  Frank  Yuan  and  ASAP  pursuant  to  the
            indemnification provisions under the Transfer Agreement. The Company
            has   informed   Frank  Yuan  and  ASAP  that  it  intends  to  seek
            indemnification  from them with  respect  to the  preference  claim.
            Further,  the  Company  has  informed  Frank  Yuan and ASAP that the
            $50,000  reserve  originally due to be paid March 30, 2006 under the
            terms of the  Transfer  Agreement  will be  retained  by the Company
            until this  preference  claim is resolved  to satisfy any  potential
            indemnity claims.

Item 2.     Changes in Securities

            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

            Exhibits

            31    Certification  pursuant to Rule  13a-14(a) or 15d-14(a)  under
                  the Securities Exchange Act of 1934, as amended.

            32    Certification of Chief Executive  Officer and President of the
                  Company,  pursuant  to 18  U.S.C.  Section  1350,  as  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       26
<PAGE>

                                   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.

                                              By:   /s/ Kevin R. Keating
                                                   -----------------------------
                                                    Principal Executive Officer
                                                    Principal Financial Officer
Date:  April 12, 2006


                                       27