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 MARCH 31, 2005


[ ]  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 April 30, 2005:
                  7,472,673 SHARES OF COMMON STOCK (ONE CLASS)
                  --------------------------------------------

Transitional Small Business Disclosure Format: Yes    No  X
                                                  ----   ----

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                                TABLE OF CONTENTS

                                                                            PAGE

PART I  - FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS

         Condensed Balance Sheets as of March 31, 2005
         (unaudited) and June 30, 2004 .......................................3

         Condensed Statements of Operations for the Nine Months Ended
         March 31, 2005 and 2004 (unaudited)..................................4

         Condensed Statements of Operations for the Three Months Ended
         March 31, 2005 and 2004 (unaudited)..................................5

         Condensed Statements of Cash Flows for the Nine Months Ended
         March 31, 2005 and 2004 (unaudited)..................................6

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

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
         PLAN OF OPERATION...................................................11

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

PART II - OTHER INFORMATION..................................................18

     ITEM 1.  LEGAL PROCEEDINGS..............................................18

     ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS....18

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES................................18

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

     ITEM 5.  OTHER INFORMATION..............................................19

     ITEM 6.  EXHIBITS ......................................................19

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

                                       2

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CYBER MERCHANTS EXCHANGE, INC.
                            CONDENSED BALANCE SHEETS

                                                        Mar. 31,      June 30,
                                                          2005          2004
                                                      -----------   -----------
                                                      (Unaudited)
ASSETS

Current assets:
   Cash                                               $    53,840   $    26,964
   Accounts receivable, net                                19,260        16,062
   Prepaid expenses                                        84,183        58,401
                                                      -----------   -----------
                                                          157,283       101,427
Total current assets
Other assets                                               11,368        11,388
                                                      -----------   -----------
Total assets
                                                      $   168,651   $   112,815
                                                      ===========   ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable and accrued expenses              $   503,295   $   220,770
   Deferred revenue                                       200,095       164,745
   Loan payable                                           100,000            --
   Line-of-credit and interest payable
      to stockholder                                      322,477       252,000
                                                      -----------   -----------
Total current liabilities                               1,125,867       637,515
                                                      -----------   -----------

COMMITMENTS AND CONTINGENCIES

Stockholders' deficit:
   Common stock, no par value; 40,000,000
   shares authorized; 7,472,673
     shares issued and outstanding                      9,995,387     9,995,387
   Additional paid-in capital                           3,631,061     3,631,061
   Accumulated deficit                                (14,583,664   (14,151,148
                                                      -----------   -----------

Total stockholders' deficit                              (957,216      (524,700
                                                      -----------   -----------

Total liabilities and stockholders' deficit           $   168,651   $   112,815
                                                      ===========   ===========

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS

                                       3

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Nine Months Ended
                                                                    March 31
                                                          --------------------------
                                                              2005           2004
                                                          -----------    -----------
                                                          (Unaudited)    (Unaudited)
<S>                                                       <C>            <C>
Revenues:
   Transaction sales                                      $   276,563    $ 1,373,342
   Cost of goods sold                                         227,368      1,188,738
                                                          -----------    -----------
   Net revenues from transaction sales                         49,195        184,604
   Tradeshow revenue                                        1,427,439      1,669,477
   Subscriber fees                                                360          1,200
                                                          -----------    -----------

Net revenues                                                1,476,994      1,855,281
                                                          -----------    -----------
Operating expenses:
   General and administrative                               1,389,326      1,452,638
   Payroll and related                                        510,194        624,840
   Stock-based compensation                                        --          6,600
   Depreciation and amortization                                   --          6,902
                                                          -----------    -----------

Total operating expenses                                    1,899,520      2,090,980
                                                          -----------    -----------

Loss from operations                                         (422,526)      (235,699)
                                                          -----------    -----------
Other expenses (income):
   Interest expense, net of interest income                    10,550        (10,652)
   Equity in losses on investments in overseas
      joint ventures                                               --          9,342
   Impairment writedown on investments in
      overseas joint ventures                                      --        720,459
   Other income                                                (1,360)            --
                                                          -----------    -----------
Total other expenses (income)                                   9,190        719,149
                                                          -----------    -----------
Loss before income taxes                                     (431,716)      (954,848)

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

Net loss                                                  $  (432,516)   $  (955,648)
                                                          ===========    ===========
Net loss per share available to common stockholders
      Basic and diluted                                   $     (0.06)   $     (0.13)
                                                          ===========    ===========
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

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                                    March 31,
                                                           ---------------------------
                                                              2005            2004
                                                           -----------     -----------
                                                           (Unaudited)     (Unaudited)
<S>                                                        <C>             <C>
Revenues:
   Transaction sales                                       $   185,688     $    53,487
   Cost of goods sold                                          154,767          85,294
                                                           -----------     -----------
   Net revenues from transaction sales                          30,921         (31,807)
   Tradeshow revenues                                          496,269         621,373
   Subscriber fees                                                 360              90
                                                           -----------     -----------

Net revenues                                                   527,550         589,656
                                                           -----------     -----------
Operating expenses:
   General and administrative                                  539,816         555,116
   Payroll and related                                         172,568         209,811
                                                           -----------     -----------

Total operating expenses                                       712,384         764,927
                                                           -----------     -----------

Loss from operations                                          (184,834)       (175,271)
                                                           -----------     -----------
Other expenses (income):
   Interest expense, net of interest income                      5,636            (385)
   Other income                                                   (238)             --
                                                           -----------     -----------

Total other expenses (income)                                    5,398            (385)
                                                           -----------     -----------

Net loss                                                   $  (190,232)    $  (174,886)
                                                           ===========     ===========
Net loss per share available to
   common stockholders
      Basic and diluted                                    $     (0.03)    $     (0.02)
                                                           ===========     ===========
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

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                                      March 31
                                                                              -----------------------
                                                                                2005          2004
                                                                              ---------     ---------
                                                                             (Unaudited)   (Unaudited)
<S>                                                                           <C>          <C>
Cash flows from operating activities:
   Net loss                                                                   $(432,516)    $(955,648)
   Adjustments to reconcile net loss to net cash
      used in operating activities
      Depreciation and amortization                                                  --         6,902
      Accrued interest                                                            7,477            --
      Stock compensation expense                                                     --         6,600
      Equity in losses on investments in overseas
         joint ventures                                                              --         9,342
      Impairment write-down on investments in overseas
         joint ventures                                                              --       720,459
      Changes in assets and liabilities:
         Accounts receivable, net                                                3,198)         8,630
         Employee advances                                                           --        (5,000)
         Inventory                                                                   --       163,491
         Prepaid expenses                                                       (25,782)       21,902
         Other assets                                                                20            --
         Accounts payable and accrued expenses                                  282,525       111,448
         Deferred revenue                                                        35,350      (204,917)
                                                                              ---------     ---------

Net cash used in operating activities                                          (136,124)     (116,791)
                                                                              ---------     ---------
Cash flows from investing activities:
    Proceed from maturity of certificates of deposit                                 --       100,000
                                                                              ---------     ---------
Cash flows from financing activities:
      Proceeds from loan payable, bank                                               --        70,035
      Repayment of loan payable, bank                                                --       (70,035)
      Proceeds from loan payable                                                100,000            --
      Proceeds from borrowings on line-of-credit
      from stockholder                                                          415,000            --
    Repayments of borrowings on line-of-credit from stockholder                (352,000)           --
                                                                              ---------     ---------

Net cash provided by financing activities                                       163,000            --
                                                                              ---------     ---------
Net increase (decrease) in cash                                                  26,876       (16,791)

Cash, beginning of period                                                        26,964        65,720
                                                                              ---------     ---------

Cash, end of period                                                           $  53,840     $  48,929
                                                                              =========     =========
</TABLE>

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS

                                       6

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF REPORTING

BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim  financial  information  and with the  instructions  to Form
10-QSB and Article 10 of Regulation S-B. Accordingly, they do not include all of
the  information  and  footnotes  required by  accounting  principles  generally
accepted in the United States of America for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
adjustments)  considered  necessary for fair  presentation  have been  included.
Operating  results for the three and nine-month periods ended March 31, 2005 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending June 30, 2005. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended June 30, 2004.

At March 31, 2005, the Company has an accumulated  deficit of approximately  $15
million,  negative  working  capital  of  approximately  $968,600  and a lack of
profitable  operational  history.  The Company  hopes to increase  revenues from
growth of its ASAP Show.  In the absence of  significant  increases in revenues,
the  Company  intends  to fund  operations  through  additional  debt and equity
financing  arrangements.  The successful  outcome of future activities cannot be
determined  at this time and  there  are no  assurances  that if  achieved,  the
Company  will have  sufficient  funds to execute its intended  business  plan or
generate positive operating results.

Management believes that the Company will require approximately $400,000 in cash
to fund operations through March 31, 2006 partly based on the $390,000 cash used
in operating  activities  for the fiscal year ended June 30,  2004.  In order to
fund the additional  $400,000,  management believes it can reduce cash needs for
the period ended March 31, 2006 by $200,000  based upon expense  reductions  and
increased revenue from the ASAP show.  Management intends to fund the additional
$200,000 with unused portions of the line-of-credit from stockholder, additional
stockholder  loans,  third party loans and  unregistered  sales of the Company's
restricted  common  stock to  investors.  At March 31,  2005,  the  Company  had
approximately   $178,000  available  to  borrow  under  a  line-of-credit   from
stockholder.

REVENUE RECOGNITION

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

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

Transaction Sales
-----------------

Transaction  revenues are recorded in accordance  with the Emerging  Issues Task
Force ("EITF") 99-19, Reporting  Revenue  Gross as a  Principal  versus net as

                                       7

<PAGE>

                            CYBER MERCHANTS EXCHANGE

"an Agent." The Company  recognizes net revenues from product  transaction sales
when title to the product passes to the customer.  For all product  transactions
with its customers, the Company acts as a principal, takes title to all products
sold upon  shipment,  and bears  inventory  risk for  return  products  that the
Company  is not  able to  return  to the  supplier,  although  these  risks  are
mitigated  through  arrangements  with  factories,  shippers and suppliers.  For
financial   reporting  purposes  the  Company  presents  the  details  of  gross
transaction  sales and related costs of sales in the accompanying  statements of
operations.

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

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

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.

COMMITMENTS

The Company entered into a co-marketing  agreement with Material World to act as
its global marketing partner.  The Company will receive 50% of the gross profits
associated with sales of booths by the Company. There was no activity related to
this agreement during fiscal 2005.

INDEMNITIES AND GUARANTEES

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

STOCK BASED COMPENSATION

At March 31, 2005, 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,  "Accounting  for Stock Issued to Employees,"
and  related   interpretations.   No  stock-based  compensation  cost  has  been
recognized in net income.  Stock  options  granted under the Plans have exercise
prices equal to the market value of the underlying  common stock on the dates of
grant.  The following table  illustrates the effect on net loss and net loss per
share if the  Company  had  applied  the fair value  recognition  provisions  of

                                       8
<PAGE>

                            CYBER MERCHANTS EXCHANGE

Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based Compensation," to stock-based employee compensation.

<TABLE>
<CAPTION>
                                        9 Months        9 Months         3 Months        3 Months
                                      Ended 03/31/05  Ended 03/31/04  Ended 03/31/05  Ended 03/31/04
                                      -------------   ------------     ------------     -----------
<S>                                    <C>            <C>              <C>              <C>
Net loss:
      As reported                      $  (432,516)   $  (955,648)     $  (190,232)     $  (174,886)
      Add: Total stock based
         employee compensation expense
         determined under fair value
         based method for all awards       (40,000)       (57,000)         (15,000)         (19,000)
                                       -----------    -----------      -----------      -----------
      Pro forma net loss               $  (472,516)   $(1,012,648)     $  (205,232)     $  (193,886)
                                       ===========    ===========      ===========      ===========
Loss per common share, as reported
      Basic and diluted                $     (0.06)   $     (0.13)     $     (0.03)     $     (0.02)

Loss per common share, pro forma
      Basic and diluted                $     (0.06)   $     (0.14)     $     (0.03)     $     (0.03)

</TABLE>

The  above  pro forma  effects  of  applying  SFAS No.  123 are not  necessarily
representative of the impact on reported net loss for the future.

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:

<TABLE>
<CAPTION>
                                                              9 Months Ended                3 Months Ended
                                                         03/31/05       03/31/04        03/31/05          03/31/04
                                                      -----------    -----------    ------------     ------------
<S>                                                     <C>            <C>            <C>                <C>
Numerator for basic and diluted loss per share:
   Net loss                                           $  (432,516)   $  (955,648)   $   (190,232)   $     (174,886)

Denominator for basic and diluted loss per share:
   Weighted average shares (basic and diluted)          7,472,673      7,472,673       7,472,673         7,472,673
                                                      -----------    -----------    ------------     ------------
Loss charged to common stockholders per common share:
   Basic and diluted                                  $     (0.06)   $     (0.13)   $      (0.03)   $        (0.02)
                                                      ===========    ===========    ============     =============
</TABLE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment"  ("Statement 123(R)") to provide investors and other users of financial
statements  with more complete and neutral  financial  information  by requiring
that the  compensation  cost relating to  share-based  payment  transactions  be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability  instruments issued.  Statement 123(R) covers a
wide range of share-based compensation arrangements including share options,

                                       9
<PAGE>

                            CYBER MERCHANTS EXCHANGE

restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  Statement  123(R)  replaces SFAS No. 123, and
supersedes  APB 25. SFAS No. 123, as originally  issued in 1995,  established as
preferable a  fair-value-based  method of  accounting  for  share-based  payment
transactions  with employees.  However,  that Statement  permitted  entities the
option of  continuing  to apply the guidance in APB 25, as long as the footnotes
to  financial  statements  disclosed  what net  income  would  have been had the
preferable  fair-value-based method been used. Public entities (other than those
filing as small business  issuers) will be required to apply Statement 123(R) as
of the first interim or annual reporting period that begins after June 15, 2005.
Small  business  issuers  will be required to apply  Statement  123(R) as of the
first interim or annual  reporting  period that begins after  December 15, 2005.
The Company is in the process of  evaluating  whether the  adoption of Statement
123(R)  will have a  significant  impact on the  Company's  overall  results  of
operations or financial position.

NOTE 2 - BUSINESS SEGMENTS

Reportable  business segments as of and for the periods ended March 31, 2005 and
2004 are as follows:

<TABLE>
<CAPTION>
                                         3 Months              9 Months              3 Months              9 Months
                                   Ended 03/31/05        Ended 03/31/05        Ended 03/31/04        Ended 03/31/04
                                   --------------        --------------        --------------        --------------
<S>                                   <C>                   <C>                   <C>                   <C>
Revenues:
      Transaction sales               $    30,921           $    49,195           $   (31,807)          $   184,604
      ASAP Show                           496,269             1,427,439               621,373             1,669,477
      Other                                   360                   360                    90                 1,200
                                      -----------           -----------           -----------           -----------
                                      $   527,550           $ 1,476,994           $   589,656           $ 1,855,281
                                      ===========           ===========           ===========           ===========
Loss from operations:
      Transaction sales               $   (29,246)          $  (130,666)          $   (98,050)          $   (86,816)
      ASAP Show                          (155,228)             (291,500)              (76,911)             (146,938)
      Other                                  (360)                 (360)                 (310)               (1,945)
                                      -----------           -----------           -----------           -----------
                                      $  (184,834)          $  (422,526)          $  (175,271)          $  (235,699)
                                      ===========           ===========           ===========           ===========
Depreciation and amortization:
      Transaction sales               $        --           $        --           $        --           $     6,902
      ASAP Show                                --                    --                    --                    --
      Other                                    --                    --                    --                    --
                                      -----------           -----------           -----------           -----------
                                      $        --           $        --           $        --           $     6,902
                                      ===========           ===========           ===========           ===========
Identifiable assets:
      Transaction sales               $    70,205                70,205
      ASAP Show                            98,446                98,446
      Other                                    --                    --
                                      -----------           -----------
                                      $   168,651           $   168,651
                                      ===========           ===========
</TABLE>

Net sales as reflected above consist of sales to unaffiliated  customers only as
there were no  significant  intersegment  sales for the periods  ended March 31,
2005 and 2004.

There were no  significant  concentrations  on net segment sales for the periods
ended March 31, 2005 and 2004.

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

                                       10

<PAGE>

                            CYBER MERCHANTS EXCHANGE

NOTE 3 - DEBT

LINE OF CREDIT FROM STOCKHOLDER

The Company has a revolving  line-of-credit  (the "Line")  from Frank Yuan,  the
Company's Chief Executive Officer and a significant Company  stockholder,  which
expires on  September 1, 2006 and  provides  for  borrowings  up to a maximum of
$500,000,  as amended.  The Line bears an interest  rate of 8.0% per annum.  The
balance at March 31, 2005 was $322,477, including accrued and unpaid interest of
$7,477 during the nine months ended March 31, 2005.

LOAN PAYABLE

During the period  ended March 31,  2005,  the  Company  borrowed  $100,000  for
working capital purposes from a related party. The note is non-interest  bearing
and is due in June 2005.

NOTE 4 - PROPOSED REORGANIZATION

The Company is negotiating  an agreement  with Keating  Reverse Merger Fund, LLC
("Keating"), which is outlined as follows:

     o    One for eight and one-half reverse stock split of the Company stock;

     o    The  transfer  of all of the assets and all  liabilities  in excess of
          $425,000 of the Company to ASAP Show Inc., a wholly  owned  subsidiary
          of the Company;

     o    The  distribution  of  8,500,000  shares of common  stock of ASAP Show
          Inc., representing all of the outstanding shares of ASAP Show Inc., to
          the shareholders of the Company on a pro rata basis; and

     o    The sale of  7,000,000  shares  of  common  stock of the  Company  for
          $425,000 to Keating.

The Company has filed a proxy  statement with the SEC for this  transaction  and
shareholder vote, which has been approved by the SEC. The voting will take place
on May 16, 2005. If the reorganization becomes effective,  immediately after the
effective  date,  the  Company  will  have  no  assets,  no  liabilities  and no
continuing operations and will seek other business partners and opportunities as
appropriate.

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 period
ended March 31, 2005.  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

                                       11

<PAGE>

                            CYBER MERCHANTS EXCHANGE

achievements  expressed  or implied by such  forward-looking  statements.  These
factors  are  discussed  in more  detail  in the  Risk  Factors  section  of the
Company's  Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004.
Given these uncertainties,  readers are cautioned not to place undue reliance on
such forward-looking  statements. The Company disclaims any obligation to update
any such  factors or to announce  publicly  the results of any  revisions of the
forward-looking  statements  contained or  incorporated  by reference  herein to
reflect future events or developments.

STATUS OF OPERATIONS

Background
----------

Cyber  Merchants   Exchange  ("C-Me"  or  the  "Company")  is  an  international
electronic trading,  financing,  logistics and trade show organizer  corporation
that is initially targeting the apparel industry.  C-Me has set the standard for
apparel  global  electronic  trading  and built  the  model  for  other  leading
industries  by adhering to a simple  formula for  success.  The  following  four
interlocking  services make the Company unique: 1) ASAP Global Sourcing Show - a
trade show for U.S. buyers to meet hundreds of garment exhibitors under one roof
- held twice a year in Las  Vegas,  NV. 2) C-Me  builds  private  extranets,  or
Internet Sourcing Networks ("ISN"), for its retail partners. The ISN matches and
pushes merchandise to the appropriate buyers computer desktops. 3) C-Me's Global
Financial  Platform  ("GFP":  Patent  Pending)  allows  U.S.  buyers to purchase
overseas  merchandise  without  the need of  issuing  a  letter  of  credit.  4)
Logistics warehouse,  shipping, and billing services for overseas manufacturers.
The Company  presently has  representatives  located in 25 countries  throughout
Asia, Africa, and the Middle East to facilitate international transactions.

Services
--------

ASAP GLOBAL SOURCING SHOW
The Apparel  Sourcing  Association  Pavilion  ("Global  Sourcing  Show" or "ASAP
Show") is bringing a totally new concept to the trade show industry.  C-Me has a
unique  opportunity  to make the ASAP Show  successful  because of the Company's
global presence and management  expertise in the apparel industry.  In addition,
there were no trade shows for the  producing  countries to exhibit in the U.S.A.
to gain container load orders until the ASAP show was launched.  Also,  many are
reluctant to travel  overseas.  Therefore,  the ASAP Show is well positioned for
buyers and overseas manufacturers.

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

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

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                            CYBER MERCHANTS EXCHANGE

ASAP CHINA BUYING TRIP 2005
China Buying Trip 2005 is being arranged by C-Me to bring 150 U.S. buyers,  each
with more than $10 million in purchasing  power, to four  production  centers in
China. This event has been  overwhelmingly  supported by the U.S Cotton Council,
American  Apparel and Footwear  Association,  The CIT Group  ("CIT"),  Ernst and
Young, and many other leading  corporations and associations.  The first tour of
its kind is  designed  for U.S.  buyers  prepared  to place  production  orders,
license their  brands,  understand  China's  distribution  channels,  find joint
ventures possibilities and relocate U.S. textile plants to China.  Participation
from the U.S.  side  will  include  such  prominent  names as Fruit of the Loom,
Jockey and many others. The trip is currently planned for May 20 - June 4, 2005.

MATERIAL WORLD
Material World is a twice-a-year  textile and accessories  sourcing show held in
Miami,  Florida and New York, New York. C-Me will act as Material World's global
marketing  partner  effective  immediately  and will  share  50% of the  profits
associated with sales of booths by C-Me.

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

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

LOGISTICS, WAREHOUSE, SHIPPING AND INVOICE SERVICES
Logistics,  warehousing,  shipping and billing  services  are also  provided for
overseas manufacturers.

REVENUE MODEL

The ASAP Show
-------------

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

E-commerce Transactions
-----------------------

The Company charges a minimum of 5%-10% commission when representing U.S. buyers
who wish to utilize C-Me as their  buying agent to source their goods  overseas.
C-Me can also act as the principal to purchase the pre-sold  merchandise  with a
minimum profit margin of 20%. There is high demand for C-Me's

                                       13

<PAGE>

                            CYBER MERCHANTS EXCHANGE

sourcing  abilities  by the U.S.  apparel  buyers and C-Me is in the  process of
selecting the U.S. apparel buyers it wants to represent.

Global Financial Platform
-------------------------

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

CIT charges 1.5% of the invoice  value as its  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.
There were no transactions with CIT during the nine-month period ended March 31,
2005.

Logistics, Warehousing, Shipping and Billing
--------------------------------------------

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

RESULTS OF OPERATIONS

Nine Months Ended March 31, 2005 and 2004
-----------------------------------------

REVENUE

Gross  revenue from  transaction  sales for the nine months ended March 31, 2005
were  $276,563,  a decrease of $1,096,779 or 80% compared to $1,373,342  for the
same  period  last  fiscal  year.  The  reason  for such a  significant  drop on
transaction  sales is because the Company  allocates  most of its  resources and
efforts to ASAP Show  production and  promotion.  The Company  anticipates  that
transactions  sales will  remain a small  percentage  of the  Company's  overall
business in future periods.

The gross profit from transaction sales for the nine months ended March 31, 2005
was $49,195,  a decrease of  $135,409,  or 73% compared to $184,604 for the same
period last fiscal year. The gross profit margin varies from 15% to greater than
20%, depending on customers and type of merchandise. The Company's management is
constantly seeking for higher gross profit margin in transaction sales.

The ASAP Show  division  gross  revenue for the nine months ended March 31, 2005
was  $1,427,439,  a decrease of $242,038 or 14% compared to  $1,669,477  for the
same period last fiscal  year.  This  decrease  was due to a slight  decrease in
number of  exhibitors  for the ASAP Show in February  2005  compared to the same
show in February 2004.  Another  reason for decreasing  exhibitors is because of
the Men's Apparel Guild in California's ("MAGIC") Sourcing Zone which is held at
the same time.  Management believes the competing show will make it difficult to
have significant growth.

Subscriber  fees for the nine months  ended March 31, 2005 were $360, a decrease
of $840 or 70% compared to $1,200 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 revenue generated through the ASAP Show.

                                       14

<PAGE>

                            CYBER MERCHANTS EXCHANGE

OPERATING EXPENSES

Operating  expenses  decreased by $191,460,  or 9%, to  $1,899,520  for the nine
months ended March 31, 2005, as compared to $2,090,980  for the same period last
fiscal year. The decrease in operating expenses is primarily due to the decrease
in payroll and ASAP Show  expenses.  Payroll and related  expenses  decreased by
$114,646 to $510,194 for the nine months ended December 31, 2005, as compared to
$624,840 for the same period last fiscal year.  The ASAP Show and its  marketing
expenses  decreased by $30,022 to $1,315,503 for the nine months ended March 31,
2005 as  compared  to  $1,345,525  for the same  period  last  fiscal  year.  In
addition,  there were no stock-based  compensation  expense and depreciation and
amortization for the nine months ended March 31, 2005 as compared to $13,502 for
the same period last fiscal year.

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 its 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  wrote  off the  asset in
accordance to SFAS 144,  recognizing a loss of $720,459 in the nine months ended
March 31, 2004.

NET LOSS

The Company  recorded a net loss of $432,516 for the nine months ended March 31,
2005,  an  improvement  of  $523,132 in  earnings;  as compared to a net loss of
$955,648 for the same period last fiscal year.  Such an  improvement in net loss
is mainly due to no fiscal 2005 impairment write-down on investments in overseas
joint ventures of ($720,459 in fiscal 2004),  a reduction on operating  expenses
of $191,460, a decrease in net revenues from transaction sales of $135,409 and a
decrease in tradeshow revenue of $242,038.

Three Months Ended March 31, 2005 and 2004
------------------------------------------

REVENUE

Gross revenues from transaction  sales for the three months ended March 31, 2005
were $185,688,  an increase of $132,201 or 247% compared to $53,487 for the same
period last fiscal year. The gross profit from  transaction  sales for the three
months ended March 31, 2005 was $30,921,  an increase of $62,728,  compared to a
net loss of $31,807 for the same period last fiscal year. Due to switching focus
on the Company's  business  direction towards the ASAP Show, the Company expects
that the gross revenue on transaction sales will remain at a small percentage of
the  Company's  overall net revenues  while the Company will continue to utilize
its overseas sourcing network and its external sales force in seeking for higher
gross profit margin.

                                       15

<PAGE>

                            CYBER MERCHANTS EXCHANGE

The ASAP  Show's  gross  revenue for the three  months  ended March 31, 2005 was
$496,269, a decrease of $125,104 or 20% compared to $621,373 for the same period
last fiscal year.  This  decrease was due to a slight  decrease in the number of
exhibitors  for the ASAP Show in  February  2005,  compared  to the same show in
February  2004,  which  was  resulted  from  direct  competition  with the MAGIC
Sourcing Zone held at the same time.

Subscriber fees for the three months ended March 31, 2005 were $360, an increase
of $270 or 300% compared to $90 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 revenue  generated through the ASAP Show. The Company
expects that  revenues from  subscriber  fees will remain  insignificant  to the
Company's overall net revenues.

OPERATING COSTS AND EXPENSES

Operating expenses decreased by $52,543,  or 7% to $712,384 for the three months
ended March 31,  2005,  as compared to $764,927  for the same period last fiscal
year.  The  decrease in operating  expenses is primarily  due to the decrease in
payroll  and the ASAP  Show  expenses.  The  payroll  and its  related  expenses
decreased  by $37,243 to $172,568  for the nine  months  ended March 31, 2005 as
compared  to  $209,811  for the  same  period  last  fiscal  year  due to  lower
headcount. The ASAP Show expenses decreased by $15,255 to $521,715 for the three
months  ended March 31,  2005 as  compared to $536,970  for the same period last
fiscal year due to the  Company's  cost-minimizing  plan on the show  production
costs.

NET LOSS

The Company recorded a net loss of $190,232 for the three months ended March 31,
2005,  an increase of $15,346 in net loss; as compared to a net loss of $174,886
for the same period last fiscal year.  The increase in net loss is mainly due to
the  reduction  of the ASAP Show  revenue,  which was  resulted  from the direct
competition with the MAGIC Sourcing Zone.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  net working  capital  decreased  from a deficit of $536,088 as of
June 30,  2004 to a deficit of  $968,584  at March 31,  2005,  primarily  due to
increases in accounts payable and accrued expenses of approximately $283,000 and
net  borrowings  from  loan  payable  and  line-of-credit  from  stockholder  of
approximately $170,000.  During the current fiscal year, the Company had average
monthly  expenses of  approximately  $131,000  (excluding  ASAP Show  production
expenses)  as compared  to  $147,000  in the same  period of last  fiscal  year.
Management anticipates maintaining its monthly expenses in the range of $125,000
to $135,000 in the foreseeable future. The Company will focus its efforts on the
semi-annual  ASAP show in Las Vegas,  plus on producing four additional shows in
four different  cities in China,  and Material World Global Pavilion  ("Material
World") show in September  2005 in New York, to generate more revenue.  At March
31, 2005, the Company has current assets of approximately $157,000. With the net
revenue from the ASAP shows, China shows,  Material World and continuing support
from its major  shareholder  to provide a revolving  line-of-credit,  management
believes  the  Company  will have  enough net  working  capital  to sustain  its
business through March 2006 and beyond.

The Company has a revolving  line-of-credit  (the "Line")  from Frank Yuan,  the
Company's CEO and a significant shareholder,  which expires on September 1, 2006
and provides for  borrowings  up to amaximum of $500,000,  as amended.  The Line

                                       16

<PAGE>

                            CYBER MERCHANTS EXCHANGE

carries an interest rate of 8.0% per annum. The balance as of March 31, 2005 was
$322,477.

LOAN PAYABLE

During the period  ended March 31,  2005,  the  Company  borrowed  $100,000  for
working capital purposes from a related party. The note is non-interest  bearing
and is due in June 2005.

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

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

The Company is negotiating  an agreement  with Keating  Reverse Merger Fund, LLC
("Keating"),  which is outlined as follows:

     o    One for eight and one-half reverse stock split of the Company stock;

     o    The  transfer  of all of the assets and all  liabilities  in excess of
          $425,000 of the Company to ASAP Show Inc., a wholly  owned  subsidiary
          of the Company;

     o    The  distribution  of  8,500,000  shares of common  stock of ASAP Show
          Inc., representing all of the outstanding shares of ASAP Show Inc., to
          the shareholders of the Company on a pro rata basis; and

     o    The sale of  7,000,000  shares  of  common  stock of the  Company  for
          $425,000 to Keating.

The Company has filed a proxy  statement with the SEC for this  transaction  and
shareholder vote, which has been approved by the SEC. The voting will take place
on May 16, 2005. If the reorganization becomes effective,  immediately after the
effective  date,  the  Company  will  have  no  assets,  no  liabilities  and no
continuing operations and will seek other business partners and opportunities as
appropriate.

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

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including the Company's Chief  Executive  Officer ("CEO") and Chief
Financial  Officer ("CFO"),  of the  effectiveness  of the Company's  disclosure
controls and procedures.  Based upon that evaluation,  the CEO and CFO concluded
that as of March 31, 2005 our disclosure controls and procedures were effective

                                       17

<PAGE>

                            CYBER MERCHANTS EXCHANGE

in timely  alerting  them to the  material  information  relating to the Company
required to be included in the Company's  periodic filings with the SEC, subject
to the various  limitations on effectiveness  set forth below under the heading,
"LIMITATIONS  ON  THE  EFFECTIVENESS  OF  INTERNAL   CONTROLS,"  such  that  the
information relating to the Company, required to be disclosed in SEC reports (i)
is  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified in SEC rules and forms,  and (ii) is accumulated  and  communicated to
the Company's  management,  including our CEO and CFO, as  appropriate  to allow
timely decisions regarding required disclosure." (b) Changes in internal control
over  financial  reporting.  There has been no change in the Company's  internal
control over financial  reporting that occurred  during the fiscal quarter ended
March  31,  2005  that has  materially  affected,  or is  reasonably  likely  to
materially affect, the Company's internal control over financial reporting.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

The  Company's  management,  including the CEO and CFO, does not expect that our
disclosure  controls  and  procedures  or our internal  control  over  financial
reporting will  necessarily  prevent all fraud and material  error.  An internal
control  system,  no matter how well  conceived and  operated,  can provide only
reasonable,  not absolute,  assurance  that the objectives of the control system
are met.  Further,  the design of a control  system  must  reflect the fact that
there are resource constraints,  and the benefits of controls must be considered
relative to their  costs.  Because of the  inherent  limitations  in all control
systems,  no  evaluation  of controls can provide  absolute  assurance  that all
control  issues and  instances  of fraud,  if any,  within the Company have been
detected.  These  inherent  limitations  include the realities that judgments in
decision-making  can be faulty,  and that breakdowns can occur because of simple
error or mistake.  Additionally,  controls can be circumvented by the individual
acts of some  persons,  by  collusion of two or more  people,  or by  management
override of the internal  control.  The design of any system of controls also is
based in part upon certain  assumptions  about the  likelihood of future events,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated  goals under all  potential  future  conditions.  Over time,  control may
become  inadequate  because  of  changes  in  conditions,  and/or  the degree of
compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company has filed five proxy statements dated October 26, 2004, November 24,
2004, December 16, 2004, February 4, 2005 and March 4, 2005.

                                       18

<PAGE>

                            CYBER MERCHANTS EXCHANGE

The  October  26,  2004  filing was  intended  to hold the annual  shareholders'
meeting and elect six directors of the Company. The meeting was postponed to May
16, 2005 for the purpose of voting on the proposed reorganization.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

None.

                                   SIGNATURES

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

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

Date: 05/13/2005      /s/Frank S. Yuan
----------------      ------------------------------------------------
                      Frank S. Yuan, Chairman, Chief Executive Officer

                                       19