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

                                 ---------------

                                   FORM 10-QSB


(Mark One)

[X]      Quarterly report pursuant section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the quarterly period ended March 31, 1999

[ ]      Transition report pursuant section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the transition period from
 .................to...................

         Commission file number 333-60487


                         CYBER MERCHANTS EXCHANGE, INC.
                                 d.b.a. C-ME.com
              (Exact name of small business issuer in its charter)

        California                                      95-4597370
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

          320 S. Garfield Avenue, Suite 318, Alhambra, California 91801
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (626) 588-3660
--------------------------------------------------------------------------------
                           (Issuer's telephone number)


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
March 31, 1999:
                  5,750,000 Shares of Common Stock (One Class)

Transitional Small Business Disclosure Format: Yes        No  X
                                                   ---       ---
         This document  consists of 18 pages,  excluding  exhibits.  The Exhibit
Index is on page 16.


<PAGE>

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


                                      INDEX


Part I - Financial Information

         Item 1.    Financial Statements ......................................3

         Item 2     Management's Discussion and Analysis of Financial
                    Condition and Results of Operations.......................13

Part II - Other Information

         Item 6.    Exhibits and Reports on Form 8-K .........................16

Signatures ...................................................................18




                                       2
<PAGE>

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


                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements





                                       3
<PAGE>


<TABLE>

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

                                 Balance Sheets
<CAPTION>
                                                                            June 30
                            Assets                                      1997         1998      March 31, 1999
                                                                                                (Unaudited)
<S>                                                               <C>                 <C>            <C>
Current assets:
       Cash and cash equivalents                                  $     4,078         81,636         17,611
       Certificates of deposit                                           --          300,000           --
       Accounts receivable                                              9,560          7,477          5,815
       Notes receivable                                               419,570           --             --
       Other current assets                                             5,901           --             --
                                                                  -----------    -----------    -----------

                       Total current assets                           439,109        389,113         23,426

Property and equipment, net                                            97,524         78,821         54,999

Other assets                                                            4,583          4,562          4,562
                                                                  -----------    -----------    -----------

                                                                  $   541,216        472,496         82,987
                                                                  ===========    ===========    ===========

             Liabilities and Stockholders' Equity

Current liabilities:
       Accounts payable and accrued expenses                      $    44,552         47,502         51,426
       Deferred revenue                                                 4,275          3,965           --
                                                                  -----------    -----------    -----------

                       Total current liabilities                       48,827         51,467         51,426

Stockholders' equity:
       Preferred stock, no par value.  Authorized 10,000,000
              shares; none issued and outstanding                        --             --             --
       Common stock, no par value.  Authorized 40,000,000
              shares; issued and outstanding 4,750,000 shares
              at
              June 30, 1997 and 5,750,000 shares as of June 30,
              1998 and as of March 31, 1999, respectively           1,050,000      1,550,000      1,550,000
       Additional paid-in capital                                      30,000         30,000         30,000
       Accumulated deficit                                           (587,611)    (1,158,971)    (1,548,439)
                                                                  -----------    -----------    -----------

                       Net stockholders' equity                       492,389        421,029         31,561

Commitments and contingency (note 6)

                                                                  $   541,216        472,496         82,987
                                                                  ===========    ===========    ===========
<FN>

See accompanying notes to financial statements.
</FN>
</TABLE>

                                       4
<PAGE>

<TABLE>

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

                            Statements of Operations
<CAPTION>

                                               Year ended June 30     Nine months ended March 31, 1999

                                              1997           1998           1998           1999
                                           -----------    -----------    -----------    -----------
                                                                         (Unaudited)    (Unaudited)
<S>                                        <C>                 <C>            <C>            <C>
Revenues - subscriber's fees               $    35,900         65,722         54,168         41,146

Operating costs and expenses:
     Cost of revenues                          123,104        139,680        106,636         85,210
     General and administrative expenses       550,004        512,849        374,253        362,990
                                           -----------    -----------    -----------    -----------

                Operating loss                (637,208)      (586,807)      (426,721)      (407,054)
                                           -----------    -----------    -----------    -----------

Other income (expenses):
     Loss on sale of fixed assets                 --              (91)          --             --
     Interest income                            50,397         16,338         10,829         17,586
                                           -----------    -----------    -----------    -----------

                Loss before income taxes      (586,811)      (570,560)      (415,892)      (389,468)
                                           -----------    -----------    -----------    -----------

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

                Net loss                   $  (587,611)      (571,360)      (415,892)      (389,468)
                                           -----------    -----------    -----------    -----------

Basic and diluted net loss per share       $     (0.14)         (0.11)         (0.09)         (0.07)
                                           ===========    ===========    ===========    ===========

Weighted-average shares used in
     computation of net loss per share       4,223,178      5,281,889      4,793,478      5,533,944
                                           ===========    ===========    ===========    ===========

<FN>


See accompanying notes to financial statements.
</FN>
</TABLE>

                                       5
<PAGE>
<TABLE>

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

                       Statements of Stockholders' Equity
<CAPTION>

                               Common stock                                             Net
                               ------------              Additional     Accumulated  stockholders'
                                  Shares      Amount   paid-in capital    deficit       equity
                               ----------   ----------   ----------     ----------    ----------

<S>                             <C>         <C>              <C>        <C>           <C>
Balance at June 30, 1996             --     $     --           --             --            --

Issuance of common
    stock at inception          4,750,000    1,050,000         --             --       1,050,000

Deferred compensation
    related to stock options         --           --         30,000           --          30,000

Net loss                             --           --           --         (587,611)     (587,611)
                               ----------   ----------   ----------     ----------    ----------

Balance at June 30, 1997        4,750,000   $1,050,000       30,000       (587,611)      492,389

Issuance of common stock        1,000,000      500,000         --             --         500,000

Net loss                             --           --           --         (571,360)     (571,360)
                               ----------   ----------   ----------     ----------    ----------

Balance at June 30, 1998        5,750,000   $1,550,000       30,000     (1,158,971)      421,029

Net loss (unaudited)                 --           --           --         (389,468)     (389,468)
                               ----------   ----------   ----------     ----------    ----------

Balance at March 31, 1999
(unaudited)                     5,750,000   $1,550,000       30,000     (1,548,439)       31,561
                               ==========   ==========   ==========     ==========    ==========

<FN>

See accompanying notes to financial statements.
</FN>
</TABLE>

                                       6
<PAGE>

<TABLE>
                         CYBER MERCHANTS EXCHANGE, INC.
                                 d.b.a. C-ME.com

                            Statements of Cash Flows
<CAPTION>
                                                              Year ended June 30        Nine Months Ended March, 31, 1999
                                                              1997           1998               1998           1999
                                                          -----------    -----------         -----------    -----------
                                                                                                            (Unaudited)
<S>                                                       <C>               <C>                 <C>            <C>
Cash flows from operating activities:
   Net loss                                               $  (587,611)      (571,360)           (415,892)      (389,468)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
         Depreciation and amortization                         24,632         38,623              24,718         23,823
         Compensation expense related
            to stock options                                   30,000           --                  --             --
         Loss on sale of fixed assets                            --               91                --             --
         Provision for doubtful accounts                         --            3,600                --             --
         Changes in assets and liabilities:
           Accounts receivable                                 (9,560)        (1,517)             (2,890)         1,661
           Other current assets                                (5,901)         5,901               5,901           --
           Other assets                                        (4,583)            21                  21           --
           Accounts payable and accrued expenses               44,552          2,950             (19,655)         3,924
           Deferred revenue                                     4,275           (310)               (640)        (3,965)
                                                          -----------    -----------         -----------    -----------

              Net cash used in operating activities          (504,196)      (522,001)           (408,437)      (364,024)
                                                          -----------    -----------         -----------    -----------

Cash flows from investing activities
   Proceeds from maturities of (payment to)                      --         (300,000)           (400,000)       300,000
        certificates of deposit
   Purchase of property and equipment                        (122,156)       (23,421)            (23,991)          --
   Proceeds from sale of property and equipment                  --            3,410                --             --
   Net proceeds received from (paid to) note receivable      (419,570)       419,570             419,570           --
                                                          -----------    -----------         -----------    -----------

              Net cash provided by
               (used in) investing activities                (541,726)        99,559              (4,421)       300,000
                                                          -----------    -----------         -----------    -----------

Cash flows provided by financing activities
    - proceeds from issuance of common stock                1,050,000        500,000             500,000           --
                                                          -----------    -----------         -----------    -----------

              Net increase in cash and
              cash equivalents                                  4,078         77,558              87,142        (64,024)

Cash and cash equivalents at beginning of period                 --            4,078               4,078         81,636
                                                          -----------    -----------         -----------    -----------

Cash and cash equivalents at end of period                $     4,078         81,636              91,220         17,611
                                                          ===========    ===========         ===========    ===========
Supplemental  disclosure of cash flow  information:
   Cash paid during the period for:
       Income taxes                                       $       800          1,600                --             --
                                                          ===========    ===========         ===========    ===========
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>

                                       7
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                                 d.b.a. C-ME.com

                          Notes to Financial Statements

            (Information  as of March  31,  1999 and for the nine  months  ended
March 31, 1998 and 1999, respectively is unaudited)

(1)    Summary of Significant Accounting Policies

       Cyber Merchants Exchange,  Inc. d.b.a. C-ME.com (the Company and formerly
       known   as   World   Wide   Magic   Net,   Inc.)   is  a   developer   of
       business-to-business  electronic commerce network, whereby a retailer can
       go on-line,  review  product  information  and purchase items through the
       network  developed  and  maintained  by  the  Company.  The  Company  was
       incorporated in July 1996 and commenced its operations in November 1996.

       (a)    Unaudited Interim Financial Information

              The  interim  financial  statements  of the  Company  for the nine
              months  ended March 31, 1998 and 1999,  included  herein have been
              prepared by the Company,  without audit, pursuant to the rules and
              regulations of the SEC.  Certain  information and note disclosures
              normally included in financial  statements  prepared in accordance
              with generally accepted accounting  principles have been condensed
              or omitted  pursuant  to such rules and  regulations  relating  to
              interim financial statements.

              In the opinion of management,  the accompanying  unaudited interim
              financial  statements reflect all adjustments,  consisting only of
              normal  recurring  adjustments,  necessary  to present  fairly the
              financial  position  of the  Company  at March 31,  1999,  and the
              results of its  operations  and its cash flows for the nine months
              ended March 31, 1998 and 1999.

       (b)    Liquidity and Going Concern

              The accompanying  financial statements have been prepared assuming
              the  Company  will  continue as a going  concern.  As shown in the
              accompanying  financial  statements,  the Company has  experienced
              operating losses and negative cash flows from operating activities
              since inception.

              Management's  plans include  obtaining  additional  financing from
              outside  sources,   increasing   revenues  through   collaborative
              arrangements with other companies and other marketing efforts, and
              controlling  operating  costs  and  expenses.   There  can  be  no
              assurance that the Company will realize such plans.

              These matters raise  substantial doubt about the Company's ability
              to  continue as a going  concern.  Accordingly,  the  accompanying
              financial  statements  do not include any  adjustments  that might
              result from the outcome of this uncertainty.

       (c)    Revenue Recognition

              Subscriber's fees represent revenues generated through a one-time,
              nonrefundable  set-up fee and monthly  hosting fees.  Revenues are
              recognized   after  the  services   have  been   rendered  and  no
              significant  vendor  obligation   remains.   Unearned  but  billed
              revenues are deferred.

       (d)    Cash and Cash Equivalents

              The Company considers all highly liquid financial instruments with
              an original  maturity of three  months or less to be cash and cash
              equivalents.

       (e)    Property and Equipment

              Property  and  equipment  are  stated  at  cost.  Depreciation  of
              property and equipment is calculated on the  straight-line  method
              over the estimated useful lives of the assets,  generally three to
              five years.  Leasehold improvements are amortized over the shorter
              of the amortized useful lives or lease term.

                                       8
<PAGE>

       (f)    Income Taxes

              The Company accounts for income taxes using Statement of Financial
              Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes."
              Under SFAS No. 109,  deferred  income taxes  reflect the impact of
              "temporary   differences"   between  assets  and  liabilities  for
              financial  reporting  purposes and such amounts as measured by tax
              law and regulations.

       (g)    Use of Estimates

              Management  of the  Company  has made a number  of  estimates  and
              assumptions relating to the reporting of assets and liabilities to
              prepare these  financial  statements in conformity  with generally
              accepted accounting  principles.  Actual results could differ from
              those estimates.

       (h)    Stock Options

              SFAS No. 123 allows  entities to continue to apply the  provisions
              of APB Opinion No. 25 and provide pro forma net income  disclosure
              for employee stock option grants over the vesting period as if the
              fair-value-based  method defined in SFAS No. 123 had been applied.
              The Company has elected to continue to apply the provisions of APB
              Opinion No. 25 and provide pro forma disclosure provisions of SFAS
              No. 123.

       (i)    Recent Accounting Pronouncement

              In June 1997,  the  Financial  Accounting  Standards  Board (FASB)
              issued  SFAS No.  130,  "Reporting  Comprehensive  Income,"  which
              establishes    standards   for   reporting   and   disclosure   of
              comprehensive income and its components (revenues, expenses, gains
              and losses) in a full set of general purpose financial statements.
              SFAS  No.  130 is  effective  for  fiscal  years  beginning  after
              December  15,  1997 and  requires  reclassification  of  financial
              statements  for  earlier  periods to be provided  for  comparative
              purposes.  The Company has not  determined  the manner in which it
              will  present  the  information  required  by SFAS No.  130 in its
              annual financial statements for the year ending June 30, 1999. The
              Company's  total  comprehensive  loss  for all  periods  presented
              herein would not have differed from those amounts  reported as net
              loss in the statements of operations.

              In June 1997,  the FASB  issued  SFAS No.  131,"Disclosures  about
              Segments of an Enterprise and Related Information." This statement
              establishes  standards  for the way companies  report  information
              about operating segments in annual financial  statements.  It also
              establishes  standards for related  disclosures about products and
              services,  geographic areas and major  customers.  The disclosures
              prescribed  by SFAS No. 131 will be effective  for the year ending
              June 30, 1999.  The Company has  determined  that it does not have
              any separately reportable business segments as of June 30, 1998.

              In  March  1998,  the  American   Institute  of  Certified  Public
              Accountants   issued  Statement  of  Position  ("SOP")  No.  98-1,
              "Software for Internal Use," which provides guidance on accounting
              for the  cost of  computer  software  developed  or  obtained  for
              internal use. SOP No. 98-1 is effective  for financial  statements
              for fiscal years  beginning  after  December 15, 1998. The Company
              does not  expect  that the  adoption  of SOP No.  98-1 will have a
              material impact on its financial statements.

        (j)   Net Loss per Share

              Basic  and  diluted  net loss per  share  are  computed  using the
              weighted  average  number of  outstanding  shares of common stock.
              Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and
              convertible  preferred  stock  issued for  nominal  consideration,
              prior  to the  anticipated  effective  date of an  initial  public
              offering, are included in the calculation of basic and diluted net
              loss  per  share  as if they  were  outstanding  for  all  periods
              presented.

              Net loss per share for the nine  months  ended  March 31, 1999 and
              the year ended June 30,  1998,  respectively  does not include the
              effect  of  145,000  stock  options  and  160,000  stock  options,
              respectively,  and 658,889  common stock  warrants  because  their
              effects are anti-dilutive.

              Net loss per share for the nine  months  ended March 31, 1998 does
              not include the effect of 155,000 stock options and 638,889 common
              stock warrants because their effects are anti-dilutive.

                                       9
<PAGE>

              Net loss per  share  for the year  ended  June 30,  1997  does not
              include the effect of 155,000 stock options  because their effects
              are anti-dilutive.

 (2)   Property and Equipment

       A summary of property and equipment, at cost is as follows:

                                            June 30
                                     -----------------------
                                       1997          1998       March 31, 1999
                                     ---------     ---------      ---------
                                                                 (Unaudited)

Leasehold improvements               $   4,351         4,351          4,351
Furniture and fixtures                  20,026        20,844         20,844
Computer equipment and software         81,509        98,579         98,579
Office equipment                        16,270        16,270         16,270
                                     ---------     ---------      ---------
                                       122,156       140,044        140,044
Less accumulated depreciation
 and amortization                      (24,632)      (61,223)       (85,046)

                                     ---------     ---------      ---------

                                     $  97,524        78,821         54,998
                                     =========     =========      =========


(3)    Notes Receivable

       At June 30, 1997, the notes  receivable  represent  $417,020 due from the
       Company's   President,   bearing  an  interest  rate  at  8%  and  $2,550
       interest-free loans to other employees.  All of the notes receivable were
       repaid in fiscal year 1998.

(4)    Income Taxes

       Income tax expense is comprised of the minimum state  franchise  tax. The
       difference  between  the amount of income tax  benefit  recorded  and the
       amount of income tax benefit  calculated using the U.S. Federal statutory
       rate of 34% is due to a  valuation  allowance  for any  benefit  from net
       operating losses.

       The Company has gross  deferred tax assets  relating  principally  to tax
       effects  of  net   operating   loss   carryforwards.   In  assessing  the
       recoverability of deferred tax assets, management considers whether it is
       more likely than not be realized.  The ultimate  realization  of deferred
       tax assets is dependent  upon the  generation  of future  taxable  income
       during  the  periods  in  which  those   temporary   differences   become
       deductible.  Management considers projected future taxable income and tax
       planning  strategies in making this  assessment.  Based upon the level of
       historical  taxable income and projections for future taxable income over
       the  periods in which the  deferred  tax items are  recognizable  for tax
       reporting  purposes,  management  does not believe it is more likely than
       not the Company will realize the benefits of these  differences  at March
       31,  1999,  June 30, 1998 and 1997.  As such,  management  has recorded a
       valuation  allowance  for the full amount of deferred tax assets at March
       31, 1999, June 30, 1998 and 1997.

       At March 31, 1999,  the Company has  available  net  operating  losses of
       approximately $1,400,000 for Federal income tax purposes to offset future
       taxable  income,  if any,  and expire at various  dates  through the year
       2013. However,  the utilization of net operating losses may be subject to
       certain  limitations as prescribed by Section 382 of the Internal Revenue
       Code.

(5)    Stockholders' Equity

       On January 29, 1998, the Company's Board of Directors  approved a 1-for-2
       reverse split of the Company's  common stock. All common share amounts in
       the accompanying  financial statements have been adjusted for all periods
       presented.  On March 24,  1998,  the  Company  amended  its  articles  of
       incorporation  to have authorized  capital stock of 40,000,000  shares of
       common stock and 10,000,000 shares of preferred stock.

       On  October  15,  1997,  the  Company  entered  into  an  agreement  with
       Burlington Coat Factory Warehouse Corporation (BCF). Under the agreement,
       the Company and BCF will jointly develop a network  whereby  participants
       of the network can do business through Internet.  BCF agrees to assist in
       marketing and promoting this



                                       10
<PAGE>

       network service to its vendors. In return, BCF is free to use the network
       designed and  maintained by the Company and will share a certain  portion
       of the fee  revenue  generated  by this  network  with  the  Company.  In
       addition,  the Company  granted a warrant to BCF to allow BCF to purchase
       up to 10% of the  outstanding  shares of common stock of the Company on a
       fully  diluted  basis,  subject to certain  conditions  as defined in the
       warrant  agreement.  The  common  stock  if  issued  to BCF  will  have a
       registration  right  same as  other  shares  may be  issued  in a  public
       offering.

       The  Company's  stock  option  plan  provides  for the  granting of stock
       options to employees.  The Company has reserved  250,000 shares of common
       stock for issuance  under the plan. The terms and conditions of grants of
       stock  options  are  determined  by the  Board of  Directors.  Generally,
       one-half of the granted option is exercisable after the employee's second
       year of employment.  The remaining option is exercisable after the end of
       the employee's third year of employment.

       A summary of stock option activity is as follows:

                                                              Weighted average
                                          Number of shares     exercise price
                                          ----------------     --------------

Balance at June 30, 1996                        --                  $ --

Options granted                              155,000                 .21
Options terminated                              --                    --
Options exercised                               --                    --
                                            --------                 ----

Balance at June 30, 1997                     155,000                 .21

Options granted                               15,000                 .40
Options terminated                           (10,000)                .40
Options exercised                               --                    --
                                            --------                 ----

Balance at June 30, 1998                     160,000                 .21

Options granted (unaudited)                   15,000                 .40
Options terminated (unaudited)               (30,000)                .40

Balance at March 31, 1999 (unaudited)        145,000                 .19
                                            ========                 ====


       At March 31, 1999 , there were 112,500 shares of options exercisable.

       As of March 31,  1999,  all  options,  except  for  options  granted to 2
       employees for 75,000 shares of common stock,  were granted at an exercise
       price equal to the fair value of the common stock,  and  accordingly,  no
       compensation  cost has been  recognized  for these  stock  options in the
       financial  statements.   Compensation  expense  aggregating  $30,000  was
       recorded  for the  issuance of the options  with an exercise  price below
       fair market value of the common stock.

       The Company applies APB Opinion No.25 in accounting for its Plan. Had the
       Company determined compensation cost based on the fair value at the grant
       date for its stock  options  under SFAS No.123,  the  Company's  net loss
       would have been increased to the pro forma amounts indicated below:

                                                     March 31
                                               ----------------------
                                                  1999         1998
                                               ---------    ---------

                     As reported               $(389,468)    (415,892)
                     Proforma                   (395,000)    (422,000)
                                               =========    =========

                                       11
<PAGE>


       The compensation cost was calculated under the minimum-value method using
       the  assumptions of a three-year  weighted  average  expected life of the
       options and a 6% risk-free interest rate.

(6)    Commitments and Contingency

       The Company  leases office space under a  noncancelable  operating  lease
       that expires on October 27, 1999.

       Future minimum lease payments under noncancelable  operating leases as of
       March 31, 1999 are as follows:

       Year ending June 30:
           1999                                  $    9,492
           2000                                      12,248
                                                    -------

                Total minimum lease payments     $   21,740
                                                    =======


       The Company has been named as a  defendant,  along with  Burlington  Coat
       Factory Warehouse (BCF), in a lawsuit brought by Stanley Rosner (Rosner),
       an individual.  In March 1998,  Rosner commenced an action in the Supreme
       Court of the  State  of New  York  alleging  breach  of oral and  written
       contracts  between  the  Company and Rosner and between BCF and Rosner in
       1997. Rosner claims that he is due certain fees from both the Company and
       BCF  for  services   allegedly   rendered  in  connection   with  certain
       transactions  involving  the  Company  and BCF.  These  transactions  and
       alleged transactions relate to the Internet services that the Company may
       provide to BCF,  and  contemplated  transactions  arising from vendors of
       BCF.  Rosner  claims  that he is due  damages  in an amount not less than
       $5,000,000 plus  unspecified  punitive  damages from both the Company and
       BCF. The Company  intends to vigorously  defend this action.  The Company
       believes  that it is not obligated to make any payments to Rosner and has
       meritorious defenses to all of Rosner's allegations.

       However,  if held  liable  for  the  entire  amount,  this  would  have a
       materially adverse effect upon the Company.

       In December  1998,  the Company  obtained a written  commitment to extend
       line of credit from a bank. The bank committed to provide a $300,000 line
       of credit,  bearing an interest at the bank's  prime rate plus 1.5%.  The
       line of credit will expire on June 30,  1999.  The Company  committed  to
       issue a warrant of 20,000  shares of the  Company's  common  stock to the
       bank.  The warrant  will have a term of five years and an exercise  price
       equal to the initial public offering price of the Company's common stock.




                                       12
<PAGE>



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

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         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 nine months ended March 31, 1999. This quarterly  report contains
certain  forward-looking  statements and the Company's future operation  results
could differ materially from those discussed herein.

Introduction

         The Company was formed in July, 1996 to develop,  establish, and market
web-based  E-commerce  solutions for retailers  and their supply  chains.  These
solutions take the form of three interlocking services: (1) a Virtual Trade Show
("VTS"),  (2) an Internet Sourcing Network ("ISN"),  and (3) Internet EDI (which
is still in the developmental  stages).  The business strategy of the Company is
focused on establishing  collaborative  relationships with U.S.-based  retailers
wherein the Company will  provide the  retailer  with an ISN in return for their
assistance  in  marketing  the  ISN  to  their  supply  chains  vendors.   After
establishing ISN's for these collaborative retail customers, the Company intends
to use the  Internet's  near-global  accessibility  to expand  these  retailers'
supply chains to foreign producing countries, primarily in the Pacific Rim.

         During the  development  stage of the Company,  the  Company's  primary
activities  have involved  developing its VTS and ISN software and database (the
"Software"), organizing its sales force, and marketing its VTS and ISN. Research
and  development  costs are  expensed  as  incurred.  Selling  expenses  consist
primarily of salaries, commissions, and administrative costs associated with the
Company's payroll and marketing personnel.  General and administrative  expenses
include  the costs of  consultants  and other  administrative  functions  of the
Company.

Financial Condition and Results of Operations:

         The Company has had two years and nine months of operation.

Nine months ended March 31, 1998 and 1999

         The following  discussion  sets forth  information  for the nine months
ended March 31, 1999  compared  with the nine months ended March 31, 1998.  This
information has been derived from unaudited interim financial  statements of the
Company   contained   elsewhere  in  the  quarterly  report  and  reflects,   in
Management's  opinion,  all  adjustments,  consisting  only of normal  recurring
adjustments,  necessary for a fair presentation of the results of operations for
these periods.  Results of operations for any interim period are not necessarily
indicative of results to be expected from the full fiscal year.

         For the nine months  ended  March 31,  1999,  the Company had  revenues
totaling $41,146  representing a decrease of $13,022 from the same period a year
ago, consisting primarily of fees paid by users of the Company's VTS, web design
services and ISN's users. The Company's  operating  expenses for the nine months
ended March 31, 1999,  totaling  $448,200,  consisted of $85,210 for the cost of
revenue  and  $362,990  for  general   administration   and  selling   expenses,
representing  a decrease of $32,689  from the nine months  ended March 31, 1998.
Consequently, the Company experienced a net loss of $389,468 for the nine months
ended March 31, 1999.



Status of Operations

         Originally,  the  Company's  business  model was to solicit  vendors to
display products on its VTS.  Accordingly,  the Company solicited  approximately
1,800  vendors who had shown some interest in joining the Company's VTS program.
The  Company  was able to  complete  600  websites  for the  vendors  who showed
interest in the VTS; however,  only 250 of the 600 vendors eventually  committed
to the Company's  services.  Based on this  experience,  the Company



                                       13
<PAGE>

decided to change its business  model.  The  Company's  current  business  model
focuses on the retailer and forming strategic retail relationships.  Pursuant to
this new business model, the Company plans to utilize the marketing power of its
retail customers to attract subscriptions from vendors.  Under this new business
model,  the Company  believes  that the  collection  rate for any accounts  will
improve.

Participation Agreements

         On October 15, 1997, the Company entered into a Participation Agreement
with Burlington Coat Factory Warehouse  Corporation ("BCF").  Under the terms of
the Participation  Agreement,  BCF would assist the Company in marketing the ISN
to BCF's  vendors in return  for a portion  of the  monthly  hosting  fees.  The
Company is required to pay BCF 50 percent of the monthly  hosting fees collected
from vendors who join BCF's ISN as well as 50 percent of the additional  monthly
hosting fees  collected from vendors who decide to join BCF's ISN as a secondary
ISN. The Company is also  required to pay BCF 33 percent of the monthly  hosting
fees  collected  from  vendors who appear on BCF's  vendor list but wish to join
another ISN the  Company  has  created  for a  different  retailer as well as 33
percent of monthly hosting fee collected from foreign  (non-US) vendors who join
BCF's ISN. Moreover, the Company is required to pay BCF 5 percent of all monthly
hosting  fees  collected  from US vendors of  products in the  apparel,  linens,
juvenile furniture, and footwear industries who did not join BCF's ISN.

         On January 27, 1998, the Company  entered into a similar  Participation
Agreement  with  Family  Bargain  Corporation  ("FBAR").  Under the terms of the
Participation  Agreement,  FBAR would assist the Company in marketing the ISN to
FBAR's vendors in return for a portion of the monthly  hosting fees.  Unlike the
Company's Participation Agreement with BCF, FBAR will only receive 33 percent of
the monthly hosting fees collected from vendors who join FBAR's ISN.

Income Taxes

         Since its  inception,  the Company  has been taxed as a C  corporation.
Accordingly,  the  Company  has  available  as of March 31,  1999  approximately
$1,548,439  in net  operating  loss carry  forwards  which can be used to offset
future federal taxable income.  However, the utilization of net operating losses
may be  subject to  certain  limitations  as  prescribed  by Section  382 of the
Internal Revenue Code.

Liquidity and Capital Resources

         Since its inception, the Company's principal source of capital has been
private  placements  of  equity.  Specifically,   through  the  use  of  private
placements,  the Company  was able to raise  $1,550,000  in capital  through the
issuance of 11.5 million shares of Common Stock described as follows:

         a. From August, 1996 to January, 1997, the Company raised $1,050,000 in
an initial private  placement of 9.5 million shares of Common Stock. 4.5 million
shares were sold to Frank S. Yuan,  founder and  President of the  Company,  for
$50,000. The remaining 5 million shares were sold at $0.20 per share.

         b. From November, 1997 to March, 1998, the Company raised an additional
$500,000 through a second private placement of 2 million shares of Common Stock.
All the shares were sold for $0.25 per share.

         In March, 1998, the Board of Directors and majority of the shareholders
approved a 1-for-2  reverse  stock  split.  The  reverse  stock split would also
affect the stock  options  held by key  employees.  After  giving  effect to the
1-for-2  reverse stock split,  the Company had a total of 5.75 million shares of
Common Stock outstanding.

         The Company experienced losses from operations of $389,468 for the nine
months  ended March 31, 1999.  As of March 31, 1999,  the Company had $17,611 in
cash and cash equivalents,  and $31,561 in net stockholders' equity. In December
1998,  the  Company  obtained a written  commitment  for a line of credit from a
bank. The bank committed to provide a $300,000 line of credit,  bearing interest
at the bank's  prime rate plus 1.5%.  The line of credit will expire on June 30,
1999. The Company committed to issue a warrant of 20,000 shares of the Company's
common stock to the bank. The warrant will have a term of five years and have an
exercise  price  equal to the initial  public  offering  price of the  Company's
common stock.  Since  December 31, 1998, the Company has continued to experience
losses from operations



                                       14
<PAGE>

and increases in net deficit.  Management  estimates the Company's  monthly burn
rate to be between  $20,000 and $40,000.  As for February and March,  1998,  the
Company's  burn rate was $75,497 and  $41,049,  respectively.  Accordingly,  the
Company needs to raise capital to continue its development strategy.  Management
expects this capital requirement to be met from the proceeds of the upcoming IPO
if an amount  greater  than the  Minimum is raised.  If the Company is unable to
raise the Minimum  amount in the  upcoming  IPO1,  it may look to raise  capital
through other means, or it may be unable to continue as a going concern.

         In the event of unanticipated  developments  during the next 12 months,
or to satisfy future funding  requirements,  the Company will fund its operation
through public or private offerings of securities,  with  collaborative or other
arrangements with corporate partners or from other sources. Additional financing
may not be  available  when needed or on terms  acceptable  to the  Company.  If
adequate financing is not available, the Company may be required to delay, scale
back  or  eliminate  certain  of  its  development   programs  and  curtail  its
development  strategy.  To the extent the Company raises  additional  capital by
issuing securities,  dilution to investors purchasing shares in the upcoming IPO
may result.

                                LEGAL PROCEEDINGS

         The Company has been named as a defendant, along with BCF, in a lawsuit
brought by Stanley  Rosner  ("Rosner"),  an  individual.  In March 1998,  Rosner
commenced  an action  in the  Supreme  Court of the  State of New  York,  Nassau
County,  New York,  (Index No.  98-006524).  Rosner  alleges  breach of oral and
written  contracts  between the Company and Rosner and between BCF and Rosner in
1997.  Rosner  claims that he is due certain  fees from both the Company and BCF
for services  allegedly  rendered in connection  with certain  transactions  and
alleged  transactions  involving  the Company  and BCF.  Such  transactions  and
alleged  transactions  relate to the  Internet  services  that the  Company  may
provide to BCF and contemplated transactions arising from vendors of BCF. Rosner
claims  that he is due  damages  in an  amount  not less  than  $5,000,000  plus
unspecified  punitive damages from both the Company and BCF.  Rosner's  attorney
has  agreed  that the  Company  and BCF are  entitled  to have the  venue of the
lawsuit transferred from Nassau County, New York to New York County (Manhattan),
New York;  Rosner's  attorney also agreed to arrange for the transfer.  Rosner's
attorney also agreed that the Company's and BCF's responsive papers would be due
no later than ten (10) days after notice of such  transfer  had been served.  To
date, the Company has not received notice of the proposed  transfer of venue and
has not filed its responsive papers or otherwise moved against the complaint.

         The  Company  intends to  vigorously  defend this  action.  The Company
believes  that it is not  obligated  to make  any  payments  to  Rosner  and has
meritorious  defenses to all of Rosner's  allegations.  However,  if the Company
does not prevail and a significant  damage award against the Company is granted,
this would have a material adverse effect upon the Company.


--------
1 As of July 9, 1999, the Company has raised  approximately  $2.6 million in the
IPO.


                                       15
<PAGE>

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

                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)       Exhibits

Exhibit No.    Description
-----------    -----------

1.1            Best Efforts Compensation Agreement with Ace Diversified Capital,
               Inc.*

1.2            Best Efforts Compensation Agreement with Drake & Co.*

1.3            Best Efforts  Compensation  Agreement with U.S. Pacific Financial
               Services*

1.4            Best   Efforts   Compensation   Agreement   with  Travis   Morgan
               Securities*

1.5            Best Efforts  Compensation  Agreement with  Corporate  Investment
               Group*

1.6            Best  Efforts  Compensation  Agreement  with  AM  Razo &  Company
               Securities, Inc.*

1.7            Best Efforts Compensation Agreement with the Malachi Group*

1.8            Best Efforts  Compensation  Agreement  with  Tradeway  Securities
               Group, Inc.*

1.9            Supplements to Best Efforts Compensation Agreements*

1.10           Form of Warrant for Best Efforts Compensation Agreements*

3.1            Articles of Incorporation*

3.2            Bylaws*

4.1            Article II of Bylaws (Reference is made to Exhibit 3.2)*

4.3            Warrant held by Burlington Coat Factory Warehouse Corporation*

10.2           Lease of registrant's facilities*

10.2           Participation  Agreement with Burlington  Coat Factory  Warehouse
               Corporation*

10.3           Contract with Family Bargain Corporation*

10.4           Employment contract with David Rau*

10.5           Escrow Agreement with Union Bank of California*

10.6           1996 World Wide Magic Net, Inc. Stock Option Plan*

27.1           Financial Data Schedule (included herein)

(b)       Reports on Form 8-K

          None

*Filed as an  Exhibit  to the  Company's  Registration  Statement  on Form SB-2,
Amendment No. 5 dated May 6, 1999, and incorporated herein by this reference.

                                       16
<PAGE>

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


                                   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:               7/12/99                  /s/ Frank S. Yuan
      ------------------------------------   -----------------------------------
                                             Frank S. Yuan, President, CEO




Date:               7/12/99                  /s/ David Rau
      ------------------------------------   -----------------------------------
                                             David Rau, Chief Financial Officer




                                       17