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

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly  report under section 13 or 15(d) of the Securities  Exchange Act
     of 1934 for the quarterly period ended DECEMBER 31, 2004

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

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

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

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

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

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

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

             Number of shares outstanding of the issuer's classes of
                     common equity, as of January 31, 2005:

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

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

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
PART I  - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

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

         Condensed Statements of Operations for the Six Months Ended
         December 31, 2004 and 2003 (unaudited)................................4

         Condensed Statements of Cash Flows for the Three Months Ended
         December 31, 2004 and 2003 (unaudited)................................5

         Condensed Statements of Cash Flows for the Six Months Ended
         December 31, 2004 and 2003 (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..........................................18

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.................................19

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............19

     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


                                                   Dec. 31,         June 30,
                                                     2004            2004
                                                 ------------    ------------
                                                  (Unaudited)
ASSETS

Current assets:
   Cash                                          $     53,885    $     26,964
   Accounts receivable, net                             1,298          16,062
   Prepaid expenses                                    44,633          58,401
                                                 ------------    ------------
                                                       99,816         101,427
Total current assets
Other assets                                           11,368          11,388
                                                 ------------    ------------
Total assets
                                                 $    111,184    $    112,815
                                                 ============    ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable and accrued expenses         $    415,407    $    220,770
   Deferred revenue                                   245,920         164,745
   Line-of-credit and interest payable
      to stockholder                                  216,841         252,000
                                                 ------------    ------------
   Total current liabilities                          878,168         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                            (14,393,432)    (14,151,148)
                                                 ------------    ------------

Total stockholders' deficit                          (766,984)       (524,700)
                                                 ------------    ------------
Total liabilities and stockholders' deficit      $    111,184    $    112,815
                                                 ============    ============

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS

                                       3

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                         Six Months Ended
                                                            December 31
                                                     --------------------------
                                                        2004           2003
                                                     -----------    -----------
                                                     (Unaudited)    (Unaudited)
<S>                                                  <C>            <C>
Revenues:
   Transaction sales                                 $    90,875    $ 1,319,855
   Cost of goods sold                                     72,601      1,103,444
                                                     -----------    -----------
   Net revenues from transaction sales                    18,274        216,411
   Tradeshow revenue                                     931,170      1,048,104
   Subscriber fees                                            --          1,110
                                                     -----------    -----------

Net revenues                                             949,444      1,265,625
                                                     -----------    -----------
Operating expenses:
   General and administrative                            849,510        897,522
   Payroll and related                                   337,626        415,029
   Stock-based compensation                                   --          6,600
   Depreciation and amortization                              --          6,902
                                                     -----------    -----------

Total operating expenses                               1,187,136      1,326,053
                                                     -----------    -----------

Loss from operations                                    (237,692)       (60,428)
                                                     -----------    -----------
Other expenses (income):
   Interest expense, net of interest income                4,914        (10,267)
   Equity in losses on investments in overseas
      joint ventures                                          --          9,342
   Impairment writedown on investments in
      overseas joint ventures                                 --        720,459
   Other income                                           (1,122)            --
                                                     -----------    -----------

Total other expense (income)                               3,792        719,534
                                                     -----------    -----------
Loss before income taxes                                (241,484)      (779,962)
Income taxes                                                 800            800
                                                     -----------    -----------

Net loss                                             $  (242,284)   $  (780,762)
                                                     ===========    ===========
Net loss per share available to
   common stockholders
      Basic and diluted                              $     (0.03)   $     (0.10)
                                                     ===========    ===========
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

                                                         Three Months Ended
                                                             December 31,
                                                      -------------------------
                                                         2004          2003
                                                      -----------   -----------
                                                      (Unaudited)   (Unaudited)
Revenues:
   Transaction sales                                  $    72,935   $   564,640
   Cost of goods sold                                      68,670       408,982
                                                      -----------   -----------
   Net revenues from transaction sales                      4,265       155,658
   Subscriber fees                                             --            90
                                                      -----------   -----------

Net revenues                                                4,265       155,748
                                                      -----------   -----------
Operating expenses:
   General and administrative                             186,841       241,204
   Payroll and related                                    166,252       215,976
   Stock-based compensation                                    --         6,600
   Depreciation and amortization                               --         1,336
                                                      -----------   -----------

Total operating expenses                                  353,093       465,116
                                                      -----------   -----------

Loss from operations                                     (348,828)     (309,368)
                                                      -----------   -----------
Other expenses (income):
   Interest expense, net of interest income                 1,842        (4,696)
   Impairment writedown on investments in
      overseas joint ventures                                  --       720,459
   Other income                                            (1,122)           --
                                                      -----------   -----------
Total other expenses (income)                                 720      (715,763)
                                                      -----------   -----------

Net loss                                              $  (349,548)  $(1,025,131)
                                                      ===========   ===========
Net loss per share available to common stockholders
   Basic and diluted                                  $     (0.04)  $     (0.14)
                                                      ===========   ===========
Weighted-average number of common shares outstanding
   Basic and diluted                                    7,472,673     7,472,673
                                                      ===========   ===========

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.

                                       5

<PAGE>

                            CYBER MERCHANTS EXCHANGE

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                             December 31
                                                        ----------------------
                                                          2004         2003
                                                        ---------    ---------
                                                       (Unaudited)  (Unaudited)
Cash flows from operating activities:
<S>                                                    <C>          <C>
   Net loss                                             $(242,284)   $(780,762)
   Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities
      Depreciation and amortization                            --        6,902
      Accrued interest                                      1,842           --
      Stock compensation expense                               --        6,600
      Impairment write-down on investments in
         overseas joint ventures                               --      720,459
      Equity in losses on investments in overseas
         joint ventures                                        --        9,342
      Changes in assets and liabilities:
         Accounts receivable, net                          14,764      (22,772)
         Prepaid expenses and other assets                 13,788      (34,750)
         Inventory                                             --      168,822
         Accounts payable and accrued expenses            194,636      (11,866)
         Deferred revenue                                  81,175     (164,198)
                                                        ---------    ---------

Net cash provided by (used in) operating activities        63,921     (102,223)
                                                        ---------    ---------
Cash flows from financing activities:

   Proceeds from loan payable                                  --       70,035
   Proceeds from borrowings on line-of-credit
      from stockholder                                    215,000           --
    Repayments of borrowings on line-of-credit
      from stockholder                                   (252,000)          --
                                                        ---------    ---------

Net cash (used in) provided by financing activities       (37,000)      70,035
                                                        ---------    ---------
Net increase (decrease) in cash                            26,921      (32,188)

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

Cash, end of period                                     $  53,885    $  33,532
                                                        =========    =========
</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 six-month period ended December 31, 2004 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending June 30, 2005. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended June 30, 2004.

At December 31, 2004,  the Company has an accumulated  deficit of  approximately
$14 million,  negative working capital of  approximately  $778,400 and a lack of
profitable  operational  history.  The  Company  hopes to  continue  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  December 31, 2005 partly based on the $390,000 cash
used in operating activities for the fiscal year ended June 30, 2004. Management
believes  it can reduce  cash needs for the period  ended  December  31, 2005 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
December 31, 2004, the Company had  approximately  $283,000  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.

                                       7

<PAGE>

                            CYBER MERCHANTS EXCHANGE

Transaction sales
-----------------

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

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
sheet.

STOCK BASED COMPENSATION

At December 31, 2004, the Company has three  stock-based  employee  compensation
plans (the "Plans").  The Company  accounts for the Plans under the  recognition
and  measurement   principles  of  APB  25,  "Accounting  for  Stock  Issued  to
Employees," and related  interpretations.  No stock-based  compensation

                                       8

<PAGE>

                            CYBER MERCHANTS EXCHANGE

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

<TABLE>
<CAPTION>
                                                    3 Months           3 Months          6 Months          6 Months
                                              Ended 12/31/04     Ended 12/31/03    Ended 12/31/04     Ended 12/31/03
                                              ----------------------------------------------------------------------
<S>                                            <C>                <C>                <C>                <C>
Net loss:
      As reported                              $  (349,548)       $(1,025,131)       $  (242,284)       $  (780,762)
      Add: Total stock based employee
                 compensation expense
                 determined under fair value
                 based method for all awards       (15,000)           (20,000)           (25,000)           (40,000)
                                               -----------        -----------        -----------        -----------
        Pro forma net loss                     $  (364,548)       $(1,045,131)       $  (267,284)       $  (820,762)
                                               ===========        ===========        ===========        ===========
Loss per common share, as reported
      Basic and diluted                        $     (0.04)       $     (0.14)       $     (0.03)       $     (0.10)

Loss per common share, pro forma
      Basic and diluted                        $     (0.05)       $     (0.14)       $     (0.04)       $     (0.11)

</TABLE>

The  above  pro forma  effects  of  applying  SFAS No.  123 are not  necessarily
representative of the impact on reported net loss for 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>
                                                                3 Months Ended                6 Months Ended
                                                             12/31/04       12/31/03       12/31/04       12/31/03
                                                           -----------    -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>            <C>
Numerator for basic and diluted loss per share:
     Net loss                                              $  (349,548)   $(1,065,131)   $  (242,284)   $  (780,762)
                                                           -----------    -----------    -----------    -----------
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 shareholders per common share:
  Basic and diluted                                        $     (0.04)   $     (0.14)   $     (0.03)   $     (0.10)
                                                           ===========    ===========    ===========    ===========
</TABLE>

                                       9

<PAGE>

                            CYBER MERCHANTS EXCHANGE

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,
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.
The Company is in the process of evaluating  whether the adoption of SFAS 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 December 31, 2004
and 2003 are as follows:

<TABLE>
<CAPTION>
                                      3 Months          6 Months           3 Months           6 Months
                                Ended 12/31/04    Ended 12/31/04     Ended 12/31/03     Ended 12/31/03
                                ----------------------------------------------------------------------
<S>                             <C>                  <C>                <C>                <C>
Revenues:
      Transaction sales         $     4,265          $    18,274        $   155,658        $   216,411
       ASAP Show                         --              931,170                 --          1,048,104
     Other                               --                   --                 90              1,110
                                -----------          -----------        -----------        -----------
                                $     4,265          $   949,444        $   155,748        $ 1,265,625
                                ===========          ===========        ===========        ===========
Loss from operations:
      Transaction sales         $   (51,227)         $  (101,420)       $   126,295        $    11,233
     ASAP Show                     (297,601)            (136,272)          (434,178)           (70,026)
      Other                              --                   --             (1,485)            (1,635)
                                -----------          -----------        -----------        -----------
                                $  (348,828)         $  (237,692)       $  (309,368)       $   (60,428)
                                ===========          ===========        ===========        ===========
Depreciation and amortization:
     Transaction sales          $        --          $        --        $     1,336        $     6,902
      ASAP Show                          --                   --                 --                 --
      Other                              --                   --                 --                 --
                                -----------          -----------        -----------        -----------
                                $        --          $        --        $     1,336        $     6,902
                                ===========          ===========        ===========        ===========
Identifiable assets:
       Transaction sales        $    81,184          $    81,184        $   339,138            339,138
       ASAP Show                     30,000               30,000                 --                 --
        Other                            --                   --                 --                 --
                                -----------          -----------        -----------        -----------
                                $   111,184          $   111,184        $   339,138        $   339,138
                                ===========          ===========        ===========        ===========
</TABLE>

                                       10

<PAGE>

                            CYBER MERCHANTS EXCHANGE

Net sales as reflected above consist of sales to unaffiliated  customers only as
there were no significant  intersegment sales for the periods ended December 31,
2004 and 2003.

There were no  significant  concentrations  on net segment sales for the periods
ended December 31, 2004 and 2003.

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

NOTE 3 - 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 December 31, 2004 was $216,841, including accrued and unpaid interest
of $1,842 during the three months ended December 31, 2004.

NOTE 4 - PROPOSED REORGANIZTION

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 is awaiting  approval by the SEC. 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 December 31, 2004. This quarterly report contains certain  forward-looking
statements and the Company's  future operating  results could differ  materially
from those  discussed  herein.  Certain  statements  contained  in this  Report,
including,  without  limitation,  statements  containing  the words  "believes,"
"anticipates," "expects" and the like, constitute  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section  21E  of  the  Securities  Exchange  Act  of  1934,  as  amended.   Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially  different from any future results,  performance or
achievements  expressed  or implied by such  forward-looking  statements.  These
factors  are  discussed  in more  detail  in the  Risk  Factors  section  of the
Company's  Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004.

                                       11
<PAGE>

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.

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 reverse  trade-show event has been  overwhelmingly  supported by the

                                       12

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                            CYBER MERCHANTS EXCHANGE

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 once-a-year  textile and  accessories  sourcing show held in
Miami,  Florida.  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 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.

                                       13
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                            CYBER MERCHANTS EXCHANGE


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 six month period ended December
31, 2004.

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

Six Months Ended December 31, 2004 and 2003
-------------------------------------------

REVENUE

Gross revenues from transaction sales for the six months ended December 31, 2004
were $90,875,  a decrease of  $1,228,980  or 93% compared to $1,319,855  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 direction.

The gross profit from  transaction  sales for the six months ended  December 31,
2004 was $18,274,  a decrease of  $198,137,  or 92% compared to $216,411 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 six months ended December 31, 2004
was $931,170,  a decrease of $116,934 or 11% compared to $1,048,104 for the same
period last fiscal year. This decrease was due to a slight decrease in number of
exhibitors  for the ASAP Show in August 2004 compared to the same show in August
2003.  Another  reason for  decreasing  exhibitors  is because the Men's Apparel
Guild in California ("MAGIC") started its MAGIC Sourcing Zone, which is a direct
competing  show to ASAP.  Management  believes the  competing  show will make it
difficult to have significant growth.

There were no  subscriber  fees for the six months  ended  December  31, 2004, a
decrease  of $1,110 or 100%  compared  to $1,110 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 $138,917,  or 10%, to  $1,187,136  for the six
months ended  December 31, 2004, as compared to  $1,326,053  for the same period
last fiscal year.  The decrease in  operating  expenses is primarily  due to the
decrease in payroll and ASAP Show expenses. The payroll and its related expenses
decreased by $77,403 to $337,626 for the six months ended  December 31, 2004, as
compared to $415,029 for the same period last fiscal year. The ASAP Show and its
marketing  expenses  decreased  by $41,810 to $617,394  for the six months ended
December  31, 2004 as compared to $659,204 for the same period last fiscal year.
In addition, there were no stock-based compensation expense and depreciation and
amortization  for the six months ended  December 31, 2004 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 six months ended
December 31, 2003.

NET LOSS

The Company  recorded a net loss of $242,284 for the six months  ended  December
31, 2004, an improvement  of $538,478 in earnings;  as compared to a net loss of
$780,762 for the same period last fiscal year.  The  improvement  in earnings in
2004 is mainly due to no 2004  impairment  write-down on investments in overseas
joint  ventures  ($720,459 in 2003),  equity losses on  investments  in overseas
joint  ventures  ($9,342  in  2003),  net  of a  decrease  in net  revenue  from
transaction sales of $198,137.

Three Months Ended December 31, 2004 and 2003
---------------------------------------------

REVENUE

Gross  revenues from  transaction  sales for the three months ended December 31,
2004 were  $72,935,  a decrease of $491,705 or 87%  compared to $564,640 for the
same period last fiscal year.  The gross profit from  transaction  sales for the
three months ended  December 31, 2004 was $4,265,  a decrease of $151,393 or 97%
compared to $155,658  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.

There was no ASAP Show revenue generated for the three months ended December 31,
2004, since the ASAP Shows are held twice a year in February and August.

                                       15

<PAGE>

                            CYBER MERCHANTS EXCHANGE

There were no  subscriber  fees for the three months ended  December 31, 2004, a
decrease of $90 or 100%  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  transaction  sales and revenue
generated through the ASAP Show.

OPERATING COSTS AND EXPENSES

Operating  expenses  decreased  by  $112,023,  or 32% to $353,093  for the three
months ended December 31, 2004, as compared to $465,116 for the same period last
fiscal year. The decrease in operating expenses is primarily due to the decrease
in payroll due to lower  headcount  and the ASAP Show  marketing  expenses.  The
payroll and its related  expenses  decreased  by $49,724 to $166,252 for the six
months ended  December 31, 2004 as compared to $215,976 for the same period last
fiscal year due to lower headcount.  The ASAP Show marketing  expenses decreased
by $73,841 to $57,426 for the three months  ended  December 31, 2004 as compared
to $131,267 for the same period last fiscal year. The reason for the decrease in
ASAP Show marketing  expenses of $73,841 is due to the Company having  inventory
of gift items such as show bags, etc. left over from past shows. Also, ASAP Show
is a mature show and management decided to promote the attendee marketing closer
to the show  instead of 3-4 months  before the show begins.  In addition,  there
were no stock-based  compensation  expense and depreciation and amortization for
the three  months  ended  December  31,  2004 as compared to $7,936 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 three months ended
December 31, 2003.

NET LOSS

The Company  recorded a net loss of $349,548 for the three months ended December
31, 2004, an improvement  of $675,583 in earnings;  as compared to a net loss of
$1,025,131 for the same period last fiscal year. The  improvement in earnings in
2004 is mainly due to no 2004  impairment  write-down on investments in overseas
joint  ventures  ($720,459  in 2003) and a decrease  of  operating  expenses  of
$112,023, net of a decrease in net revenue from transaction sales of $151,393.

                                       16

<PAGE>

                            CYBER MERCHANTS EXCHANGE

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 $778,352 at December  31, 2004,  primarily  due to
increases in accounts payable and accrued expenses of approximately $195,000 and
deferred   revenue  of   approximately   $81,000,   net  of  net  repayments  of
line-of-credit  from  stockholder of approximately  $37,000.  During the current
fiscal year, the Company had average monthly general and administrative expenses
of approximately  $125,000 (excluding ASAP Show production expenses) as compared
to  $152,000  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
March 2005 in Miami, to generate more revenue. At December 31, 2004, the Company
has current assets of approximately $100,000. 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
December 2005 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 a maximum of $500,000,  as amended.  The Line
carries an interest rate of 8.0% per annum.  The balance as of December 31, 2004
was $216,841.

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 is awaiting  approval by the SEC. If the  reorganization
becomes  effective,  immediately  after  the  effective  date,  Cyber  Merchants
Exchange, Inc. will have no assets, no liabilities and no continuing operations
and will seek other business partners and opportunities as appropriate.

                                       17

<PAGE>

                            CYBER MERCHANTS EXCHANGE

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  December  31,  2004 our  disclosure  controls  and  procedures  were
effective 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
December  31, 2004 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.

                                       18

<PAGE>



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

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

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 a
future date for the purpose of voting on the proposed reorganization.

The November 24,  December 16, 2004 and February 4, 2005 filings are  amendments
to reflect  more  details of the proposed  reorganization.  The official  annual
shareholder meeting will be set once SEC approves the filing.

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:    02/14/2005             /s/ Frank S. Yuan
-------------------------       ------------------------------------------------
                                Frank S. Yuan, Chairman, Chief Executive Officer

                                       19