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, 2002
                                              -----------------

[  ]   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.)

600 S. Lake Ave. , Suite 208, Pasadena, CA                         91106
------------------------------------------                         -----
 (Address of principal executive offices)                        (Zip Code)

                     Issuer's telephone number (626)793-5000
                                               -------------

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, 2003:
                  7,472,673 Shares of Common Stock (One Class)
                  --------------------------------------------

Transitional Small Business Disclosure Format: Yes __ No X


<PAGE>

                            CYBER MERCHANTS EXCHANGE

                                TABLE OF CONTENTS
                                -----------------

                                                                          Page

PART I  - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

         Condensed Balance Sheets as of December 31, 2002 (unaudited)
         and June 30, 2002 ................................................3

         Condensed Statements of Operations for the Six Months Ended
         December 31, 2002 and 2001 (unaudited)............................4

         Condensed Statements of Operations for the Three Months Ended
         December 31, 2002 and 2001 (unaudited)............................5

         Condensed Statements of Cash Flows for the Six Months Ended
         December 31, 2002 and 2001(unaudited).............................6

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

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
         PLAN OF OPERATION................................................10

      ITEM 3. CONTROLS AND PROCEDURES.....................................13

PART II - OTHER INFORMATION...............................................14

     ITEM 1.  LEGAL PROCEEDINGS...........................................14

     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS....................14

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.............................14

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.......15

     ITEM 5.  OTHER INFORMATION...........................................16

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K............................16

SIGNATURES................................................................16

                                        2

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CYBER MERCHANTS EXCHANGE, INC.
                            CONDENSED BALANCE SHEETS





<TABLE>
<S>                                                          <C>                <C>

                                                                  Dec. 31,       June 30,
                                                                    2002           2002
                                                               ------------    ------------
                                                                                (Unaudited)
ASSETS

Current assets:
   Cash and cash equivalents                                   $    205,867    $    709,791
   Accounts receivable, net                                         545,673         150,370
   Inventory                                                        553,926         233,912
   Convertible note and interest receivable                         609,000         600,000
   Related party note and interest receivable                            --         407,000
   Prepaid expenses                                                  80,000         173,214
                                                               ------------    ------------
                                                                  1,994,466       2,274,287
Total current assets

Property and equipment, net                                          18,060          31,011
Investments in overseas joint ventures, net
                                                                    655,071         612,695
Other assets                                                          3,604           7,222
                                                               ------------    ------------

Total assets
                                                               $  2,671,201    $  2,925,215
                                                               ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses
                                                               $    553,082    $    233,687


Shareholders' equity:
   Common stock, no par value; 40,000,000 shares authorized;
     7,472,673 shares issued and outstanding                      9,995,387       9,995,387
   Additional paid-in capital                                     3,624,461       3,624,461
   Accumulated deficit                                          (11,501,729)    (10,928,320)
                                                               ------------    ------------

Total stockholders' equity                                        2,118,119       2,691,528

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

Total liabilities and stockholders' equity                     $  2,671,201    $  2,925,215
                                                               ============    ============

</TABLE>


            See accompanying notes to condensed financial statements

                                        3
<PAGE>



                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<S>                                                           <C>             <C>

                                                                      Six Months Ended
                                                                         December 31,
                                                               ---------------------------
                                                                   2002            2001
                                                               ------------    -----------
                                                                (Unaudited)
(Unaudited)
Revenues:
   Transaction sales                                            $ 1,332,340    $ 1,076,623
   Cost of goods sold                                             1,177,669        945,990
                                                                -----------    -----------
   Net revenues from transaction sales                              154,671        130,633
   Tradeshow revenue                                                412,506             --
   Subscriber fees                                                    3,225          7,940
                                                                -----------    -----------

Net revenues                                                        570,402        138,573

Operating expenses:
   General and administrative expenses                            1,196,209        562,866
   Stock-based compensation                                              --        101,097
   Depreciation and amortization                                     12,951         23,433
                                                                -----------    -----------

Total operating expenses                                          1,209,160        687,396
                                                                -----------    -----------

Loss from operations                                               (638,758)       548,823

Other income (expenses):
   Interest income, net of interest expense                          23,773         64,469
   Equity in losses on investments in overseas joint ventures      (124,290)      (214,002)
   Amortization of software sales                                   166,666        166,668
   Impairment write-down on investments in ABNet                         --        (21,762)
                                                                -----------    -----------
Total other income (expenses)                                        66,149         (4,627)
                                                                -----------    -----------

Loss before income taxes                                           (572,609)      (553,450)

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

Net loss                                                        $  (573,409)   $  (554,250)
                                                                ===========    ===========

Basic and diluted net loss available to common
    Stockholders per share                                      $     (0.08)   $     (0.07)
                                                                ===========    ===========

Weighted-average number of common shares outstanding              7,472,673      7,583,623
                                                                ===========    ===========

</TABLE>

            See accompanying notes to condensed financial statements.

                                        4
<PAGE>


                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<S>                                                           <C>             <C>

                                                                    Three Months Ended
                                                                        December 31,
                                                                --------------------------
                                                                   2002             2001
                                                                -----------    -----------
                                                                (Unaudited)
(Unaudited)
Revenues:
   Transaction sales                                            $   543,320    $   576,350
   Cost of goods sold                                               466,508        498,785
                                                                -----------    -----------
   Net revenues from transaction sales                               76,812         77,565
   Tradeshow revenues                                                 4,500             --
   Subscriber fees                                                    1,375          3,930
                                                                -----------    -----------

Net revenues                                                         82,687         81,495

Operating expenses:
   General and administrative expenses                              444,636        190,302
   Stock-based compensation                                              --        101,097
   Depreciation and amortization                                      5,578          5,845
                                                                -----------    -----------

Total operating expenses                                            450,214        297,244
                                                                -----------    -----------

Loss from operations                                               (367,527)      (215,749)

Other income (expenses):
   Interest income, net of interest expense                          11,119         19,017
   Equity in losses on investments in overseas joint ventures       (54,803)       (62,183)
   Amortization of software sales                                    83,333         83,335
                                                                -----------    -----------
Total other income (expenses)                                        39,649         40,169
                                                                -----------    -----------

Loss before income taxes                                           (327,878)      (175,580)

Income taxes                                                             --             --
                                                                -----------    -----------

Net loss                                                        $  (327,878)   $  (175,580)
                                                                ===========    ===========

Basic and diluted net loss available to common
    Stockholders per share                                      $     (0.04)   $     (0.02)
                                                                ===========    ===========

Weighted-average number of common shares outstanding              7,472,673      7,583,623
                                                                ===========    ===========

</TABLE>

            See accompanying notes to condensed financial statements.

                                        5
<PAGE>



                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<S>                                                             <C>           <C>


                                                                     Six Months Ended
                                                                        December 31,
                                                                  ----------------------
                                                                     2002         2001
                                                                  ---------    ---------

(Unaudited) (Unaudited) Cash flows from operating activities:
   Net loss                                                       $(573,409)   $(554,250)
   Adjustments to reconcile net loss to net cash used in
    operating activities:
     Depreciation and amortization                                   12,951       23,432
     Amortization of software sales                                (166,666)    (166,668)
     Stock compensation expense                                          --      101,097
     Equity in losses on investments in overseas joint ventures     124,290      214,002
     Impairment write-down on investments in ABNet                       --       21,762
      Changes in assets and liabilities:
         Accounts receivable, net                                  (395,303)    (220,804)
         Interest receivable                                         (9,000)      26,389
            Inventory                                              (320,014)          --
            Prepaid expenses                                         93,214     (220,513)
         Other assets                                                 3,618       (5,725)
         Accounts payable and accrued expenses                      319,395       91,443
                                                                  ---------    ---------

Net cash used in operating activities                              (910,924)    (689,835)
                                                                  ---------    ---------

Cash flows from investing activities:
   Proceeds from maturity of certificates of deposit                     --      850,000
   Investment in related party note receivable                           --     (400,000)
   Collection of related party note and interest receivable         407,000           --
   Purchases of property and equipment                                   --       (4,613)
   Investment in E-Sea                                                   --      (21,337)
                                                                  ---------    ---------

Net cash provided by investing activities                           407,000      424,050
                                                                  ---------    ---------

Cash flows from financing activities:
   Repayments of borrowings under line of credit                         --      166,938
                                                                  ---------    ---------

Net cash provided by financing activities                                --      166,938
                                                                  ---------    ---------

Net decrease in cash and cash equivalents                          (503,924)     (98,847)

Cash and cash equivalents, beginning of period                      709,791      205,384
                                                                  ---------    ---------

Cash and cash equivalents, end of period                          $ 205,867    $ 106,537
                                                                  =========    =========

</TABLE>

            See accompanying notes to condensed financial statements

                                        6
<PAGE>


                         CYBER MERCHANTS EXCHANGE, INC.

                        NOTES TO THE FINANCIAL STATEMENTS



CERTAIN  STATEMENTS  CONTAINED IN THIS REPORT,  INCLUDING,  WITHOUT  LIMITATION,
STATEMENTS CONTAINING THE WORDS, "BELIEVES," "ANTICIPATES," "EXPECTS," AND OTHER
WORDS OF SIMILAR  IMPORT,  CONSTITUTE  "FORWARD-LOOKING  STATEMENTS"  WITHIN THE
MEANING OF SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION
21E OF THE  SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED.  SUCH  FORWARD-LOOKING
STATEMENTS  INVOLVE KNOWN AND UNKNOWN  RISKS,  UNCERTAINTIES  AND OTHER FACTORS,
WHICH  MAY  CAUSE THE  ACTUAL  RESULTS,  PERFORMANCE  OR  ACHIEVEMENTS  OF CYBER
MERCHANTS  EXCHANGE,  INC. TO BE MATERIALLY  DIFFERENT FROM ANY FUTURE  RESULTS,
PERFORMANCE,  OR  ACHIEVEMENTS  EXPRESSED  OR  IMPLIED  BY SUCH  FORWARD-LOOKING
STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THE FACTORS DISCUSSED
UNDER THE CAPTION  "COMPANY  RISKS"  ELSEWHERE IN ITEM 1 OF THIS  REPORT.  GIVEN
THESE  UNCERTAINTIES,  READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING  STATEMENTS.   CYBER  MERCHANTS  EXCHANGE,  INC.  DISCLAIMS  ANY
OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO ANNOUNCE PUBLICLY THE RESULTS OF ANY
REVISION  OF  THE  FORWARD-LOOKING   STATEMENTS  CONTAINED  OR  INCORPORATED  BY
REFERENCE HEREIN TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.

NOTE 1 - BASIS OF REPORTING

Basis of Presentation
---------------------

The accompanying unaudited 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-X.  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-month  and six-month  period ended December 31,
2002 are not necessarily  indicative of the results that may be expected for the
year ending June 30, 2003. For further  information,  refer to the  consolidated
financial  statements  and footnotes  thereto  included in the Company's  annual
report on Form 10-KSB for the year ended June 30, 2002.

Revenue Recognition
-------------------

Net revenues include amounts earned under product  transaction sales,  tradeshow
revenue  and  subscriptions.   Product  transaction  revenues  are  recorded  in
accordance with EITF 99-19 "Reporting Revenue Gross as a Principal versus net as
an Agent".  The Company  recognizes net revenues from product  transaction sales
when title to the product passes to the customer, net of factoring fees. For all
product transactions with its customers, the Company acts as a principal,  takes
title to all products sold upon  shipment,  and bears  inventory risk for return
products that the Company is not able to return to the supplier,  although these
risks are mitigated through  arrangements with factors,  shippers and suppliers.
Due  to  the  Company  not  bearing  credit  risk,   the  Company   records  the
corresponding  revenue on a net basis. However, for financial reporting purposes
the Company presents the details of gross transaction sales and related costs of
sales in the  accompanying  statements  of  operations.  The Company  recognizes
revenue from the ASAP trade show held twice a year in February  and August.  The
ASAP trade show generates  revenue  through  exhibitor  booths sales,  corporate
sponsorship,  and  advertising.  This revenue is  recognized  at the time of the
related  trade  show.   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.

                                       7

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.


In December 1999, the Security and Exchange  Commission  issued Staff Accounting
Bulletin  101  ("SAB  101"),  "Revenue  Recognition"  which  outlines  the basic
criteria  that  must  be met to  recognize  revenue  and  provide  guidance  for
presentation  of revenue  and for  disclosure  related  to  revenue  recognition
policies in financial  statements  filed with Security and Exchange  Commission.
Management  believes the Company's revenue  recognition  policies conform to SAB
101.

Segments of an Enterprise and Related Information
-------------------------------------------------

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 131
("SFAS  131"),   "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information." SFAS 131 changes the way public companies report information about
segments of their  business in their annual  financial  statements  and requires
them to report selected segment information in their quarterly reports issued to
shareholders.  It also requires  entity-wide  disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers (see Note 2).

Recent Accounting Pronouncement
-------------------------------

SFAS 148,  "Accounting for Stock-Based  Compensation - Transition and Disclosure
an amendment of FASB Statement No. 123," is effective for fiscal years beginning
after December 15, 2002. SFAS 148 provides alternative methods of transition for
a voluntary  change to the fair value based method of accounting for stock-based
employee  compensation.  In  addition,  this  Statement  amends  the  disclosure
requirements  of Statement 123 to require  prominent  disclosures in both annual
and interim financial  statements about the method of accounting for stock-based
employee  compensation  and the effect of the method used on  reported  results.
Management has not  determined the effect,  if any, of SFAS 148 on the Company's
future financial statements.

Recent accounting pronouncements discussed in the Notes to the June 30, 2002 and
2001  financial  statements  filed  previously  with the Securities and Exchange
Commission in Form 10-KSB that were required to be adopted during the year ended
June  30,  2003 did not  have a  significant  impact  on the  Company  financial
statements.

                                       8

<PAGE>


NOTE 2 - BUSINESS SEGMENTS

Reportable  business  segments for the periods ended December 31, 2002 (as there
was only one segment in 2001) are as follows:

<TABLE>
<S>                                                  <C>             <C>



                                                            3 Months       6 Months
                                                      Ended 12/31/02 Ended 12/31/02
Net sales from continuing operations:
      Transaction sales                                  $    76,812    $   154,671
       ASAP Show                                               4,500        412,506
     Other                                                     1,375          3,225
                                                         -----------    -----------
                                                         $    82,687    $   570,402
                                                         ===========    ===========

Operation profit (loss) from continuing operations:
      Transaction sales                                  $  (127,282)   $  (437,513)
     ASAP Show                                              (234,451)      (195,196)
      Other                                                   (5,794)        (6,049)
                                                         -----------    -----------
                                                         $  (367,527)   $  (638,758)
                                                         ===========    ===========

Depreciation and amortization - continuing operations:
     Transaction sales                                   $     5,578    $    12,951
      ASAP Show                                                   --             --
      Other                                                       --             --
                                                         -----------    -----------
                                                         $     5,578    $    12,951
                                                         ===========    ===========

Identifiable assets - continuing operations:
       Transaction sales                                 $ 2,671,201    $ 2,671,201
       ASAP Show                                                  --             --
        Other                                                     --             --
                                                         -----------    -----------
                                                         $ 2,671,201    $ 2,671,201
                                                         ===========    ===========

Capital expenditures:
       Transaction sales                                 $        --    $        --
       ASAP Show                                                  --             --
       Other                                                      --             --
                                                         -----------    -----------
                                                         $        --    $        --
                                                         ===========    ===========

-----------------------------------------------------------------------------------
</TABLE>

                                       9

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

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 six
months  ended  December  31,  2002.  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, 2002.  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

Cyber Merchants  Exchange,  Inc.'s (the "Company" or "C-Me") primary business is
bringing retailers and vendors together through an Internet-based  communication
system, known as the Internet Sourcing Network(TM) ("ISN"), that enables them to
conduct negotiations and to electronically source, purchase and sell merchandise
on a global  basis.  Using its  proprietary  software,  the Company  maintains a
secure yet open  electronic  network  that allows  retailers  to manage  on-line
communications   and   transactions   with   their   vendors.   This   front-end
communications  and  trading  process  is  generally  referred  to in the retail
industry as  "sourcing".  In order for buy-sell  transactions  to be  initiated,
negotiated, and consummated between retailers and their vendors, high volumes of
product and transaction data must be exchanged.  This critical  sourcing process
typically  requires a  substantial  amount of time and  attention  from both the
retail  merchandise buyer and the salesperson of a vendor. The Company's related
software products and services are designed to make the sourcing and transaction
function easier and less time-consuming and costly.

C-Me has adopted a buyer-centric business focus by creating its proprietary ISN,
which consists of specialized  private  extranets for retailers that centralizes
the  merchandise  review and search  process.  Its current  retail  partners are
Burlington Coat Factory,  Factory 2-U Stores,  and Bermo  Enterprises.  C-Me has
built or is in the process of building each of these retailers their own private
ISN. C-Me also provides  services through its ISN to other retailers,  including
Value City Department Stores,  Ross Stores,  One Price Stores,  National Stores,
Bealls Outlet, Volume Apparel, Gabriel Brothers and 99 cents only Stores.

In January 2001, C-Me announced a tri-party  financial platform in alliance with
CIT Commercial Services and Bank SinoPac in Taiwan. The agreement eliminates the
need for letters of credit by allowing exporters in foreign countries (currently
exporters  in  Taiwan,  Hong  Kong  and  Vietnam)  to ship  merchandise  to U.S.
retailers with pre-approved credit lines established by CIT Commercial Services.
Letters of credit have  historically  been the predominant  means of payment for
cross border  trading,  but are rapidly  being  supplanted  by more creative and
flexible financing mechanisms such as tri-party agreements that assure less risk
for both exporters and retailers. The Company has a U.S. patent pending for this
financing method.

                                       10

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

In addition to its online e-commerce  trading  business,  during September 2001,
C-Me launched a new venture  called the Apparel  Sourcing  Association  Pavilion
("ASAP Show") Sourcing Trade Show ("ASAP Show").  ASAP Show is an  international
sourcing and  manufacturing  trade show that brings leading  manufacturers  from
around the world to one venue to greet,  meet and sell to buyers  under one roof
twice a year in Las Vegas,  Nevada.  ASAP Show is a natural  extension of C-Me's
core  business  on-line  model.  In the  past six  years,  C-Me  has  created  a
comprehensive  base of  manufacturers  from  around  the world.  Through  C-Me's
network of global  offices,  the  Company  anticipates  that many  international
manufacturers will exhibit at the ASAP Show.

C-Me continues to expand  internationally.  As of December 31, 2002, the Company
has  formed  joint  ventures  in Taiwan,  China,  Thailand,  Hong  Kong,  Korea,
Bangladesh,  Pakistan, Indonesia, United of Emeritus and the Philippines. C-Me's
strategy is to partner with reputable  local  companies in countries  throughout
the world to expand its  international  network.  Through these joint  ventures,
localized  merchandise  sourcing and ASAP marketing offices are established.  In
addition to these joint ventures,  C-Me has sourcing agents in Turkey,  Vietnam,
Sri Lanka,  South Africa,  and  Mauritius.  Through these  sourcing  agents also
acting as ASAP show marketing  officers,  C-Me's retail partners are expected to
be able to source international merchandise directly and the Company is expected
to be able to attract leading manufacturers to attend its ASAP Show. The Company
believes its business  model will be  successful  by providing a direct,  global
merchandise-sourcing  channel for  retailers  to enable  them to increase  their
vendor base and the Company's network. The ASAP show will enhance both buyer and
seller needs for face-to-face meetings.

Accumulated Losses
------------------

The Company has incurred  significant  losses since its  inception and may never
generate or substain a profit.  Through the second  quarter  ended  December 31,
2002,  the  Company  reported  a net  loss  of  $573,409.  The  Company  devotes
significant  resources  to  developing,  enhancing,  selling and  marketing  its
products  and  services.  As  a  result,  the  Company  will  need  to  generate
significant revenues to maintain profitability. The Company may not continue its
historical  growth or  generate  sufficient  revenues  to  sustain  or  increase
profitability on a quarterly or annual basis in the future.

RESULTS OF OPERATION

Six Months Ended December 31, 2002 and 2001
-------------------------------------------

Revenue
-------

Net gross  revenues on  transaction  sales for the six months ended December 31,
2002 were $1,332,340, an increase of $255,717 or 24% compared to the same period
last year. The Company  expects the volume of gross sales  transactions  and the
gross profit margin  percentage to maintain and grow, as it continues to utilize
its overseas sourcing network and its external sales force.

The gross profit from  transaction  sales for the six months ended  December 31,
2002 was  $154,671 an increase  of $24,038,  or 18%  compared to the same period
last year.

The ASAP Show  division's  gross  revenue for the six months ended  December 31,
2002 was $412,506.  The first ASAP show was launched in the third quarter of the
year 2002; therefore there is no comparison for the same period last year.


                                       11
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

Subscriber  fees for the six months  ended  December  31,  2002 were  $3,225,  a
decrease of $4,715 or 59%  compared  to the same  period  last 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
----------------------------

General  and  administrative   expenses  increased  by  $633,343,  or  113%,  to
$1,196,209  for the six months ended  December 31, 2002, as compared to $562,866
for the same  period  last year.  The  increase  in general  and  administrative
expenses is primarily  due to the increase in the ASAP Show  expenses.  The ASAP
Show expenses for this six-month period are $607,702.

No non-cash stock compensation  expenses were recognized for the six-month ended
December 31, 2002.

Net Loss
--------

The Company  recorded a net loss of $573,409 for the six months  ended  December
31,  2002,  an  increase  of $19,159 in net loss,  as  compared to a net loss of
$554,250  for the same period last year.  The increase in net loss is mainly due
to an increase in operating expenses of $521,764, a reduction in interest income
of $40,696,  net of an increase in net  revenues of $431,829  and a reduction in
equity losses on overseas investments of $89,712.  Loss per share as of December
31,  2002 was $0.08 as  compared to $0.07 as of  December  31,  2001,  due to an
increase  in net loss and a  reduction  in the number of  outstanding  shares of
common stock.

Three Months Ended December 31, 2002 and 2001
---------------------------------------------

Revenue
-------

Net gross revenues on transaction  sales for the three months ended December 31,
2002 were $543,320, a decrease of $33,030 or 6% compared to the same period last
year.  The gross  profit  from  transaction  sales for the  three  months  ended
December 31, 2002 was $76,812,  a slight decrease of $753, or 1% compared to the
same  period  last  year.  The  Company   expects  the  volume  of  gross  sales
transactions and the gross profit margin  percentage to maintain and grow, as it
continues to utilize its overseas sourcing network and its external sales force.

The ASAP Show  division  gross  revenue for the three months ended  December 31,
2002 was $4,500.  The first ASAP show was  launched in the third  quarter of the
year 2002; therefore there is no comparison for the same period last year.

Subscriber  fees for the three  months ended  December  31, 2002 were $1,375,  a
decrease of $2,555 or 65%  compared  to the same  period  last 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
----------------------------

General and administrative  expenses increased by $254,334, or 134%, to $444,636
for the three  months ended  December 31, 2002,  as compared to $190,302 for the

                                       12

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

same period last year.  The increase in general and  administrative  expenses is
primarily  due to the increase in the ASAP Show  expense.  The ASAP Show expense
was $238,951.

No non-cash  stock  compensation  expenses were  recognized for the three months
ended December 31, 2002.

Net Loss
--------

The Company  recorded a net loss of $327,878 for the three months ended December
31,  2002,  an increase  of  $152,298 in net loss,  as compared to a net loss of
$175,580  for the same period last year.  The increase in net loss is mainly due
to an increase of operating expenses of $152,970.  Loss per share as of December
31,  2002 was  $0.04 as  compared  to $0.02  as of  December  31,  2001 due to a
decrease  in net loss and a  reduction  in the number of  outstanding  shares of
common stock.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital  decreased from $2,040,600 as of June 30, 2002
to $1,441,384 as of December 31, 2002,  primarily due to cash used in operations
of $910,924.  During the current year, the Company had average  monthly  general
and  administrative  expenses  of  approximately  $98,000  (excluding  ASAP Show
related  expenses)  as compared to $94,000 in the same period of last year.  The
Company  will  keep  implementing  its  cost-minimizing  plan,  which  includes,
reduction of  professional  consulting  fees,  investor  relations and marketing
costs.  With working capital of  approximately  $1.4 million and average monthly
expenses of  approximately  $98,000,  and average  monthly  ASAP Show expense of
approximately  $101,000,  coupled with cash  generated  from growing net revenue
from  transaction  sales and  tradeshow  revenue,  the  Company  believes it has
sufficient cash to operate its business over the next 12 months.

Depending on market  acceptance of the Company's  current  business  model,  the
Company may raise additional funds,  either in debt or equity, to augment future
growth of the  business.  Over the next  following  years,  the Company plans to
utilize a combination of internally  generated funds from operations,  potential
debt and / or equity  financing to fund its short-term and  longer-term  growth.
The availability of future financing will depend on market conditions.

EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATE

The Company's current joint ventures are located in countries outside the United
States.  The  functional  currency  for  each  foreign  operation  is the  local
currency.  The carrying value of the Company's investments in the Pacific Rim is
subject to the risk of foreign  currency  fluctuations.  Any dividends  received
from the Company's  international joint ventures will also be subject to foreign
exchange risk.

ITEM 3.   EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The  management of the Company  including  Mr. Frank S. Yuan as Chief  Executive
Officer and as Chief Financial  Officer have evaluated the Company's  disclosure
controls and procedures. Under rules promulgated by the SEC, disclosure controls
and procedures are defined as those  "controls or other  procedures of an issuer
that are  designed to ensure that  information  required to be  disclosed by the
issuer  in the  reports  filed or  submitted  by it under  the  Exchange  Act is
recorded, processed,  summarized and reported, within the time periods specified
in the  Commission's  rules and forms." Based on the evaluation of the Company's
disclosure  controls and  procedures,  it was determined  that such controls and
procedures  were effective as of January 30, 2003, the date of the conclusion of
the evaluation.

                                       13

<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.


Further,  there were no significant changes in the internal controls or in other
factors that could  significantly  affect these controls after January 30, 2003,
the  date  of the  conclusion  of the  evaluation  of  disclosure  controls  and
procedures.


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The  Company  and Frank S. Yuan  ("Yuan")  filed a lawsuit  against  Yoram Dahan
("Dahan")  in the  Superior  Court of the  State of  California,  County  of Los
Angeles,  Central District (Case No. BC274550) on May 4, 2002. The claims by the
Company  against Dahan arose out of certain  activities  undertaken by him as an
employee of the Company  while  serving as the director of business  development
and President of the ASAP Show, a division of the Company.  The Company alleges,
among other things, that Dahan failed to fulfill his contractual  obligations as
an employee  and breached  his  fiduciary  duties to the company for a number of
reasons,  including by acting to usurp ownership  rights to the ASAP Show and by
attempting to operate the trade show  independently  from the Company.  Further,
Yuan and the Company charged in the lawsuit that Dahan defamed both Yuan and the
Company.

In  response  to the  lawsuit  filed  by Yuan  and the  Company,  Dahan  filed a
Cross-Complaint  against the Company and Yuan on June 26, 2002 in the same court
(Case No.  BC274550)  alleging breach of contract,  fraud,  misappropriation  of
confidential  information,  intentional  interference with prospective  economic
advantage,  and breach of implied  covenant of good faith and fair dealing,  all
related to the ASAP Show. Dahan claims that he owns a certain  percentage of the
ASAP  Show  and  that  he is owed  certain  amounts  of  commissions  and  other
compensation  for work  performed by him.  The  Cross-Complaint  seeks  monetary
damages,  including a share of any profits that the Company might  generate from
the ASAP Show, and further seeks punitive damages for allegedly  fraudulent acts
by the Company in misappropriating the ASAP Show contract rights.

The Company  intends to pursue its  Complaint  for damages  against Dahan and to
vigorously  defend the  Cross-Complaint  brought by Dahan.  The Company believes
that it is not  obligated  to make any  payments  to Dahan  and has  meritorious
defenses to all of Dahan's allegations. However, if the Company does not prevail
and the Court awards the percentage  ownership rights to the ASAP Show or awards
any significant damage award to Dahan,  including  punitive damages,  this would
have a material adverse effect upon the Company.

Except as described above, the knowledge of the Company's executive officers and
directors,  the Company is not a party to any legal proceeding or litigation and
none of its  property  is the  subject  of a pending  legal  proceeding  and its
executive  officers and directors  know of no other  threatened or  contemplated
legal proceedings or litigation.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

                                       14

<PAGE>


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


At the 2002 Annual  Meeting of the  Company's  Stockholders  held on December 6,
2002 (the "Meeting"),  six proposals were submitted. No other proposals were put
before the meeting. The proposals and voting results were as follows:

         --

         To elect six directors, each to hold office for one year or until their
successors are elected and shall qualify:



                                        FOR                 WITHHELD
   Frank S. Yuan                      4,738,566                0
   Charles H. Rice                    4,738,566                0
   Donald C. McNabb, Sr               4,738,566                0
   Deborah Shamaley                   4,738,566                0
   James Vandeberg                    4,738,566                0
   John F. Busey                      4,738,566                0

   --
   To  ratify  and  approve  the  appointment  of Squar,  Milner,  Reehl &
   Williamson as the independent public accountants of the Company for the
   fiscal year ending June 30, 2003:


   FOR: 4,738,566             AGAINST: 0                ABSTAIN: 0


   --
   To ratify and  approve  the Board of  Director's  adoption  of the 1996
   Stock Option Plan:

   FOR: 3,912,471    AGAINST: 10,250  ABSTAIN: 37,580   BKR-NON-VOTE: 777,995

   --
   To ratify and  approve  the Board of  Director's  adoption  of the 1999
   Stock Option Plan:

   FOR: 3,912,691    AGAINST: 10,350  ABSTAIN: 37,530   BKR-NON-VOTE: 777,995

   --
   To ratify and  approve  the Board of  Director's  adoption  of the 2001
   Stock Option Plan:

   FOR: 3,912,671    AGAINST: 10,350  ABSTAIN: 37,550   BKR-NON-VOTE: 777,995

   --
   To ratify and approve the Board of  Director's  action to terminate the
   Lock-Up Agreement dated November 13, 1998:

   FOR: 3,937,683    AGAINST: 10,358  ABSTAIN: 12,530   BKR-NON-VOTE: 777,995

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

                                       15

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.


ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None.

(b) Reports on 8-K

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:    02/14/2003        /s/ Frank S. Yuan
---------------------      ----------------------------------------------------
                           Frank S. Yuan, Chairman, Chief Executive Officer







                                       16

<PAGE>


                    Certification of Chief Executive Officer
                        Pursuant to Section 302(a) of the
                           Sarbanes-Oxley Act of 2002

I, Frank S. Yuan, certify that:

1. I have  reviewed  this  quarterly  report  on Form  10-Q of  Cyber  Merchants
Exchange Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3. Based  on  my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The   registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  February 14, 2003                  /s/ Frank S. Yuan
                                          Chairman, Chief Executive Officer and
                                          Principal Accounting Officer

                                       17
<PAGE>

                                                                  Exhibit 99.1

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I,  Frank S. Yuan,  certify,  pursuant  to 18 U.S.C.  Section  1350,  as adopted
pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002,  that the Quarterly
Report of Cyber Merchants  Exchange,  Incorporation  on Form 10-Q for the fiscal
quarter ended December 31, 2002 fully complies with the  requirements of Section
13(a) or  15(d)  of the  Securities  Exchange  Act of 1934 and that  information
contained in such Quarterly  Report on Form 10-Q fairly presents in all material
respects the financial  condition  and results of operations of Cyber  Merchants
Exchange Inc.


                                               By:      /s/ Frank S. Yuan

                                               Name:    Frank S. Yuan
                                               Title:   Chairman, CEO and CFO