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

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly  report under section 13 or 15(d) of the Securities Exchange Act
     of 1934 for the quarterly period ended March 31, 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 April 20, 2004:
                  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 March 31, 2004 (unaudited)
         and June 30, 2003 ....................................................3

         Condensed Statements of Operations for the Nine Months Ended

         March 31, 2004 and 2003 (unaudited)...................................4

         Condensed Statements of Operations for the Three Months Ended

         March 31, 2004 and 2003 (unaudited)...................................5

         Condensed Statements of Cash Flows for the Nine Months Ended

         March 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.........................................16

PART II - OTHER INFORMATION...................................................17

     ITEM 1.  LEGAL PROCEEDINGS...............................................17

     ITEM 2. CHANGES IN SECURITIES............................................17

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................17

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...........17

     ITEM 5.  OTHER INFORMATION...............................................17

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K................................17

SIGNATURES....................................................................18


                                       2

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CYBER MERCHANTS EXCHANGE, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    March 31,       June 30,
                                                                      2004            2003
                                                                   ------------    ------------
                                                                   (Unaudited)
<S>                                                                <C>             <C>
ASSETS
Current assets:
   Cash                                                            $     48,929    $     65,720
   Certificate of deposit                                                    --         100,000
   Accounts receivable, net                                              81,171          89,801
   Employee advances                                                      5,000              --
   Inventory                                                             25,874         189,365
   Prepaid expenses                                                       4,470          26,372
                                                                   ------------    ------------
                                                                        165,444         471,258
Total current assets
Property and equipment, net                                                  --           6,902
Investments in overseas joint ventures, net                                  --         729,801
Other assets                                                             11,368          11,368
                                                                   ------------    ------------
Total assets
                                                                   $    176,812    $  1,219,329
                                                                   ============    ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
   Accounts payable and accrued expenses                           $    384,575    $    273,127
   Deferred revenue                                                       2,022         206,939
                                                                   ------------    ------------
   Total current liabilities                                            386,597         480,066
                                                                   ------------    ------------
Stockholders' (deficit) equity:
   Preferred stock, no par value, 10,000,000 shares
     authorized, no shares issued and outstanding                           --              --
   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       3,624,461
   Accumulated deficit                                              (13,836,233)    (12,880,585)
                                                                   ------------    ------------
Total stockholders' (deficit) equity                                   (209,785)        739,263
                                                                   ------------    ------------
Total liabilities and stockholders' (deficit) equity               $    176,812    $  1,219,329
                                                                   ============    ============
</TABLE>

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       3

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         Nine Months Ended
                                                                             March 31,
                                                                      --------------------------
                                                                          2004           2003
                                                                      -----------    -----------
<S>                                                                   <C>            <C>
Revenues:
   Transaction sales                                                  $ 1,373,342    $ 2,010,106
   Cost of goods sold                                                   1,188,738      1,710,104
                                                                      -----------    -----------
   Net revenues from transaction sales                                    184,604        300,002
   Tradeshow revenue                                                    1,669,477        901,807
   Subscriber fees                                                          1,200          4,158
                                                                      -----------    -----------
Net revenues                                                            1,855,281      1,205,967
Operating expenses:
   General and administrative expenses                                  1,452,638      1,609,635
   Payroll and related                                                    624,840        622,869
   Stock-based compensation                                                 6,600             --
   Depreciation and amortization                                            6,902         18,530
                                                                      -----------    -----------
Total operating expenses                                                2,090,980      2,251,034
                                                                      -----------    -----------
Loss from operations                                                     (235,699)    (1,045,067)
Other income (expense):
   Interest income, net of interest expense                                10,652         34,796
   Equity in losses on investments in overseas joint ventures              (9,342)      (174,169)
   Impairment write-down on investments in overseas joint ventures       (720,459)            --
   Amortization of software sales                                              --        250,000
                                                                      -----------    -----------
Total other income (expense)                                             (719,149)       110,627
                                                                      -----------    -----------
Loss before income taxes                                                 (954,848)      (934,440)
Income taxes                                                                  800            800
                                                                      -----------    -----------
Net loss                                                              $  (955,648)   $  (935,240)
                                                                      ===========    ===========
Basic and diluted net loss attributable to common
    stockholders per share                                            $     (0.13)   $     (0.13)
                                                                      ===========    ===========
Weighted-average number of common shares outstanding                    7,472,673      7,472,673
                                                                      ===========    ===========
</TABLE>

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       4

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                          March 31,
                                                                  --------------------------
                                                                     2004           2003
                                                                  -----------    -----------
                                                                  (Unaudited)    (Unaudited)
<S>                                                               <C>            <C>
Revenues:
   Transaction sales                                              $    53,487    $   677,766
   Cost of goods sold                                                  85,294        532,435
                                                                  -----------    -----------
   Net (loss) revenues from transaction sales                         (31,807)       145,331
   Tradeshow revenues                                                 621,373        489,301
   Subscriber fees                                                         90            933
                                                                  -----------    -----------
Net revenues                                                          589,656        635,565
Operating expenses:
   General and administrative                                         555,116        832,133
    Payroll and related                                               209,811        204,162
   Depreciation and amortization                                           --          5,579
                                                                  -----------    -----------
Total operating expenses                                              764,927      1,041,874
                                                                  -----------    -----------
Loss from operations                                                 (175,271)      (406,309)
Other income (expense):
   Interest income, net of interest expense                               385         11,023
   Equity in losses on investment in overseas joint ventures               --        (49,879)
   Amortization of software sales                                          --         83,334
                                                                  -----------    -----------
Total other income (expense)                                              385         44,478
                                                                  -----------    -----------
Net loss                                                          $  (174,886)   $  (361,831)
                                                                  ===========    ===========
Basic and diluted net loss attributable to common
    stockholders per share                                        $     (0.02)   $     (0.05)
                                                                  ===========    ===========
Weighted-average number of common shares outstanding                7,472,673      7,472,673
                                                                  ===========    ===========
</TABLE>

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       5

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                         March 31,
                                                                                 --------------------------
                                                                                    2004           2003
                                                                                 -----------    -----------
<S>                                                                              <C>            <C>
Cash flows from operating activities:
   Net loss                                                                      $  (955,648)   $  (935,240)
   Adjustments to reconcile net loss to net cash used
   in operating activities:
     Depreciation and amortization                                                     6,902         18,530
     Amortization of software sales                                                       --       (250,000)
     Stock compensation expense                                                        6,600             --
     Equity in losses on investments in overseas joint ventures                        9,342        174,169
     Impairment write-down on investments in overseas joint ventures                 720,459             --
      Changes in assets and liabilities:
        Accounts receivable, net                                                       8,630       (332,154)
        Employee advances                                                             (5,000)            --
           Inventory                                                                 163,491       (140,668)
           Prepaid expenses                                                           21,902        166,139
        Other assets                                                                      --         (7,750)
        Accounts payable and accrued expenses                                        111,448        284,634
           Deferred revenue                                                         (204,917)            --
                                                                                 -----------    -----------
Net cash used in operating activities                                               (116,791)    (1,022,340)
                                                                                 -----------    -----------
Cash flows from investing activities:
   Proceed from maturity of certificates of deposit                                  100,000             --
   Collection of related party note and interest receivable                               --        407,000
                                                                                 -----------    -----------
Net cash provided by investing activities                                            100,000        407,000
                                                                                 -----------    -----------
Cash flows from financing activities:
   Proceeds from loan payable, bank                                                   70,035        130,000
    Repayment of loan payable, bank                                                  (70,035)       (90,000)
                                                                                 -----------    -----------
Net cash provided by financing activities                                                 --         40,000
                                                                                 -----------    -----------
Net decrease in cash                                                                 (16,791)      (575,340)
Cash, beginning of period                                                             65,720        709,791
                                                                                 -----------    -----------
Cash, end of period                                                              $    48,929    $   134,451
                                                                                 ===========    ===========
</TABLE>


            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS


                                       6

<PAGE>

                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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 condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim  financial  information  and with the  instructions  to Form
10-QSB and Article 10 of Regulation S-B. Accordingly, they do not include all of
the  information  and  footnotes  required by  accounting  principles  generally
accepted in the United States of America for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
adjustments)  considered  necessary for fair  presentation  have been  included.
Operating  results for the three and nine-month  period ended March 31, 2004 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending June 30, 2004. 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, 2003.

REVENUE RECOGNITION

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

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

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 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.


                                       7

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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

The ASAP trade show generates revenue through exhibitor booths sales,  corporate
sponsorship,  and  advertising.  Such revenue is  recognized  at the time of the
related trade show.

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.

The Security and Exchange  Commission  ("SEC") 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 SEC. Management believes the Company's revenue recognition
policies conform to SAB 101.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent  accounting  pronouncements  issued by the FASB  (including  its Emerging
Issues Task Force), The American Institute of Certified Public Accountants,  and
the Securities and Exchange Commission did not or are not believed by management
to  have a  material  impact  on  the  Company's  present  or  future  financial
statements.

STOCK-BASED COMPENSATION

At March 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, and related  interpretation.  No  stock-based
compensation  cost is  recognized in net loss.  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
income and loss per share if the Company had applied the fair value  recognition
provisions of SFAS 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                Nine Months Ended March 31,
                                                                --------------------------
                                                                    2004           2003
                                                                -----------    -----------
<S>                                                             <C>            <C>
Net loss:
      As reported                                               $  (955,648)   $  (935,240)
       Deduct: Total stock based employee compensation
               expense determined under fair value based
               method for all awards                                (57,000)       (30,000)
                                                                -----------    -----------
        Pro forma                                               $(1,012,648)   $  (965,240)
                                                                ===========    ===========
Loss per common share, as reported
      Basic and diluted                                         $     (0.13)   $     (0.13)
                                                                -----------    -----------
Loss per common share, pro forma
      Basic and diluted                                         $     (0.14)   $     (0.13)
</TABLE>


                                       8

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         Three Months Ended March 31,
                                                         ----------------------------
                                                              2004         2003
                                                           ---------    ---------
<S>                                                        <C>          <C>
Net loss:
      As reported                                          $(174,886)   $(361,831)
      Deduct: Total stock based employee compensation
               expense determined under fair value based
               method for all awards                         (19,000)     (10,000)
                                                           ---------    ---------
        Pro forma                                          $(193,886)   $(371,831)
                                                           =========    =========
Loss per common share, as reported
      Basic and diluted                                    $   (0.02)   $   (0.05)
Loss per common share, pro forma
      Basic and diluted                                    $   (0.03)   $   (0.05)
</TABLE>

The  above  pro  forma  effects  of  applying  SFAS  123  are  not   necessarily
representative of the impact on reported net loss for future

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 it's 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 has written off the asset.

INVENTORY

Inventory consists entirely of ready-to-wear garments and is stated at the lower
of standard cost or market.  Cost is determined on a weighted average basis that
approximates the first-in,  first-out method. Market is determined by comparison
with recent  purchases or net realizable  value.  Such net  realizable  value is
based on  management's  forecast  for sales of the  Company's  inventory  in the
ensuing years.  The industry in which the Company  operates is  characterized by
style and fashion changes, should demand for the Company's inventory prove to be
significantly  less  than  anticipated,  the  ultimate  realizable  value of the
Company's  inventories could be substantially  less than the amount shown on the
accompanying condensed balance sheet. Accordingly, the Company has established a
reserve of approximately $2,500 at March 31, 2004.


                                       9

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 2 - BUSINESS SEGMENTS

Reportable  business  segments for the periods ended March 31, 2004 and 2003 are
as follows:

<TABLE>
<CAPTION>
                                       3 Months            9 Months            3 Months            9 Months
                                    Ended 03/31/04      Ended 03/31/04      Ended 03/31/03      Ended 03/31/03
--------------------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                 <C>                 <C>
Revenues
      Transaction sales, net          $   (31,807)        $   184,604         $   145,331         $   300,002
       ASAP Show                          621,373           1,669,477             489,301             901,807
     Other                                     90               1,200                 933               4,158
                                      -----------         -----------         -----------         -----------
                                      $   589,656         $ 1,855,281         $   635,565         $ 1,205,967
                                      ===========         ===========         ===========         ===========
Loss from operations:
      Transaction sales               $   (98,050)        $   (86,816)        $  (225,986)        $  (668,913)
     ASAP Show                            (76,911)           (146,938)           (179,401)           (374,597)
      Other                                  (310)             (1,945)               (922)             (1,557)
                                      -----------         -----------         -----------         -----------
                                      $  (175,271)        $  (235,699)        $  (406,309)        $(1,045,067)
                                      ===========         ===========         ===========         ===========
Depreciation and amortization:
     Transaction sales                $        --         $     6,902         $     5,579         $    18,530
      ASAP Show                                --                  --                  --                  --
      Other                                    --                  --                  --                  --
                                      -----------         -----------         -----------         -----------
                                      $        --         $     6,902         $     5,579         $    18,530
                                      ===========         ===========         ===========         ===========
Identifiable assets:
       Transaction sales              $   176,812             176,812         $ 2,314,609         $ 2,314,609
       ASAP Show                               --                  --                  --                  --
        Other                                  --                  --                  --                  --
                                      -----------         -----------         -----------         -----------
                                      $   176,812         $   176,812         $ 2,314,609         $ 2,314,609
                                      ===========         ===========         ===========         ===========
</TABLE>

NOTE 3 - STOCKHOLDERS' EQUITY

PREFERRED STOCK

The  Company  has  authorized  10,000,000  shares  of  cumulative,   convertible
preferred stock with no par value. As of March 31, 2004, there were no shares of
preferred stock issued and outstanding.

The Board of Directors authorized 2,500,000 shares of 8% cumulative, convertible
Series A Preferred  Stock  ("Series A") with no par value.  The preferred  stock
have  mandatory  cumulative  dividends  of 8%,  which are payable on a quarterly
basis,  each share is convertible  into one share of the Company's common stock,
do not have any voting rights, and have liquidation preferences, as defined.

Subsequent to March 31, 2004, in connection with the Company's Private Placement
Memorandum  ("PPM") in which the  Company is  offering  qualified  investors  8%
convertible  Series A and warrants  ("Warrants"),  collectively the "Units",  in
exchange for a cash investment in the Company for an aggregate of $1,250,000. In
April 2004, the Company's Chief Executive  Officer  invested  $100,000 under the
PPM.


                                       10

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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 three
and nine months ended March 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, 2003.  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  company;  financing,  logistics  and trade  show  organizer
corporation  that is 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  global  ready-made  garment
factories  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 overseas stock lots merchandise information
to the appropriate buyers computer desktop.  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 ("L/C"). 4) Logistics  warehouse,
shipping,  and billing  service for the  overseas  manufacturers.  The  Ccompany
presently has representatives  located in 25 countries  throughout Asia, Africa,
and the Middle East to facilitate international transactions.

Services
--------

ASAP GLOBAL SOURCING SHOW

There's  definitely no shortage of trade shows in the United States. The Apparel
Sourcing  Association  Pavilion  ("Global  Sourcing  Show"  or "ASAP  Show")  is
bringing a totally new concept to the trade show industry,  with many exhibitors
following such concept.  The Global  Sourcing Show is not an easy task. But C-Me
has the  perfect  opportunity  to make it  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


                                       11

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

launched.  Most people are now  reluctant to travel  overseas  than ever before.
Therefore,  the  ASAP  Show  is  even  more  crucial  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.

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 service services are also provided
for the 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
always  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.


                                       12

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                   (UNAUDITED)

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%. The demands for C-Me's  sourcing  abilities by the
U.S.  apparel  buyers  have  arrived at stages  where C-Me must  select the U.S.
Apparel buyers it wants to represent.

Global Financial Platform

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

CIT charges 1.5% of the invoice value as their 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.

Logistics, Warehousing, Shipping and Billing

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

RESULTS OF OPERATIONS

NINE MONTHS ENDED MARCH 31, 2004 AND 2003

Revenue
-------

Net gross revenues on transaction sales for the nine months ended March 31, 2004
were  $1,373,342,  a decrease of $636,764 or 32% compared to $2,010,106  for the
same period last fiscal year.  Due to shifting the Company's  resources to focus
on the ASAP Show, the net gross revenues on transaction  sales decreased for the
first time since the  Company's  inception.  The  Company  expects to regain the
volume of gross sales  transactions  and the gross profit margin  percentages it
has generated in the past, as it further utilizes its overseas  sourcing network
and its external sales force.

The gross profit from transaction sales for the nine months ended March 31, 2004
was  $184,604 a decrease of  $115,398,  or 38% compared to $300,002 for the same
period last fiscal year.  The gross profit margin is  approximately  13% and 15%
for transaction  sales for the nine month periods ended March 31, 2004 and 2003,
respectively.

The ASAP  Show's  gross  revenue  for the nine  months  ended March 31, 2004 was
$1,669,477,  an increase of  $767,670 or 85%  compared to $901,807  for the same
period  last  fiscal  year.  This  increase  was due to an increase in number of
exhibitors for the August 2003 and February 2004 shows. Historically, the


                                       13

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                   (UNAUDITED)

August  shows  have  significantly  more  manufacturers  exhibiting  than in the
February  shows. In addition,  more Government  subsidy funds are only available
for the August show.

Subscriber fees for the nine months ended March 31, 2004 were $1,200, a decrease
of $2,958 or 71% compared to $4,158 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.

Operating Costs and Expenses
----------------------------

Operating  expenses  decreased by $160,054,  or 7%, to  $2,090,980  for the nine
months ended March 31, 2004, as compared to $2,251,034  for the same period last
fiscal  year.  The  decrease  in  operating  expenses  is  primarily  due to the
implementation of the company's cost-minimizing plan.

Stock compensation expenses of approximately $6,600 were recognized for the nine
months  ended  March 31,  2004 to reflect  the  issuance of warrants to purchase
30,000 shares of the Company's  restricted  common stock at an exercise price of
$0.26.

Net Loss
--------

The Company  recorded a net loss of $955,648 for the nine months ended March 31,
2004,  a slight  increase of $20,408;  as compared to a net loss of $935,240 for
the same period last fiscal year.  Such an increase in net loss is mainly due to
the impairment  write-down on overseas joint venture investments of $720,459,  a
reduction  on  amortization  of software  sales of $250,000  and a reduction  in
interest  income of $24,144,  net of the reduction of operating loss of $809,368
and equity losses on overseas joint venture  investments  of $164,827.  Loss per
share for the nine months ended March 31, 2004 and March 31, 2003, was $0.13 due
to comparable net losses in both periods.

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 it's 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  has  written  off  Its
investment.

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

Revenue
-------

Gross revenues from transaction  sales for the three months ended March 31, 2004
were  $53,487,  a decrease of $624,279 or 92%  compared to $677,766 for the same
period last fiscal year, due to the


                                       14

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                   (UNAUDITED)

shifting revenue focus to the ASAP Show. Gross loss from the net revenues earned
on  transaction  sales for the three  months  ended March 31, 2004 was  $31,807,
compared to net revenue of $145,331 for the same period last fiscal year,  which
resulted from returns and charge backs. The Company intends to regain the volume
of gross  sales  transactions  and the gross  profit  margin  percentage,  as it
further utilizes its overseas sourcing network and its external sales force.

The ASAP  Show's  gross  revenue for the three  months  ended March 31, 2004 was
$621,373,  an  increase of  $132,072  or 27%  compared to $489,301  for the same
period last fiscal year,  which  resulted from  increases of exhibitors  for the
February 2004 shows.

Subscriber  fees for the three  months ended March 31, 2004 were $90, a decrease
of $843 or 90% compared to $933 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.

Operating Costs and Expenses
----------------------------

Operating  expenses  decreased  by  $276,947,  or 27%, to $764,927 for the three
months ended March 31, 2004, as compared to $1,041,874  for the same period last
fiscal  year.  The  decrease  in  operating  expenses  is  primarily  due to the
implementation  of the company's  cost-minimizing  plan (reduction of payroll by
20% and minimizing the Company's IR/PR expenses).

No non-cash  stock  compensation  expenses were  recognized for the three months
ended March 31, 2004.

Net Loss
--------

The Company recorded a net loss of $174,886 for the three months ended March 31,
2004, a decrease of $186,945 in net loss;  as compared to a net loss of $361,831
for the same period last fiscal year.  The decrease in net loss is mainly due to
a reduction in operating  loss of $231,038 and equity  losses on overseas  joint
venture  investments  of $49,879,  net of the  reduction  on interest  income of
$10,638  and  amortization  of software  sales of $83,334.  Loss per share as of
March 31,  2004 was $0.02 as  compared  to $0.05 as of March 31, 2003 due to the
decrease in net loss.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital decreased by $212,345 from a deficit of $8,808
as of June 30, 2003 to a working capital  deficiency of $221,153 as of March 31,
2004,  primarily  due to the  significant  decrease  in  the  current  quarter's
transactions  sales  activity.  For the nine months  ended March 31,  2004,  the
Company  had  average  monthly  operating  expenses  of  approximately  $147,000
(excluding  ASAP Show  production  expenses) as compared to $173,000 in the same
period last fiscal year. The overall current year ASAP Show production  expenses
were  consistent  with the  prior  year.  While  the  Company  was able to lower
facilities  charges,  the increase in  exhibitors  and related  costs offset the
decreased  charges  in  facilities.  The  Company  will  keep  implementing  its
cost-minimizing plan, which includes, reduction of professional consulting fees,
investor relations and marketing costs.

The  convertible  stock offering lead by C.K. Cooper & Company on April 17, 2003
has not had any  commitments or  investments  as of the date of the filing.  The
senior management of the Company is


                                       15

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                   (UNAUDITED)

seeking through its network of close investors to complete this offering.  As of
May 3, 2004, management has injected $100,000 as part of this offering.

Should  the  senior  management  successfully  raise  the  capital  through  the
convertible  stock  offering,  the Company  believes it has  sufficient  cash to
operate its business over the next 12 months.  If Senior Management has problems
raising adequate funds, Senior Management will aggressively seek a buyer willing
to purchase the Company. 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 and operation  revenue 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 and the continued success of the Company's business model. 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 has no commitments to make capital  expenditures for the fiscal year
ending  June 30,  2004.  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.   EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the  participation  of our management,  including
our Chief  Executive  Officer ("CEO") and Chief Financial  Officer  ("CFO"),  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and  procedures  (as defined in Rule  13a-15(e) and 15d-15(e) of the 34
Act) as of a date (the  "Evaluation  Date")  within 90 days  prior to the filing
date of this report. Based upon that evaluation, the CEO and CFO concluded that,
as of March 31, 2004, our disclosure  controls and procedures  were effective in
timely  alerting  them  to the  material  information  relating  to us  (or  our
consolidated  subsidiaries) required to be included in our periodic filings with
the SEC. Based on their most recent  evaluation as of the  Evaluation  Date, the
CEO and the CFO have also concluded  that there are no significant  deficiencies
in the design or operation of internal  control over financial  reporting  which
are  reasonably  likely to  adversely  affect the  Company's  ability to record,
process,  summarize  and report  financial  information,  and such officers have
identified no material weaknesses in internal controls.

Changes in Controls and Procedures
----------------------------------

There were no significant  changes made in our internal  controls over financial
reporting during the quarter ended March 31, 2004 that have materially  affected
or  are  reasonably  likely  to  materially  affect  these  controls.  Thus,  no
corrective   actions  with  regard  to  significant   deficiencies  or  material
weaknesses were necessary.


                                       16

<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                   (UNAUDITED)

Limitations On the Effectiveness of Internal Control
----------------------------------------------------

The Company's management, including the CEO, does not expect that our disclosure
controls and procedures or our internal  control over  financial  reporting will
necessarily  prevent all fraud and material errors.  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 on all internal 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,  and/or by management  override of
the control.  The design of any system of internal control is also 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,  controls may become  inadequate
because of changes in  circumstances,  and/or the degree of compliance  with the
policies and procedures may deteriorate.  Because of the inherent limitations in
a cost-effective internal control system,  financial reporting misstatements due
to error or fraud may occur and not be detected on a timely basis.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None.

(b) Reports on 8-K

None


                                       17

<PAGE>

                                   SIGNATURES

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

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

Date:    May 14, 2004              /s/ Frank S. Yuan
-----------------------------     ---------------------------------------------
                                   Frank S. Yuan, Chairman,
                                   Chief Executive Officer


                                       18