|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended September 30, 1999
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ................. to ...................
Commission file number 333-60487
CYBER MERCHANTS EXCHANGE, INC.
d.b.a. C-ME.com
(Name of small business issuer in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|California
(State or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|600 S.Lake Ave., Suite 405, Pasadena, CA
(Address of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Issuer's telephone number (626)793-5000
Securities registered under Section 12(b) of the Exchange Act:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Title of each classNone                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Securities registered under Section 12(g) of the Exchange Act:None
Former Business Address:320 S GARFIELD AVE STE 318, ALHAMBRA, CA 91801
Former Business Phone:(626)588-3660
Securities registered under Section 12(g) of the Exchange Act:None
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. [X] Yes [ ] No
Number of shares outstanding of the issuer's classes of common equity, as of Sep. 30,
1999: 6,086,173 Shares of Common Stock (One Class)
Transitional Small Business Disclosure Format: Yes  No X

TABLE OF CONTENTS
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
    ITEM 1. FINANCIAL STATEMENTS
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
    ITEM 1. LEGAL PROCEEDINGS
    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS

|                                                                                               |                                                                                                                                                                                                                |                               |           | 
|---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | --------- | 
|                                                                                               | June 30,1999
(Audited)                                                                                                                                                                                         | September 30,1999
(Unaudited)
|AssetsCurrent Assets                                                                          
|                                                                                               | Cash and cash equivalents (Note 1b)                                                                                                                                                                            | $ 595,265                     | $ 22,981 
|Certificates of deposit                                                                        | 1,500,200                                                                                                                                                                                                      | 1,865,448                    
|Stock subscription receivable                                                                  | 96,984                                                                                                                                                                                                         |                              
|Accounts receivable, net of allowance for doubtful accounts                                    | 8,150                                                                                                                                                                                                          | 10,375                       
|Total current assets                                                                           | 2,200,599                                                                                                                                                                                                      | 1,898,803                    
|Property and equipment, net (Note 1c)                                                          | 38,540                                                                                                                                                                                                         | 58,111                       
|Other assets                                                                                   | 3,143                                                                                                                                                                                                          | 3,143                        
|Total assets                                                                                   | $ 2,242,282                                                                                                                                                                                                    | $ 1,960,057                  
|Liabilities and Stockholder' Equity
Current Liabilities:                                      
|                                                                                               | Accounts payable and accrued expenses                                                                                                                                                                          | $ 230,139                     | $ 64,706 
|Deferred revenue                                                                               | 3,510                                                                                                                                                                                                          | 3,510                        
|Total current liabilities                                                                      | 233,649                                                                                                                                                                                                        | 68,216                       
|Commitments and contingency (Note 3)
Shareholders' equity:                                    
|                                                                                               | Common stock, no par value; authorized 40,000,000 shares; issued and outstanding 5,750,000 shares,   6,003,170 shares, 6,086,173 shares at September 30 1998, June 30 1999, and September 30 1999 respectively | 3,169,034                     | 3,833,058
|Additional paid-in capital                                                                     | 30,000                                                                                                                                                                                                         | 30,000                       
|Common stock subscribed                                                                        | 664,024                                                                                                                                                                                                        |                              
|Accumulated deficit                                                                            | (1,854,425)                                                                                                                                                                                                    | (1,971,217)                  
|Total shareholders' equity                                                                     | $ 2,008,633                                                                                                                                                                                                    | $ 1,891,841                  
|Total liabilities and shareholders' equity                                                     | $ 2,242,282                                                                                                                                                                                                    | $ 1,960,057                  
|See accompanying notes to financial statements.

STATEMENT OF OPERATIONS                      
|                                                                                               | Three Months ended September 30,                                                                                                                                                                              
|1998                                                                                           | 1999                                                                                                                                                                                                          
|(Unaudited)                                                                                   
|Revenues - subscribers' fees
Operating costs and expenses:                                     | $ 17,535                                                                                                                                                                                                       | $ 10,150                     
|                                                                                               | Cost of revenues                                                                                                                                                                                               | 32,735                        | 23,452   
|General and administrative expenses                                                            | 110,990                                                                                                                                                                                                        | 121,622                      
|                                                                                              
|Operating loss
Other income (expenses):                                                        | (126,190)                                                                                                                                                                                                      | (134,924)                    
|                                                                                               | Interest income                                                                                                                                                                                                | 4,251                         | 18,133   
|                                                                                              
|Loss before income taxes
Income taxes (Note 1d)                                                | (130,441)
-                                                                                                                                                                                                    | (116,792)
-                  
|                                                                                              
|Net loss                                                                                       | $ (130,441)                                                                                                                                                                                                    | $ (116,792)                  
|                                                                                              
|Basic and diluted net loss per share (Note 1f)                                                 | $ (.025)                                                                                                                                                                                                       | $ (.019)                     
|                                                                                              
|Weighted-average shares used in computation of net loss per share(Note 1g)                     | 5,281,889                                                                                                                                                                                                      | 6,086,173                    
|See accompanying notes to financial statements.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

|                                                | Common Stock | Additional Paid-In Capital | Common Stock Subscribed | Accumulated Deficit | Net Shareholders' Equity
|----------------------------------------------- | ------------ | -------------------------- | ----------------------- | ------------------- | ------------------------
|Shares                                          | Amount      
|                                               
|Balance, June 30, 1998                          | 5,750,000    | $ 1,550,000                | $ 30,000                | -                   | $ (1,158,971)           
|                                               
|Issuance of common stock                        | 253,170      | 1,619,034                  | -                       | -                   | -                       
|Subscription of common stock                    | -            | -                          | -                       | 664,024             | -                       
|Net Loss                                        | -            | -                          | -                       | -                   | (695,454)               
|Balance, June 30, 1999                          |             
|6,003,170                                       | $ 3,169,034  | $ 30,000                   | $ 664,024               | $ (1,854,425)       | $ 2,008,633             
|Issuance of Common Stock Subscribed (Note 2)    | 83,003       | 664,024                    | -                       | (664,024)           | -                       
|Net Loss                                        | -            | -                          | -                       | -                   | (116,792)               
|                                               
|Balance, September 30, 1999                     | 6,086,173    | $ 3,833,058                | $ 30,000                | $ -                 | $ (1,971,217)           
|                                               
|See accompanying notes to financial statements.

|STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalent                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                           
|1998                                                                                                                                                                                                       
|(unaudited)                                                                                                                                                                                                
|Cash flows from operating activities:                                                                                                                                                                      
|                                                                                                                                                                                                           
|Adjustments to reconcile net loss to net cash used in operating activities:                                                                                                                                
|                                                                                                                                                                                                           
|Provision for doubtful accounts                                                                                                                                                                            
|Changes in assets and liabilities:                                                                                                                                                                         
|                                                                                                                                                                                                           
|Other current assets                                                                                                                                                                                       
|                                                                                                                                                                                                           
|Deferred revenue                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Net cash used in operating activities                                                                                                                                                                      
|                                                                                                                                                                                                           
|Cash flows from investing activities:                                                                                                                                                                      
|                                                                                                                                                                                                           
|Investment in certificates of deposit                                                                                                                                                                      
|Proceeds from maturity of certificates of deposit                                                                                                                                                          
|                                                                                                                                                                                                           
|Net cash provided by (used in) investing activities                                                                                                                                                        
|                                                                                                                                                                                                           
|Cash flows from financing activities:                                                                                                                                                                      
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Net cash provided by financing activities                                                                                                                                                                  
|                                                                                                                                                                                                           
|Net increase in cash and cash equivalents                                                                                                                                                                  
|                                                                                                                                                                                                           
|Cash and cash equivalents, beginning of period                                                                                                                                                             
|                                                                                                                                                                                                           
|Cash and cash equivalents, end of period                                                                                                                                                                   
|                                                                                                                                                                                                           
|See accompanying notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
(Information as of September 30, 1999 and for the three months ended September 30, 1998 and 1999, respectively is unaudited)

|NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in July 1996 in the State of California and commenced its
operations in November 1996. Cyber Merchants Exchange, Inc. d.b.a. C-ME.com (the Company
and formerly known as World Wide Magic Net, Inc.) is engaged in developing and marketing
Internet based business-to-business e-commerce network services to retailers and their
vendors worldwide. The Company provides private extranet merchandise sourcing networks
whereby a retailer can access the Internet, review vendors' product information, and
source merchandise. Vendors pay a one-time setup fee and a monthly maintenance fee to
display products and receive real time response, inquires, and/or orders from retailers.
The Company provides vendors with additional services such as customized web design and
hosting services, and the Virtual Trade Show, a continuous revolving product showcase that
allows buyers to freely search for products.
(a) Unaudited Interim Financial Information
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(b) Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(c) Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(d) Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(e) Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(f) Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(g) Net Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|NOTE 2: SHAREHOLDERS' EQUITY
On May 14, 1999, the Company filed and effected its prospectus with the Securities and
Exchange Commission to offer 2,500,000 shares of its common stock to the public.  On June
1, 1999, the Company launched its initial public offering on a best efforts basis.  The
Company issued 336,173 shares of common stock at $8.00 per share and received $2,283,158
in cash (net of $406,326 issuance cost).
The Company's 1996 stock option plan (the Plan) provides for the granting of stock
options to employees.  The Company has reserved 250,000 shares of common stock for issuance
under the Plan.  The terms and conditions of grants of stock options are determined by the
Board of Directors.  Generally, one-half of the granted option is exercisable after the
employee's second year of employment.  The remaining option is exercisable after the end
of the employee's third year of employment.
A summary of stock option activity is as follows:                                                         

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Number of Shares | Weighted Average Exercise Price
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | -------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                 
|Balance at July 31, 1997                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 155,000          | $ .21                          
|Options granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 15,000           | $ .40                          
|Options terminated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (10,000)         | $ .40                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                  |                                
|Balance at June 30, 1998                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 160,000          | $ .21                          
|Options granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 15,000           | $ .40                          
|Options terminated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (55,000)         | $ .40                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                  |                                
|Balance at June 30, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 120,000          | $ .12                          
|Options exercised                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (75,000)         | $ .00027                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                  |                                
|Balance at September 30, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 45,000           | $ .40                          
|At September 30, 1999, 37,500 shares were exercisable.
The options expire three months after termination of employment.
The Company applies APB Opinion No. 25 in accounting for its Plan.
On January 29, 1998, the Company's Board of Directors approved a 1-for-2 reverse split
of the Company's common stock.  All common share amounts in the accompanying financial
statements have been adjusted retroactively.  On March 24, 1998, the Company amended its
articles of incorporation to have authorized capital stock of 40,000,000 shares of common
stock and 10,000,000 shares of preferred stock.
On February 10, 1999, the Company issued 20,000 common stock warrants, subject to
certain conditions and restrictions as defined in the warrant agreement, at $8.00 per
share to a bank. The warrant will expire on February 10, 2004.
The Company issued common stock warrants, subject to certain conditions and
restrictions as defined in the warrant agreement, to each of the participating
broker-dealers for securities they sold during the initial public offering period.
The exercise price is 165% of the Company's IPO price ($8.00 per share).  As of September
30, 1999, there were 10,815 warrants outstanding under these agreements.  The warrants
will expire on May 13, 2004.
On October 15, 1997, the Company entered into an agreement with Burlington Coat Factory
Warehouse Corporation (BCF).  Under the agreement, the Company and BCF jointly develop a
network whereby participants of the network can do business through the Internet.  BCF agrees
to use this proprietary network as its main internet sourcing method.  BCF agrees to
assist in marketing and promoting this network service to its vendors.  In return, BCF is
free to use the network designed and maintained by the Company and will share a certain
portion of the fee revenue generated by this network with the Company.  In addition, the
Company granted a warrant to BCF to allow BCF to purchase up to 10% of the outstanding
shares (maximum 676,241 shares as of June 30, 1999) of common stock of the Company on a
fully diluted basis, subject to certain conditions and restrictions as defined in the
warrant agreement.  The common stock if issued to BCF will have certain registration
rights.  As of September 30, 1999, the exercise price was $4.00 per share.  This agreement
will expire on October 15, 2002.

NOTE 3: COMMITMENTS AND CONTINGENCY
The Company has entered into a noncancelable operating lease agreement, expiring on
September 30, 2002, to facilitate its principal place of business in Pasadena. This lease
provides for a gross rent of $3,520.80 per month and will expire October 30, 2002. The
Company does not have any renewal options on the lease. Future minimum lease payments
under noncancelable operating leases as of September 30, 1999 are as follows:

|Year ending June 30,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Amount    | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | 
|2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $ 31,687 
|2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 42,250   
|2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 42,250   
|2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 10,562   
|Total minimum lease payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $ 126,748
|ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the
Company should be read in conjunction with the financial statements and the related notes
thereto included elsewhere in this quarterly report for the three months ended September
30, 1999. This quarterly report contains certain forward-looking statements and the
Company's future operating results could differ materially from those discussed herein.
INTRODUCTION
C-ME.com was founded in 1996 and provides Internet turnkey solutions to streamline
retailers' merchandise sourcing (front-end) activities. The Company's solutions include
its proprietary Internet Sourcing Networks ("ISN") -- private extranets that links the
Company's retail partners with their vendors. The ISN provides retailers with a desktop
solution to reduce the cost of front-end merchandise sourcing activities while expanding
the retailer's vendor base. Other services include the Virtual Trade Show ("VTS"), - a
product showcase that allows retail buyers to quickly search among thousands of vendors'
products, the Wholesale Auction Center ("WAC") (planned launch: Spring 2000) - a place
where vendors list closeouts, odd lots in bulk quantity and allows smaller retailers,
jobbers and others instant access, and the Factory Outlet Mall ("FOM") (planned launch:
Spring 2000), a place where manufacturers sell goods directly to consumers, which includes
a full e-commerce package consisting of secure credit card transaction processing and
shopping cart functions including automatic calculation of freight and sales tax,
Currently, C-ME.com's major retail partners include Factory 2-U Stores (NASDAQ:FTUS) and
Burlington Coat Factory (NYSE:BCF).
RESULTS OF OPERATION
Three months ended September 30, 1999 and 1998
The following discussion sets forth information for the three months ended September 30,
1999 compared with the three months ended September 30, 1998. This information has been
derived from unaudited interim financial statements of the Company contained elsewhere in
the quarterly report and reflects, in Management's opinion, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the results of
operations for these periods. Results of operations for any interim period are not
necessarily indicative of results to be expected from the full fiscal year.
Net Loss
The Company recorded a net loss of $116,792 for the three months ended September 30, 1999
as compared to a net loss of $130,441 for the same period last year. The decrease in net
loss is primarily attributable to the increase in interest income.
Operating Revenue
For the three months ended September 30, 1999, the Company had revenues totaling $10,150
representing a decrease of $7,385 from the same period a year ago, consisting primarily of
fees paid by users of the Company's VTS and web design services. The decrease in revenue
is attributable to activity relating to the Company's Initial Public Offering during the
month of July, and also reflects company activities related to changing its business plan
and beginning to implement its new business plan. These activities included recruiting and
hiring a president and executive vice president, and moving its offices to a more suitable
location.
Cost of Revenue
Cost of revenues decreased $9,283 to $23,452 for the quarter ended September 30, 1999,
compared to $32,735 for the same period last year. The majority of the decrease of the
cost of revenue represents a decrease in variable operating costs. Revenues decreased 42%,
while the cost of revenue decreased 28% to $23,452.
Operating Expenses
The Company's operating expenses for the three months ended September 30, 1999, totaling
$145,074, consisted of $23,452 for the cost of revenue and $121,622 for general
administration and selling expenses, as compared to $143,725 in 1998, representing an
increase of $1,349 from the three months ended September 30, 1998. The general and
administrative expenses increased primarily due to an increase in administrative costs
from the additions to our management team.
Status of Operations
The Company's current business plan focuses on the retailer and forming strategic retail
relationships. Pursuant to this plan, the Company is planning to utilize the marketing
power of its retail partners to attract subscriptions from their vendors. In order to
attract vendors, the Company is adding additional services, such as the Virtual Trade
Show ("VTS"), the Wholesale Auction Center ("WAC"), and the Factory Outlet Mall ("FOM").
The WAC and the FOM are both planned to be launched in the Spring of 2000.
Participation Agreements
On October 15, 1997, the Company entered into a Participation Agreement with Burlington
Coat Factory Warehouse Corporation ("BCF"). Under the terms of the Participation Agreement,
BCF would assist the Company in marketing the ISN to BCF's vendors in return for a portion
of the monthly hosting fees. The Company is required to pay BCF 50 percent of the monthly
hosting fees collected from vendors who join BCF's ISN as well as 50 percent of the
additional monthly hosting fees collected from vendors who decide to join BCF's ISN as a
secondary ISN. The Company is also required to pay BCF 33 percent of the monthly hosting
fees collected from vendors who appear on BCF's vendor list but wish to join another ISN
the Company has created for a different retailer as well as 33 percent of monthly hosting
fee collected from foreign (non-US) vendors who join BCF's ISN. Moreover, the Company is
required to pay BCF five percent of all monthly hosting fees collected from US vendors of
products in the apparel, linens, juvenile furniture, and footwear industries that did not
join BCF's ISN.
On January 27, 1998, the Company entered into a similar Participation Agreement with
Factory-2-U Stores ("FTUS"). Under the terms of the Participation Agreement, FTUS would
assist the Company in marketing the ISN to FTUS's vendors in return for a portion of the
monthly hosting fees. Unlike the Company's Participation Agreement with BCF, FTUS will
only receive 33 percent of the monthly hosting fees collected from vendors who join FTUS's
ISN.
INITIAL PUBLIC OFFERING "IPO"
The Company successfully sold 336,173 shares of common stock at $8.00 per share. The
net proceeds of $2,283,058 will be used to implement the business plan. The Company is
currently traded on the Over-the-Counter Bulletin Board stock exchange (OTC:BB) under the
symbol of CMEE. For the trading period from July 22 to September 30, the highest price was
$11.00 and the lowest price was $2.50.
YEAR 2000 COMPLIANCE ISSUE
The inability of computers, software and other equipment utilizing microprocessors to
recognize and properly process data fields containing a 2-digit year is commonly referred
to as the "Year 2000 Compliance" issue. As the year 2000 approaches, such systems may be
unable to accurately process certain date-based information. The Company has reviewed all
significant internal applications and is in the process of implementing modifications that
are considered necessary to ensure Year 2000 compliance. Since the Company has only three
years' history of operation, all the computer hardware and software are newly purchased
and management believes them to be Y2K compliant.
In addition, the Company is in the process of communicating with others with whom it
does significant business, to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 Compliance. However,
there can be no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted, or that a failure to convert by another company, or
a conversion that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has not been and
is not anticipated to be material to its financial position or to its results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased by $136,363, from $1,966,950 as of June 30,
1999, to $1,830,587 as of September 30, 1999 primarily due to losses from operations.
Management estimates the monthly cash "burn rate" to be approximately $55,000.  As of
Sept. 30,1999 working capital is $1,830,587, or 33 times the currently estimated monthly
burn rate.
Management believes that current cash balances and cash flows from operations, if any,
will be sufficient to meet present growth strategies and related working capital and
capital expenditure requirements for at least the next 12 months. Without the proceeds
from future offerings, its cash resources would be sufficient to fund the operations under
the current plan for the near future. The current plan contemplates significant increases
in spending when compared to the historical expenditures. Management currently anticipates
the need to raise additional capital prior to achieving positive cash flows from
operations through the issuance of additional debt or equity securities. The forecast of
the period of time through which the financial resources will be adequate to support
operations is a forward-looking statement that involves risks and uncertainties. The
actual funding requirements may differ materially from this as a result of a number of
factors including the plans to fully support the ISN and the launch of the WAC and the
FOM, our investments in systems infrastructure and staffing. We may require substantial
working capital to fund our business and we may need to raise additional capital prior to
this time or thereafter. We cannot be certain that additional funds will be available on
satisfactory terms when needed, if at all. If we are unable to raise additional necessary
capital in the future, we may be required to curtail our operations significantly. Raising
additional equity capital would have a dilutive effect on existing stockholders.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and Exchange
Commission (including this Form 10-QSB) may contain statements, which are not historical
facts, so-called "forward-looking statements". These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual future results may differ significantly from those stated in
any forward-looking statements. Forward-looking statements involve a number of risks and
uncertainties, including, but not limited to, product demand, pricing, market acceptance,
litigation, intellectual property rights, risks in product and technology development,
product competition, limited number of customers, key personnel, potential transactions
and other risk factors detailed in this Quarterly Report on Form 10-QSB and in the
Company's other Securities and Exchange Commission filings.
The discussions of the Company's business and activities set forth in this report and
in other past and future reports and announcements by the Company may contain
forward-looking statements and assumptions regarding future activities and results of
operations of the Company. In light of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company hereby identifies the following
factors which could cause actual results to differ materially from those reflected in any
forward looking statement made by or on behalf of the Company: reliance on collaborative
retail partners, market acceptance of Company products and services; changing business
conditions or technologies in the industry, which could affect demand for the Company's
products and services; the impact of competition; problems with technology; product
development schedules; and regulatory factors beyond the Company's control.


PART II - OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
Previously reported on Form 10-KSB, dated June 30, 1999.ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS

|Exhibit No.                                                                                                                                                                      | Description                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------
|3.1                                                                                                                                                                              | Articles of Incorporation*                                                 
|3.2                                                                                                                                                                              | Bylaws*                                                                    
|4.1                                                                                                                                                                              | Article II of Bylaws (Reference is made to Exhibit 3.2)*                   
|4.3                                                                                                                                                                              | Warrant held by Burlington Coat Factory Warehouse Corporation*             
|10.2                                                                                                                                                                             | Lease of registrant's facilities*                                          
|10.2                                                                                                                                                                             | Participation Agreement with Burlington Coat Factory Warehouse Corporation*
|10.3                                                                                                                                                                             | Contract with Family Bargain Corporation*                                  
|10.4                                                                                                                                                                             | Employment contract with David Rau*                                        
|10.5                                                                                                                                                                             | Escrow Agreement with Union Bank of California*                            
|10.6                                                                                                                                                                             | 1996 World Wide Magic Net, Inc. Stock Option Plan*                         
|16.1                                                                                                                                                                             | Change of Certified Public Accountant                                      
|23.2                                                                                                                                                                             | Consent of Evers & Hendrickson, LLP*                                       
|27.1                                                                                                                                                                             | Financial Data Schedule                                                    
|*Filed as an Exhibit to the Company's Registration
Statement on Form SB-2, Amendment No. 5 dated May 6, 1999, and incorporated herein by
this reference.
FINANCIAL DATA SCHEDULE

|TAG NAME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | TAG VALUE                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------
|Form                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 10QSB                       
|Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | CYBER MERCHANTS EXCHANGE INC
|Filed on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 12-Nov-99                   
|PERIOD-TYPE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 3-MOS                       
|FISCAL-YEAR-END                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | JUN-30-2000                 
|PERIOD-START                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | JUL-01-1999                 
|PERIOD-END                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | SEP-30-1999                 
|CASH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 22981                       
|SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 1865448                     
|RECEIVABLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 10390                       
|ALLOWANCES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 15                          
|INVENTORY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 0                           
|CURRENT-ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 1898803                     
|PP&E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 167025                      
|DEPRECIATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 108914                      
|TOTAL-ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 1960057                     
|CURRENT-LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 68216                       
|BONDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 0                           
|PREFERRED-MANDATORY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 0                           
|PREFERRED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 0                           
|COMMON                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 3833058                     
|OTHER-SE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | (1971217)                   
|TOTAL-LIABILITY-AND-EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 1960057                     
|SALES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 10150                       
|TOTAL-REVENUES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 10150                       
|CGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 23452                       
|TOTAL-COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 23452                       
|OTHER-EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 121622                      
|LOSS-PROVISION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 0                           
|INTEREST-EXPENSE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 0                           
|INCOME-PRETAX                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | (116792)                    
|INCOME-TAX                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 0                           
|INCOME-CONTINUING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 0                           
|DISCONTINUED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 0                           
|EXTRAORDINARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 0                           
|CHANGES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 0                           
|NET-INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | (116792)                    
|EPS-BASIC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | (0.019)                     
|EPS-DILUTED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (0.019)                     
|(B) REPORT ON 8-K
On October 1, 1999 the Company filed a form 8-K to report a change in registrant's
certifying accountant from KPMG, LLP to BDO Seidman, LLP. The Company had no disagreements
with KPMG, LLP with regards to any accounting matter or otherwise. A letter from KPMG,
LLP addressed to the Commission was filed as an exhibit to the 8-K filing.
Reference: Exhibit 16.1, Change of Certified Public Accountant.


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: 11/12/1999 | /s/ Frank S. Yuan

Frank S. Yuan, Chairman, Chief Executive Officer         
|---------------- | ----------------------------------------------------------------------------
|Date: 11/12/1999 | /s/ John F. Busey

John F. Busey, President (Acting Chief Financial Officer)