SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                   ------------------------------------------
                                   FORM 10-KSB
(Mark one)

[X} Annual report under section 13 or 15(d) of the Securities Exchange
    Act of 1934 For the fiscal year ended June 30, 2003

                                       OR

[ ] transition report under section 13 or 15(d) of the Securities
    Exchange Act of 1934 For the transition Period from _______ to _______

                        Commission file number 001-15643

                         CYBER MERCHANTS EXCHANGE, INC.
                   --------- -------------------------------
                 (Name of small business issuer in its charter)

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

4349 Baldwin Avenue, Suite A       Registrant's telephone number:
    EL MONTE, CALIFORNIA                 (626) 636-2530                  91731
   ---------------------                                              ----------
  (Address of principal executive offices)                            (Zip Code)

      Securities registered under
      Section 12(b) of the Act:                     Name of exchange
          (Title of Class)                        on which registered
               NONE                                       NONE
    ------------------------------           ------------------------------

                   Securities registered under Section 12(g)
                     of the Act: COMMON STOCK, NO PAR VALUE
                                 --------------------------
                                      (Title of class)


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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.

Registrant's net revenue for its most recent fiscal year:  $1,187,679

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on September 23, 2003,  computed by reference to the closing price of
that date, was $1,026,415, assuming solely for purposes of this calculation that
all  directors  and  executive  officers  of the issuer are  "affiliates."  This
determination of affiliate status is not necessarily a conclusive  determination
for other purposes.

On September 23, 2003, the registrant had 7,472,673  shares of Common Stock,  no
par value per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  definitive  proxy statement under Regulation 14A,
which  statement  will be filed  not  later  than 120 days  after the end of the
fiscal year covered by this report,  are  incorporated  by reference in Part III
hereof.

              TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: Yes    No X


<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                                    INDEX TO
                          ANNUAL REPORT ON FORM 10-KSB
                       FOR FISCAL YEAR ENDED JUNE 30, 2003


PART I                                                                      PAGE

Item 1   Description of Business............................................. 3
Item 2   Description of Property.............................................13
Item 3   Legal Proceedings...................................................13
Item 4   Submission of Matters to a Vote of Security Holders.................13

PART II
Item 5   Market for Common Equity and Related Stockholder Matters............13
Item 6   Management's Discussion and Analysis of Financial Condition
           and Results of Operations.........................................15
Item 7   Financial Statements................................................19
Item 8   Changes In and Disagreements With Accountants on Accounting
           and Financial Disclosure..........................................19
Item 8A  Controls and Procedures.............................................19

PART III
Item 9   Directors, Executive Officers, Promoters and Control Persons;
           Compliance With Section 16(a) of the Exchange Act.................20
Item 10  Executive Compensation..............................................20

Item 11  Security Ownership of Certain Beneficial Owners and Management......20
Item 12  Certain Relationships and Related Transactions......................20
Item 13  Exhibits and Reports on Form 8-K....................................20
Item 14  Principal Accountant Fees and Services..............................21

SIGNATURES...................................................................22

REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.........................F-1

<PAGE>

                                     PART I

FORWARD-LOOKING STATEMENTS

Except for the historical  information  presented in this document,  the matters
discussed  in this  Form  10-KSB,  and  specifically  in the  sections  entitled
"Description of Business" and "Management's Discussion and Analysis of Financial
Condition and Results of  Operations,"  or otherwise  incorporated  by reference
into this document contain "forward-looking statements" (as such term is defined
in the Private  Securities  Litigation Reform Act of 1995). These statements can
be  identified by the use of  forward-looking  terminology  such as  "believes,"
"plans,"  "expects,"  "may," "will,"  "should," or "anticipates" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties.  The safe harbor provisions of
Section 21E of the Securities Exchange Act of 1934, as amended,  and Section 27A
of the Securities Act of 1933, as amended,  apply to forward-looking  statements
made by the Company, as defined below. These forward-looking  statements involve
risks and  uncertainties,  including those statements  incorporated by reference
into this Form 10-KSB.  The actual results that the Company  achieves may differ
materially  from  any   forward-looking   projections  due  to  such  risks  and
uncertainties.  The  following  are some of the factors  that 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.  These  forward-looking  statements  are  based  on  current
expectations,  and the Company assumes no obligation to update this information.
Readers are urged to carefully review and consider the various  disclosures made
by the Company in this Annual Report on Form 10-KSB and in the  Company's  other
reports filed with the Securities and Exchange Commission that attempt to advise
interested  parties  of the risks and  factors  that may  affect  the  Company's
business.

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

     Cyber  Merchants  Exchange  ("C-Me" or the  "Company") is an  international
electronic trading,  financing,  logistics and trade show organizer  corporation
that is initially targeting the apparel industry.  C-Me has set the standard for
apparel  global  electronic  trading  and built  the  model  for  other  leading
industries  by adhering to a simple  formula for  success.  The  following  four
interlocking  services make the company unique: 1) ASAP Global Sourcing Show - a
trade show for U.S.  buyers to meet  hundreds of ready-made  garment  exhibitors
under one roof - held  twice a year in Las  Vegas,  NV. 2) C-Me  builds  private
extranets,  or Internet Sourcing Networks ("ISN"), for its retail partners.  The
ISN matches and pushes  merchandise to the appropriate  buyers computer desktop.
3) C-Me's Global Financial  Platform ("GFP":  Patent Pending) allows U.S. buyers
to purchase overseas  merchandise without the need of issuing a Letter of Credit
("L/C"). 4) Logistics warehouse,  shipping, and billing service for the overseas
manufacturers. The company presently has representatives located in 25 countries
throughout  Asia,  Africa,  and  the  Middle  East to  facilitate  international
transactions.

THE COMPANY

C-Me is a  California  corporation  that was  formed in July 1996 under the name
World Wide Magic Net, Inc., d.b.a. Cyber Merchants Exchange,  Inc. On October 7,
1998, the Company changed its name to Cyber  Merchants  Exchange,  Inc.,  d.b.a.
C-ME.com. C-Me has a number of joint venture partners as follows:


                                       3
<PAGE>

                               PERCENTAGE OF
                               OWNERSHIP BY   STATE/PROVINCE          DATE OF
NAME OF JOINT VENTURE              C-ME       OF INCORPORATION     INCORPORATION
--------------------------------------------------------------------------------
Global Purchasing Dotcom, Inc.      50%        China               June 2000
E-Southeast Asia, Inc.              47%        Thailand            June 2000
C-Me Taiwan                         40%        Taiwan              December 1999
C-Me Bangladesh                     50%        Bangladesh          May 2002
C-Me Korea                          50%        Korea               July 2001
C-Me Hong Kong                      50%        Hong Kong           July 2001
C-Me Indonesia                      50%        Indonesia           October 2002
C-Me Sri Lanka                      50%        Sri Lanka           November 2002

The  Company's  joint  venture  partners are its active sales agents for finding
overseas  full-package  garment and textile  factories,  sourcing  stock lot and
closeout merchandise and promoting the ASAP Show.

During fiscal 2000, the Company  entered into  agreements to form joint ventures
in Taiwan ("C-Me Taiwan"),  in Thailand  ("E-Southeast Asia, Inc.") and in China
("Global  Purchasing  Dotcom,  Inc.")  to  facilitate  the  buying  and  selling
activities  between  U.S.-based  retailers and foreign country exporters through
the Company's web-based communication system. The Company invested approximately
$1,900,000  (of which  $1,000,000  was used to purchase  software  back from the
Company)  for  50%,  47%,  40%  interest  in  Global  Purchasing  Dotcom,  Inc.,
E-Southeast  Asia,  Inc. and C-Me Taiwan,  respectively.  Through the year ended
June 30,  2003,  the  Company has  recognized  investment  losses  approximating
$1,200,000, based on the Company's equity ownership percentage.

During fiscal year 2002 and 2003, the company entered into agreements with third
parties to form joint ventures in Bangladesh,  Korea,  Hong Kong,  Indonesia and
Sri Lanka named C-Me  Bangladesh,  C-Me Korea C-Me Hong Kong, C-Me Indonesia and
C-Me Sri Lanka,  respectively,  in which all will use the Company's  proprietary
web-based   communication  systems  to  facilitate  the  front  end  merchandise
sourcing.  The Company is not required to invest money into the joint  ventures.
Per the joint venture  agreements,  the Company is to provide its technology and
all costs to  operate  the joint  ventures  are to be funded by the third  party
joint venture partners. Profits are first to be distributed to the joint venture
partners  until the joint venture  partners are reimbursed for all costs paid by
the third  parties on behalf of the joint  ventures,  then all  profits  will be
allocated  on a 50%  basis to each  partner.  As of June  30,  2003,  the  joint
ventures are fully  operational and are promoting the Company and the ASAP show,
however the operations were insignificant.

The world economic  marketplace has  dramatically  changed in the past few years
due to the unsafe  environment  for travel.  This will  continue to  drastically
change as the trade barriers and deregulations are lifted between countries. The
U.S. buyer community immediately recognized the ASAP Show as the World's Largest
Garment and Textile Sourcing Show.

Marketing  a brand  new  international  trade  show of this  magnitude  has been
accomplished by the presence of 25 C-Me overseas  offices  throughout the world.
Additionally,  C-Me has aligned  itself with foreign  government  alliances  and
endorsements,  which see the ASAP  Show as the  first  step  their  country  can
participate in to see an immediate increase of apparel exports to the U.S. Other
industry leading trade shows such as auto parts, house wares, hardware, athletic
equipment,  and poolside  supplies have  approached C-Me and asked the company's
expertise to build each  industry's  specific global sourcing shows after seeing
such success achieved in the ASAP Show.

INDUSTRY OVERVIEW

APPAREL INDUSTRY

Intense  competition,   consolidation  and  the  tightening  of  profit  margins
characterize the retail industry. Consumers are increasingly more discerning and
consequently  demand  that  retailers  offer  more  value in


                                       4
<PAGE>

return for their  purchasing  dollar.  To attract and keep consumers,  retailers
must offer more desirable products and prices. Sourcing correctly is the primary
success of any retailers.

Sourcing-related   communications   between   retailers   and   their   overseas
manufacturers are a continuous flow of information regarding products,  pricing,
delivery,  special  promotions,  packaging  and  other  issues.  To date,  these
communications  have  largely  been  carried out through  paper flow,  telephone
calls, facsimiles, courier services, and/or through travel and personal visits

Pressure on retailers affects all players in the sourcing environment.  Emerging
technologies,  such as C-Me's,  can offer dramatic  improvements  in efficiency,
costs and business process management.  Purchasing  automation efforts,  such as
Electronic Data Interchange ("EDI"),  currently address the back-end efficiency.
The front-end sourcing process should be automated as well.

Historically,  letters of credit have been used in connection with international
trade  transactions  between sellers and buyers,  but the Company  believes that
letters  of credit  are not the most  desirable  way to  transact  international
purchases.  Additional  problems  associated  with  letters of credit  include a
limited  amount  of  credit  lines  and a time  consuming,  cumbersome  and  the
administratively   challenging   process  of   obtaining  a  letter  of  credit.
Furthermore,  letter of credit fraud risk is very common for buyers and sellers.
The Company,  through its  creation of the Global  Financial  Platform  ("GFP"),
eliminates the need for letters of credit and the burdens involved with them.

TRADE SHOWS AND CONFERENCES

There's  definitely no shortage of trade shows in the United States. The Apparel
Sourcing  Association  Pavilion  ("Global  Sourcing  Show"  or "ASAP  Show")  is
bringing a totally new concept to the trade show industry,  with many exhibitors
following such concept.  The Global  Sourcing Show is not an easy task. But C-Me
has the  perfect  opportunity  to make it  successful  because of the  Company's
global  presence and marketing  teams.  The garment and textile  exhibitors that
come to the ASAP show from various producing countries previously did not have a
trade  show  geared to their  needs  until  ASAP was  launched.  Because  of the
September  11th  tragedies,  the ASAP Show is even more  crucial  for buyers and
attendees.  Most people are now  reluctant to travel  overseas than ever before.
The ASAP Show is the perfect event for buyers and overseas manufacturers to meet
and conduct  business  under one roof during the world's  largest  apparel trade
week.

The ASAP show segment derives revenue principally from the sale of exhibit space
and conference  attendance fees generated at its events. In 2003,  approximately
95% of our trade  shows and  conferences  revenue  was from the sale of  exhibit
space. Events are generally held on a semi-annual basis in Las Vegas, Nevada. At
many of our trade  shows,  a portion of exhibit  space is  reserved  and partial
payment is received as much as 90 days in advance.  The sale of exhibit space is
generally  impacted by the on-going  quality and quantity of  attendance,  venue
selection and availability,  industry life cycle and general market  conditions.
Revenue and related  direct event  expenses are recognized in the month in which
the event is held.  Cash is  collected in advance of an event and is recorded on
our balance sheet as deferred revenue.

Costs  incurred  by the ASAP show  segment  include  facility  rent,  outsourced
services such as  registration,  booth set-up,  electrical  services,  security,
decorator  and  attendee and  exhibitor  promotion.  Staff  salaries and related
payroll expenses are treated as monthly period expenses.  All other direct costs
are expensed in the month the event occurs.

C-ME'S SOLUTION TO THE APPAREL INDUSTRY

C-Me has  continued to implement  its business  plan to become an  international
electronic trading,  financing,  logistics and trade show organizer corporation.
During the last seven years of  development,  the Company has begun to establish
its technologies and methodologies through its Internet Sourcing Network ("ISN")
and Virtual Trade Show ("VTS"), which have proven to be a valuable and effective
tool for its retail  partners to source overseas  merchandise.  The formation of
multiple joint venture

                                      5
<PAGE>

relationships  with localized  sourcing  offices during the last seven years has
expanded the Company's ISN internationally.  The Company's patent pending Global
Financial  Platform  ("GFP") is beginning to be used by its U.S. retail partners
to purchase overseas merchandise without the need for issuing foreign letters of
credit.  Over the past two  years,  the ASAP Show has become  increasingly  more
popular among retailers and overseas garment and textile  factories.  Currently,
the ASAP show is a very important apparel-sourcing event in Las Vegas held twice
yearly.

OVERVIEW OF C-ME SERVICES

The  Company's  Internet-based  solutions  were  designed  to meet  the  general
merchandising  needs of  retailers  and their  overseas  manufacturers,  with an
initial emphasis placed on the bargain, or "off-price,"  apparel market segment.
To that end, the Company has  developed  five  interrelated  service  solutions:
Internet  Sourcing  Network,  Virtual  Trade Show,  Global  Financial  Platform,
International Electronic Trading and ASAP Global Sourcing Show.

     1.  Internet Sourcing Network ("ISN")

         The cornerstone of C-Me's services is the proprietary ISN, comprised of
         private  extranets  developed in accordance with each retail  partner's
         merchandising specifications.  The Web-based turnkey solution automates
         the front-end  merchandise  sourcing  activities of retailers,  and has
         been  designed  to  provide  them with time and cost  savings.  The ISN
         enables  retailers and overseas  manufacturers  located  throughout the
         world to meet and conduct business using the Internet. Once an overseas
         manufacturer  subscribes to a retailer's ISN, they can receive feedback
         about particular merchandise reviewed by buyers and receive information
         about long-term and short-term  merchandising needs of the retailer. An
         overseas  manufacturer  can then  change its  strategies  to meet these
         needs by  updating  its  product  line - all  over  the  same  Internet
         connection.   Overseas  manufacturers  also  receive  an  "open-to-buy"
         broadcast  of what a retailer  is  sourcing  during a  particular  time
         period.  Overseas  manufacturers  pay a  monthly  subscription  fee  to
         display products on the ISN. Retailers are charged a nominal percentage
         for each sales transaction.

     2.  Virtual Trade Show ("VTS")

         The  progenitor  of  C-Me's  diverse  services  is the VTS,  which is a
         centralized  product  showcase that features a multitude of products in
         easily understandable and searchable categories.  The appeal of the VTS
         is its ability to enable  direct  marketing to a wide variety of retail
         buyers. Overseas manufacturers may display products free of charge only
         if they also  subscribe  to an ISN and if they are an  exhibitor of the
         ASAP show.

     3.  Global Financial Platform ("GFP")

         The  Company's  innovative  GFP  eliminates  the need  for  traditional
         letters of credit for international  purchases. CIT Commercial Services
         ("CIT")  and Bank  SinoPac  in Taiwan  participate  in the GFP to allow
         exporters in Taiwan,  Hong Kong and Vietnam to ship  merchandise  to US
         Buyers with pre-approved  credit  established by CIT. Bank Sinopac will
         advance up to 80% of the invoice  amount once the  shipment is effected
         from  overseas.   The  GFP  can  be  employed  for  any   international
         transaction, provided that the US Buyers' credit is first approved with
         CIT. Even  retailers  that do not source  through C-Me's ISN or VTS may
         still  utilize  the  GFP.  C-Me  and CIT  charge  a  percentage  of the
         transaction  fee on all purchase  orders  written  under the GFP.  Bank
         Sinopac  charges  interest  for  the  advances  given  to the  overseas
         exporters.

     4.  International Electronic Trading

         C-Me  utilizes  its ISN and email  marketing  to push its own  overseas
         close out and/or stock lot items to  potential  retail  buyers.  Once a
         buyer shows  interest in a particular  item,  the Company's  sales team
         will send samples to the buyer for their consideration.  Through C-Me's
         GFP, a U.S.


                                      6
<PAGE>

         buyer can purchase the Company's overseas merchandise without issuing a
         letter of credit. The Company can earn the difference between the price
         sold to the retailer and the cost from the overseas manufacturer, which
         equates between 7% to 20% per transaction.

         Management believes that the idea of U.S. retailers purchasing overseas
         goods directly and without issuing a letter of credit will attract more
         transactions  and retail partners in the near future.  As of today, the
         Company  has sold its goods to the  following  retailers:  Factory  2-U
         Stores, Fruit of the Loom, Kellwood, Low & Sweet, Value City Department
         Stores,  Ross  Stores,  99 Cents Only Stores,  and other such  discount
         chains.

     5.  ASAP Global Sourcing Show ("ASAP Show")

         ASAP Show is an  international  sourcing and  manufacturing  trade show
         that brings leading garment and textile  manufacturers  from around the
         world to one venue to meet,  greet and sell to buyers.  The  attendance
         records  for ASAP  Show  were  approximately  2,500  and  3,700 for the
         February and August 2003 shows, respectively.  The attending exhibitors
         were  approximately  180 and 250 for the  February and August 2003 ASAP
         trade shows,  respectively.  The participating countries were 20 and 34
         for the  February  and August  2003  trade  shows,  respectively.  As a
         result,  this makes ASAP Show the World's  Largest  Garment and Textile
         Sourcing Show.

Two additional services that the Company is developing are the Wholesale Auction
Center and Factory Outlet Mall.

     1.  Wholesale Auction Center ("WAC")

         C-Me's WAC is being developed to provide a Web-based  central location,
         or  community,  for overseas  manufacturers  to liquidate  odd lots and
         closeouts in bulk  quantity.  The WAC is being  designed to feature the
         Company's  patent-pending auction process, which, by a partnership with
         any financial  institution  to insure  sellers credit risk in order for
         buyers  to  eliminate   the   possibility   of  fraud  in  the  auction
         transaction.  The  Company has filed a patent  application  for the WAC
         process.  Sellers using the WAC will pay transaction  commission  fees.
         The  Company  has  decided to halt its plans to  release  the WAC until
         economic conditions improve.

     2.  Factory Outlet Mall ("FOM")

         The FOM is a public vertical  marketplace,  which is being developed to
         enable  overseas   manufacturers  to  sell   merchandise   directly  to
         consumers.   The  FOM  is   being   designed   to   supplement   C-Me's
         business-to-business  solutions  by  giving  overseas  manufacturers  a
         direct  business-to-consumer  e-commerce package,  consisting of secure
         credit  card  transactions,   shopping  cart  functions  and  automatic
         calculation of sales tax and freight  charges.  Overseas  manufacturers
         selling on the FOM will pay  transaction  commission  fees. The Company
         has  halted  its plans to  release  the FOM until  economic  conditions
         improve.

SUPPORTING TECHNOLOGY

The Company has developed three proprietary technologies:

     1. Product Driven Search Engine

     The Company believes the keyword search  functions  employed by traditional
     search  engines are  impractical  for  merchandise  sourcing.  Rather,  the
     Company  developed a product  driven search  engine,  which  simplifies the
     search  process.  This search  engine is linked to dynamic  listings of the
     overseas  manufacturers'  product  catalog and line sheets,  complete  with
     detailed product descriptions and digital  photographs.  These products are
     then  indexed  and  separated  into  easily  recognizable  categories  that
     facilitate quick product searches by retail buyers.

                                       7
<PAGE>

     2.  Focused Broadcasting ("FOCASTING(TM)")

     The  Company's  FOCASTING(TM)  software  enables  retail  buyers  to create
     individual Web pages,  thereby  limiting  unnecessary  "surfing." After the
     buyer creates his or her customized Web page,  the  FOCASTING(TM)  software
     will  "push" or  broadcast  all  products  containeD  within the  Company's
     database directly to the buyer's desktop. For example, if a buyer for Men's
     jeans created a customized Web page using FOCASTING(TM) and selected "Men's
     jeans," the  FOCASTING(TM)  software would transmit all the information and
     images  relaTING to Men's jeans within the Company's  database to the buyer
     each time he or she logs on.

     3.  Dynamic End-User Profile System ("DEPS(TM)")

     The DEPS(TM)  software  provides  retail buyers and overseas  manufacturers
     with numerous  interactive  functions.  The DEPS softwarE  allows a user to
     maneuver and manipulate  (delete,  restore,  etc.) the product  information
     contained within his or her own product database. In addition,  DEPS alerts
     a user  whenever  "new"  or  "close-out"  items  are  added  to the  user's
     database.  For the  overseas  manufacturer,  DEPS  enables them to remotely
     change,  upload  and  delete  their  product  information  based on  users'
     requests as well as receive business  critical  announcements  from buyers.
     Additionally,  DEPS(TM)  will  allow  the  buyer to send  bulk oR  personal
     e-mails  to all  overseas  manufacturers  in the ISN.  These may be used to
     announce the buyer's "open-to-buy  position," request special products, and
     announce merchandise buying and planning goals.

POTENTIAL REVENUE STREAMS

The  Company's  primary  source  of  revenue  over the next 12 to 24  months  is
anticipated to be  transaction-based  profit generated by U.S. buyers' purchases
and  sourcing  of the  Company's  ability  to locate the right  product,  price,
quality and overseas manufacturer. The ASAP Show will bring significant revenues
to the Company for the first and third fiscal quarters.

The Company  envisions  made-to-order  and  programmed  merchandise  as a viable
source of revenue for 2004. U.S. Buyers feel comfortable and confident about the
Company's  ability  to  source  for them for a fee.  The  Company's  trade  show
exhibitors and vast overseas manufacturers in its database are eager for C-Me to
represent  them  to  gain  container  load  orders  and  move  their   close-out
merchandise with decent commission fees.

The  Company  expects  to  continue  to grow the ASAP  show  following  the past
patterns of 50% - 100% growth per show. The revenue for the ASAP Global Sourcing
Show is generated through exhibitor  participation fees, corporate sponsorships,
and advertisement fees.

COMPETITION

INTERNATIONAL ELECTRONIC TRADING

The distinction  between  merchandise  sourcing  (front-end) and the procurement
function  (back-end)  is important to a discussion  on  competition.  Currently,
standardized  EDI  transaction  sets,  including  purchase  orders,  are common.
However,  EDI is costly and does not solve the  front-end  issue of  merchandise
sourcing and international electronic trading.

The  Company's  primary  competitors  of the  Company's  front-end  sourcing and
international electronic trading business are as follows:

     |X| QRS enables retailers and overseas  manufacturers to list, buy and sell
         merchandise  through a staged  auction  process over the Internet.  All
         buyers and sellers are  pre-registered  and authorized to trade by QRS.
         After registering, customers are provided with a Tradeweave 'Passport,'
         which


                                       8
<PAGE>

         authenticates  them as an approved trader in the  marketplace.  Sellers
         issue  `Visas'  to  selected   approved  buyers  to  formalize  trading
         relationships.  Sellers  benefit  by  increasing  their  market  reach,
         drawing more competitive bids and gaining more control over their brand
         and the sales  process.  Buyers  benefit  by having  broader  access to
         merchandise  at  attractive  prices  through a central  location.  Both
         sellers and buyers benefit from an integrated e-commerce back-end using
         existing QRS services. All industry players have access to Tradeweave's
         retail trade news, content and directories.

     |X| GLOBAL  SOURCES  is an  enabler  of global  merchandise  trade.  Global
         Sources  develops and operates  independent  Internet  marketplaces and
         offers software solutions that facilitate cross-border  transactions in
         public and private environments. Global Sources cataloging software and
         content  management  infrastructure  support these  offerings while its
         trade  magazines  remain a key  complementary  component  of its  total
         solution.

     o   ARIBA makes operating resource management ("ORM") products, which helps
         companies  track and manage  supply  purchases  over the  Internet  and
         corporate  intranets.  Its scalable ORM software  automates  e-commerce
         transactions  and contains  modules for creating  customized  forms and
         managing  expense  reports.  Its Ariba.com  network  connects buyers to
         suppliers,  helps suppliers  provide product  catalogs and routes order
         transactions.   Ariba's  customers  include  AMD,  Chevron,  Merck  and
         Staples.

     o   COMMERCE ONE offers  software and services  that connect  global buyers
         with  suppliers of business  goods and services over the Internet.  Its
         BuySite  software  simplifies the buying  process by providing  product
         catalogs from different  suppliers,  automating approvals and enforcing
         buyer and seller-specific  policies. Its MarketSite.net website enables
         buyers and sellers using different software  applications to seamlessly
         connect and perform e-commerce transactions.  The company also provides
         services including content management,  order availability information,
         status tracking and transaction support.

     o   RETEK  provides  inventory  management  software  that  lets  retailers
         interact  across the Web with  suppliers,  wholesalers,  transportation
         companies  and other links in the supply chain.  Customers  include Ann
         Taylor, Eckerd, CBRL Group and Lancome.

TRADE SHOWS

There are numerous  fashion,  apparel,  textile and  accessories/supplies  trade
shows in the U.S. each year.  Some of these shows are well  established and have
been held for years. The Company's trade show is focused on sourcing merchandise
and  merchandise  manufacturing  services  from overseas  manufacturers  located
throughout the world,  but currently with an emphasis on overseas  manufacturers
from Southeast Asia.

The primary competitors of the Company's ASAP Show are as follows:

     o   MAGIC - MAGIC,  the Men's Apparel Guild in  California,  was founded in
         1933.  Due to enormous  growth,  the show relocated from Los Angeles to
         Las Vegas in 1989.  Today,  MAGIC  International is the world's largest
         and most widely  recognized  organizer of apparel and fashion  industry
         trade shows.  The show  encompasses  every facet of fashion:  MAGIC for
         Men's Apparel;  WWDMAGIC and femme for Women's Apparel;  MAGIC kids for
         Children's  Apparel;  The  Edge  for the  progressive  market;  and the
         International  Fashion Fabric Exhibition and I-TexStyle for the Textile
         and Sourcing markets.

     o   Material  World  Miami  Beach -  Material  World  showcases  the latest
         introductions and innovations from leading mills,  textile  converters,
         trim and related  product  manufacturers,  as well as software  and CAD
         system providers.


                                       9
<PAGE>

     o   NAMSB  WorldSource - NAMSB is an exposition that enables  international
         manufacturers and U.S. buyers to work directly together on sourcing for
         Men's  Wear,  Women's  Wear,  Children's  Wear,  Accessories,   Apparel
         Textiles  and  Leather.  The  show is held  twice a year in New  York's
         Javitz Convention Center.

     o   WWIN - Women's Wear in Nevada caters to the big and tall.  While mostly
         women's fashions,  it also includes hand-crafted items and accessories.
         It is held  twice a year at the Rio  Hotel  and  Casino  in Las  Vegas,
         Nevada.

Although the competitors  detailed in the preceding paragraphs may offer similar
services to C-Me,  the Company  believes  that no other company has its range of
services,  approach to serving the  industry or such an  experienced  management
team. C-Me is focused on providing a complete  merchandise  sourcing solution by
providing on-line  merchandise  sourcing,  a network to access overseas markets,
its Global Financial Platform, its ASAP Global Sourcing Show, and other services
that  interlock  each other and are  focused on  serving  buyers'  international
sourcing and transaction needs.

INTELLECTUAL PROPERTY PROTECTION

The Company has two patents pending that pertain to business processes:

     1.  Global Financial Platform ("GFP") (patent pending)

         C-Me's GFP eliminates the need for letters of credit by allowing small-
to medium-sized  enterprises  ("SMEs") in other countries to ship merchandise to
pre-approved  credit  worthy  buyers in the United  States,  without the need of
issuing  letters  of  credit.  Letters  of  credit  have  historically  been the
predominant means of payment for international trading.

C-Me pioneered this process by establishing  the first tri-party  agreement with
The CIT Group and Bank  SinoPac  in  Taiwan.  By virtue of C-Me's  international
factoring agreement,  SME's,  retailers,  international banks and CIT Commercial
Services  are linked  together by its Global  Financial  Platform.  Through this
arrangement,  each of the tri-party  participants plays an integral role. First,
CIT Commercial  Services guarantees the credit worthiness of the U.S. retailers.
Secondly,  Bank  SinoPac  provides  working  capital  financing  and acts as the
conduit  for  foreign  SMEs to  receive  payment.  Through  C-Me's  GFP  (patent
pending),  U.S.  retailers  can  purchase  overseas  merchandise,  just  as they
purchase  domestic  merchandise,  with open terms and  without  the need to open
letters of credit.  Overseas SMEs ship merchandise to pre-approved credit worthy
retailers  without any receivables  collection risk and will receive advances of
up to 80% when they ship merchandise to satisfy their cash flow needs.  SMEs can
also utilize the platform for advancing cash flow.

The Company currently has patent applications pending on an Innovative Financing
Method and System Therefore  ("Financing  Method").  The Company has received no
substantive Patent Office action on the Financing Method application.

     2.  Non-Fraudulent Online Auction (patent pending)

         Approximately   10%-25%  of  all  online   auction   transactions   are
fraudulent.  Under current auction models,  the seller must receive payment from
the  highest  bidder  before  the  merchandise  is  shipped.  This  creates  the
opportunity for fraudulent or disputed transactions. In fraudulent transactions,
the buyer may not  receive  the  merchandise  per  specifications  posted by the
seller. The wrong merchandise may arrive, quality may not be as represented,  or
the merchandise may never even be shipped.  On the sellers' side, if the highest
bidder  does not make  payment,  the seller  will be unable to locate the second
highest  bidder and the  transaction  will be lost.  There are companies such as
I-escrow,  E-escrow and some insurance  companies that are attempting to resolve
these problems.  C-Me believes that I-escrow,  E-escrow and insurance  companies
cannot resolve these problems in a cost effective manner.


                                       10
<PAGE>

C-Me has applied for patent protection for its Wholesale Auction Center ("WAC"),
which is under development.  Among other things,  the WAC eliminates  fraudulent
transactions  in on-line  auctions.  The process  involves  sellers that have an
agreement  with C-Me and with a  factoring  corporation  that  collects  for the
seller.  The seller also provides  payment  terms of at least net 30 days.  Each
buyer,  before  entering the WAC for bidding,  is  pre-approved by the factoring
corporation and uses pre-approved auction dollars, to begin the bidding process.
This way,  the buyer  will not pay for  merchandise  until it has had 30 days to
evaluate that the  merchandise  received is of the same or better quality as the
item posted by the seller.  The seller will have no payment or  collection  risk
because  the  factoring   corporation   has  assumed  the  credit  risk  of  the
pre-approved buyer.

In addition,  the Company has trademarked  the following trade names:  C-Me(TM),
Cyber Merchants Exchange(TM), ASAP Global Sourcing ShOW(TM), ASAP(TM); DEPS(TM);
FOCASTING(TM); and Internet Sourcing Network(TM).

GOVERNMENT REGULATIONS

Since the Company's core business is related to international  trade,  there are
numerous U.S and foreign  government  regulations and restrictions that impose a
significant  burden upon the  Company's  international  business,  such as quota
limitations for apparel entering the USA, tariffs and U.S. Customs controls. The
World Trade Organization's ("WTO") bilateral agreement between the U.S. and each
overseas  country  has  numerous  limitations  and  conditions  to be  met.  The
Company's  buyers  or  sellers'  violation  of the WTO  conditions  will  have a
material effect on the Company's core business.

Government  regulations  of the  Internet  are another  barrier that the Company
faces.  For example,  wide use of the Internet is  restricted in China and other
countries where the Company may seek to do business.

EMPLOYEES

As of September  30, 2003,  the Company  employs 14  full-time  employees  and 1
part-time employee  classified as follows:  2 full-time  executive  officers;  4
full-time  administrative  personnel;  8 full-time  marketing  personnel;  and 1
part-time technical personnel. None of the employees are subject to a collective
bargaining agreement, and the Company believes that relations with its employees
are good.

RISK FACTORS

THE FOLLOWING RISK FACTORS INCLUDE,  AMONG OTHER THINGS,  CAUTIONARY  STATEMENTS
WITH RESPECT TO CERTAIN  FORWARD-LOOKING  STATEMENTS,  INCLUDING  STATEMENTS  OF
CERTAIN  RISKS  AND  UNCERTAINTIES  THAT  COULD  CAUSE  ACTUAL  RESULTS  TO VARY
MATERIALLY  FROM  THE  FUTURE  RESULTS  REFERRED  TO  IN  SUCH   FORWARD-LOOKING
STATEMENTS. SEE "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS."

WE ARE AN EARLY-STAGE COMPANY WITH A LIMITED OPERATING HISTORY.
The company is an early-stage  company.  It is using an unproved  business model
and  cannot   guarantee   that  the  business   model  is   appropriate  to  the
implementation of its business plan.

WE EXPECT TO DEPEND ON REVENUE  FROM OUR  DOMESTIC  AND  INTERNATIONAL  INTERNET
SOURCING NETWORKS,  ASAP TRADE SHOWS, AND GLOBAL FINANCIAL PLATFORM. The Company
expects to depend primarily on revenue from the complete  implementation  of our
domestic and international  Internet Sourcing  Networks,  ASAP Shows, and Global
Financial  Platform.  The  Internet  Sourcing  Network  has  started to generate
revenue  although  there is no guarantee  that it will  generate  revenue in the
future.  The ASAP Show and Global Financial  Platform have generated  revenue in
the past.  However,  there is no guarantee  that these services will continue to
generate revenue or that that revenue will meet our expectations.

WE HAVE A HISTORY OF OPERATING LOSS AND ARE NOT PROFITABLE.


                                       11
<PAGE>

The Company has a history of operating  losses.  We have not been  profitable in
our history, and do not expect to be profitable in the near future. In addition,
there is no guarantee that the Company will ever be profitable.

WE HAVE NOT PROVED THE REVENUE OR PROFIT POTENTIAL OF OUR BUSINESS MODEL.
Because the business model is unproven, both the revenue and profit potential of
the Company are uncertain. If the Company meets its revenue expectations,  there
is no  guarantee  that the  Company  will be  profitable  or that costs will not
continue to exceed revenue.

WE FACE INTENSE COMPETITION FROM MANY ENTITIES.
The trade  show and  electronic  commerce  marketplace  is  highly  competitive.
Although  the Company  believes it has  several key  advantages,  the barrier to
entry is not significant.  We have identified and continue to identify  numerous
companies that are better  funded,  have more  experience  and more  significant
resources  that  have  entered  or are  planning  to enter  the  trade  show and
electronic  commerce  industries.  Should  these  companies  decide to enter our
specific  market,  there  is no  guarantee  that we will be able to  effectively
compete with them.

WE ARE DEPENDENT ON OUR FOREIGN ALLIANCES.
The Company is dependent  upon its ability to establish and maintain  successful
foreign alliances.  If we are not able to establish and maintain such alliances,
we will not be able to implement the business plan in its current configuration,
which will affect both our revenue stream and profit potential. In addition, the
Company faces  political  sovereign risks of conducting  international  business
including  risks of changing  economic  conditions in the Pacific Rim, which may
have a material  adverse  effect on our  ability to provide  global  merchandise
sourcing to our retail partners.

WE ARE DEPENDENT ON MARKET DEMAND FOR AN ACCEPTANCE OF OUR SERVICES.
Much of the Company's  success is dependent upon  aggregating a critical mass of
subscribing overseas manufacturers and trade show attendees and establishing and
maintaining  strong  relationships  with retail  partners.  If market demand and
acceptance for our services is not in line with the Company's  expectations,  it
is likely that the Company's revenue will not meet its expectations.

WE ARE DEPENDENT ON RELATIONSHIPS  WITH KEY RETAIL PARTNERS,  AND THE ABILITY TO
CREATE MORE SUCH RELATIONSHIPS.
Our  business  model is  retailer-centric.  Successful  implementation  of it is
predicated  on our  ability  to create  and  nurture  strong  partnerships  with
retailers.  If we are unable to maintain existing  partnerships or establish new
partnerships  with  retailers,  our  revenue  and  profitably  will not meet our
expectations.  Although  the  Company  believes it can create and  maintain  the
necessary relationships, there is no guarantee that it will.

WE DEPEND ON THE RELIABILITY AND CONTINUITY OF OUR SERVICES.
As a service provider,  the Company is dependent upon the continued  reliability
of its  Internet  Sourcing  System,  ASAP Trade  Show,  software  and  hardware.
Although  we have  reliable  systems  in  place,  and have not had any  problems
providing  quality service,  there is no guarantee that the Company will be able
to continue to provide reliable services.

WE DEPEND ON CONTINUED SERVICE AND SOFTWARE DEVELOPMENT.
The Company is dependent  upon  continued  service and software  development  to
maintain the quality and reliability of its services and to continue to grow. We
are  dependent  on the  ability to keep  trade  secrets  and  obtain  patents on
business  processes  as well as on the ability to develop new  processes to meet
our customers' sourcing needs.

WE DEPEND UPON KEY MEMBERS OF MANAGEMENT.
The  implementation of our business plan and our continued success relies on key
members of the  management  team and sales,  marketing,  and finance  personnel.
There  is no  guarantee  that  these  employees  will  continue  to work for the
Company.  In addition,  there is no  guarantee  that the Company


                                       12
<PAGE>

will be able to replace  these  employees  with  personnel  of similar  caliber,
should they not be able to work, or decide not to work for the Company.

INCREASED  GOVERNMENT  REGULATION OF THE INTERNET COULD HAVE A MATERIAL  ADVERSE
EFFECT ON US

Increased government  regulation,  or the application of existing laws to online
activities,  could  inhibit  Internet  growth,  expose us and other  sellers  of
products for use on the Internet to additional liabilities and increase the cost
of doing business.  This could have a material adverse effect on our profits and
liquidity.  The  increasing  popularity and use of the Internet and other online
services  may lead to the  adoption of new laws and  regulations  in the U.S. or
elsewhere covering issues such as online privacy, copyright and trademark, sales
taxes and fair business practices or which require  qualification to do business
as a foreign corporation in certain jurisdictions.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company leases its corporate  headquarters  located at 4349 Baldwin  Avenue,
Suite A, El Monte, California 91731. Its telephone number is (626) 636-2530. The
lease  commenced on March 15, 2003,  and expires on March 31, 2006.  The Company
currently leases  approximately  9,800 square feet at an average monthly rent of
approximately $5,684.

ITEM 3.  LEGAL PROCEEDINGS

Cyber Merchants  Exchange,  Inc (C-Me) and its chief executive  officer Frank S.
Yuan  ("Yuan")  sued a former  employee  Yoram Dahan  ("Dahan")  for a number of
alleged acts of  wrongdoing.  The  complaint  was filed on May 24,  2002.  Dahan
cross-complained  against both C-Me and Yuan.  The parties  disagreed  about the
basis for Dahan's  termination  and about the rights to the ASAP trade show. The
matter was resolved in a  confidential  settlement  on June 27, 2003. No company
funds were paid out in  settlement.  The lawsuit was dismissed with prejudice on
August 22,  2003.  C-Me has no further  liabilities  arising  out of the lawsuit
except for unpaid attorneys fees and costs.

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

None

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  common stock is traded on the NASDAQ  Over-the-Counter  Bulletin
Board (OTC-BB) under the symbol "CMEE." The following table sets forth,  for the
periods  indicated,  the  range of high and low sales  prices  of the  Company's
common stock as quoted by various  market  makers for the period of July 1, 2001
through June 30, 2003.

    July 1, 2001 to June 30, 2002:                HIGH*                   LOW*
                                                  -----------------------------
             First Quarter                        $ 0.51                  $0.27
             Second Quarter                       $ 0.55                  $0.17
             Third Quarter                        $ 0.40                  $0.22
             Fourth Quarter                       $ 0.40                  $0.29

    July 1, 2002 to June 30, 2003:                HIGH*                   LOW*
                                                  -----------------------------
             First Quarter                        $ 0.24                  $0.24
             Second Quarter                       $ 0.25                  $0.22
             Third Quarter                        $ 0.32                  $0.22
             Fourth Quarter                       $ 0.25                  $0.25


                                       13
<PAGE>

* The source of the high and low closing  sales price  information  is Commodity
Systems, Inc. and can be found on Yahoo's Web-site at  http://finance.yahoo.com.
These quotations reflect inter-dealer prices, without retail mark-up,  mark-down
or commission and may not represent actual transactions.

HOLDERS OF RECORD

On June 30, 2003,  the  Company's  issued and  outstanding  common stock totaled
7,472,673  shares,  held by 186  shareholders  of record and by an  undetermined
number of additional  shareholders  through nominee or street name accounts with
brokers.

DIVIDENDS

The  Company  has not  paid  dividends  in prior  years  and has no plans to pay
dividends  in the near future.  The Company  intends to reinvest its earnings on
the  continued  development  and  operation  of its  business.  Any  payment  of
dividends  would  depend upon the  Company's  pattern of growth,  profitability,
financial condition,  and such other factors, as the Board of Directors may deem
relevant.

PENNY STOCK

The Company's securities are subject to the Securities and Exchange Commission's
"penny stock"  rules.  The penny stock rules may affect the ability of owners of
the  Company's  shares to sell  them.  There may be a limited  market  for penny
stocks due to the regulatory burdens on broker-dealers. The market among dealers
may not be active.  Investments  in penny  stocks often are unable to sell stock
back to the dealer that sold them the stock. The mark-ups or commissions charged
by the  broker-dealers  might be greater  than any profit an investor  may make.
Because of large spreads that market  makers  quote,  investors may be unable to
sell the stock  immediately back to the dealer at the same price the dealer sold
the stock to the investor.

The  Company's  securities  are also  subject  to the  Securities  and  Exchange
Commission   rule  that  imposes  special  sales  practice   requirements   upon
broker-dealers that sell such securities to other than established  customers or
accredited investors. For purposes of the rule, the phrase "accredited investor"
means,  in general  terms,  institutions  with assets  exceeding  $5,000,000  or
individuals  having net worth in excess of $1,000,000 or having an annual income
that  exceeds  $200,000  (or that,  combined  with a  spouse's  income,  exceeds
$300,000).  For transactions  covered by the rule, the broker-dealer must make a
special suitability  determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale.  Consequently,  the rule
may affect the ability of purchasers of the Company's  securities to buy or sell
in any market.

RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information  regarding the issuance and sale of the Company's
securities without  registration  during the fiscal year ended June 30, 2003. No
such sales  involved the use of an underwriter  and no commissions  were paid in
connection with the sale of any securities.

Throughout  fiscal 2003, the Company  granted options through its 1999, and 2001
Stock  Option  Plans to purchase an  aggregate  of 50,000,  and 140,000  shares,
respectively,  of  restricted  common stock,  at an exercise  price of $0.24 per
share  (the  fair  market  value of the  Company's  common  stock on the date of
grant),  to various  directors  and  employees of the Company.  The options vest
through  December 2004 and are  exercisable  through  December 2011. The Company
believes the  issuances of the stock  options to its  directors  executives  and
employees  were exempt from  registration  pursuant to Rule 506 of  Regulation D
and/or Section 4(2) under the Securities Act of 1933, as amended.

In May and June 2003, the Company  granted  warrants to purchase an aggregate of
10,000 shares of the Company's  common stock,  with exercise prices ranging from
$0.26 - $0.30 per share,  vested  upon grant and expire  through  May 2006.  The
Company believes the issuance was exempt from registration  pursuant to Rule 506
of Regulation D and/or Section (4)(e) under the Act.

                                       14
<PAGE>

ITEM 6. 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 Company's  audited  financial
statements  and the  related  notes  thereto-included  elsewhere  in this annual
report for the fiscal year ended June 30,  2003.  Certain  statements  contained
herein may constitute forward-looking  statements, as discussed at the beginning
of Part I of this Annual  Report on Form 10-KSB.  The Company's  actual  results
could differ  materially  from the results  anticipated  in the  forward-looking
statements as a result of a variety of factors, including those discussed in the
Company's filings with the Securities and Exchange Commission

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FISCAL YEAR ENDED JUNE 30, 2003, COMPARED TO YEAR ENDED JUNE 30, 2002

The following discussion sets forth information for the twelve months ended June
30, 2003,  compared with the twelve months ended June 30, 2002. This information
has been derived from the audited financial  statements of the Company contained
elsewhere in this Form 10-KSB.

REVENUES

TRANSACTION SALES

Net  revenues  from  transaction  sales for the year  ended  June 30,  2003 were
$207,794,  an increase of $25,271 from  $182,523 in 2002.  During the year ended
June 30,  2003 the  Company  had  transaction  sales of  $2,189,828  compared to
$2,025,256  for the same period last year.  The gross profit margin for the year
ended June 30, 2003 was 9.5%,  compared to 9% for the same period last year. The
Company  expects  this  percentage  to grow,  as it begins to fully  utilize its
overseas  sourcing  network and its external sales force.

ASAP SHOW TRADE SHOWS

The ASAP show segment derives revenue principally from the sale of exhibit space
and conference  attendance fees generated at its events. In 2003,  approximately
95% of our trade  shows and  conferences  revenue  was from the sale of  exhibit
space. Events are generally held on a semi-annual basis in Las Vegas, Nevada. At
many of our trade  shows,  a portion of exhibit  space is  reserved  and partial
payment is received as much as 90 days in advance.  The sale of exhibit space is
generally  impacted by the on-going  quality and quantity of  attendance,  venue
selection and availability,  industry life cycle and general market  conditions.
Revenue and related  direct event  expenses are recognized in the month in which
the event is held.  Cash is  collected in advance of an event and is recorded on
our balance sheet as deferred revenue.

Our business is seasonal,  with revenue  typically  reaching its highest  levels
during the first and third  quarters  of each  fiscal  year,  largely due to the
timing of the ASAP trade shows. In 2003,  approximately  45.66% of our tradeshow
revenue was generated during the first quarter and  approximately  53.83% during
the third  quarter.  The second  quarter  accounted  for  approximately  0.5% of
tradeshow  revenue in 2003 and the fourth  quarter  accounted for  approximately
0.1% of tradeshow  revenue in 2003.  Because event revenue is recognized  when a
particular  event is held,  we may also  experience  fluctuations  in  quarterly
revenue  based on the  movement  of annual  trade show dates from one quarter to
another.

ASAP Show revenues totaled $893,523,  compared to $424,271,  an increase of 110%
compared to last fiscal year.


                                       15
<PAGE>

SUBSCRIBER FEES

Subscriber  fees  decreased  $9,931 or 61% to $6,362 in the year  ended June 30,
2003 from  $16,293 in the prior  year,  due to the shift in focus on the revenue
received  from the users of the  Company's  VTS, ISN and Web design  services to
transaction sales.

OPERATING EXPENSES

Operating expenses consist primarily of marketing programs,  investor relations,
and professional  consulting fees.  Operating expenses increased $597,867 or 30%
to  $2,621,360  in the year ended  June 30,  2003 from  $2,023,493  for the same
period  last year.  Such an  increase  is mainly due to  increases  in ASAP show
expenses,  bad debts and warehouse  handling fees. ASAP show expenses  increased
$466,764 to  $1,422,936  for the year ended June 30, 2003 from  $956,172 for the
same period last year.  The increase of ASAP show expenses is a result from show
expansion.  Bad debts increased $139,440 to $140,155 for the year ended June 30,
2003 from $715 for the same  period  last  year.  The  increase  on bad debts is
resulted from amounts  uncollectable  from ASAP exhibitors.  Warehouse  handling
fees of  $91,609  was a new  expense  item for the  year  ended  June 30,  2003.
Warehouse  handling  fees are incurred for the Company's  in-house  shipping and
receiving operations,  which used to be handled by outside services.  During the
fiscal year ended June 30, 2003, the Company granted 190,000 stock options.  The
Company recognized non-cash stock-based compensation expense of $0 and $101,097,
for the year ended June 30, 2003 and 2002, respectively.

OTHER INCOME (EXPENSE)

Interest  income  decreased  by $55,380 or 55% to $45,110 in the year ended June
30,  2003 from  $100,490  for the same  period  last year.  The  decrease of net
interest  income was mainly due to a decrease in cash  investment  in short term
certificates  of deposit and lower  interest  rates.  In  addition,  the Company
incurred an impairment loss on a convertible note receivable of $600,000.

Under the equity  method of  accounting,  the loss in  overseas  joint  ventures
decreased  by  $208,952  or 52% to $191,227 in the year ended June 30, 2003 from
$400,179 for the same period last year. Each joint venture in E-SEA,  Taiwan and
China  has  incurred  significant  development  costs  and  amortization  of the
software acquired from the Company  associated with  infrastructure  development
and market  branding.  The Company  believes each  overseas  joint venture could
begin to capitalize on its  expenditures  on market  branding which could reduce
costs and increase  revenues  for the fiscal year ended June 30,  2004.  For the
year ended June 30, 2002,  the  Company's  investment in ABNet was accounted for
under the cost  method and valued at the lower of cost or net  realizable  value
with  any  impairment  being  recognized.  Based  on  its  analysis,  management
determined  that it has incurred an impairment loss of $21,762 in its investment
in ABNet,  which was recorded in the  accompanying  statements of operations for
the year ended June 30, 2002.

In June 2002, the Company entered into an agreement whereby the Company returned
the  1,500,000  shares of ABNet  common  stock and in turn  ABNet  returned  the
111,000 shares of the Company's  common stock,  (which was then freely  trading)
which the Company then cancelled. The Company accounted for the transaction as a
disposition  of the investment in ABNet by recording the estimated fair value of
the  company's  common  stock  returned  in the amount of $36,630  (based on the
market  price at the date of  disposition)  as a reduction in common stock and a
loss on disposition of investment of $792,729 in the  accompanying  statement of
operations  for the  remainder of the net book value of the related  investment.
ABNet is an Internet  portal in Taiwan.  ABNet had difficulty  implementing  its
original  business model and is now having  difficulty  finding another business
model or new capital to survive.  The Company's Board of Directors  decided that
it was in the Company's best interest to reverse the stock swap transaction with
ABNet,  take a  significant  loss as noted above and clear the  Company's  books
going forward.

                                       16
<PAGE>

Amortization of negative  goodwill  decreased by $25,002 to $308,333 in the year
ended  June 30,  2003 from  $333,335  in the prior  year.  The  amortization  of
negative  goodwill is resulted from the sales of the Company's ISN (software) to
its overseas joint ventures in Taiwan,  South East Asia, and China. The software
sales to Taiwan,  South  East  Asia,  and China  were  $300,000,  $300,000,  and
$400,000,  respectively.  The Company amortized the negative goodwill over three
years.

NET LOSS

The net loss for the fiscal  year ended June 30, 2003  decreased  by $229,786 or
11% to $1,952,265 from $2,182,051 for the same period last year. The decrease in
2003 is mainly due to an increase of ASAP show revenue of $469,252,  a reduction
of equity  losses in overseas  joint  ventures of  $208,952,  net of increase in
operating expenses.

Net loss per  share  decreased  by $0.03 or 9% to $0.26  per  share for the year
ended June 30, 2003 from $0.29 for the same period last year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital  decreased from $2,040,600 as of June 30, 2002
to a working  capital  deficit of $8,808 as of June 30, 2003,  primarily  due to
impairment loss on convertible note receivable of $600,000,  deferred revenue of
ASAP show of  $206,939  and the  reduction  of cash  reserves  of  approximately
$650,000.  During the current  fiscal year ended June 30, 2003,  the Company had
average  monthly  general  and  administrative   expenses   (excluding  non-cash
compensation expenses) of approximately $148,000, excluding ASAP show production
costs,  as  compared to $156,000  for fiscal  year ended June 30,  2002.  During
fiscal year 2004,  the Company  will focus on the  transaction  revenue and ASAP
show  business  model.  As of June 30, 2003,  the Company has current  assets of
approximately  $470,0000.  With the net revenue  from June 30, 2003 and the ASAP
show  income,  management  believes  the  company  will have  enough net working
capital to sustain its business for another 12 months.

As of September 23, 2003, the Company has current assets of $656,000, unaudited,
which  consists of cash of  approximately  $201,000,  certificate  of deposit of
$100,000,  inventory  of  approximately  $260,000,  collectable  receivables  of
approximately  $395,000 less  short-term  payables of $300,000.  The Company has
made its 24 months'  profit and loss  projections  with a growth of  transaction
sales and ASAP show revenue, and maintain G&A expenses of $148,000 per month and
has  projected  to be a  profitable  and in a cash  positive  position at end of
fiscal year June 30, 2004. Hence, the Company believes it has sufficient cash to
operate its business over the next 12 months

On April 17, 2003, the Company  entered an agreement with C.K.  Cooper & Company
("CKCC"),  a NYSD member investment banker based in Irvine,  California,  as its
placement  agent and financial  consultant  to sell newly issued 8%  convertible
preferred  stock at $0.50 per share for a total of  $1,250,000.  The Company has
agreed to pay CKCC sales commissions equal to 8% of gross proceeds,  up to 3% of
which may be re-allowed to  participating  broker-dealers.  The Company has also
agreed to indemnify CKCC for certain liabilities under the Security Act of 1933,
as amended.  This  convertible  stock offering does not have any  commitments or
investments as of the date of the filing.

The  forecast  of the  period  of time  through  wich  the  Company's  financial
resources  will be  adequate  to support  its  operations  is a  forward-looking
statement that involves risks and  uncertainties.  The Company's  actual funding
requirements may differ materially as a result of a number of factors, including
unknown  expenses  associated  with  the cost of  continuing  to  implement  the
Company's  international  electronic  trading  business and ASAP Show  business.
There can be no assurance  that  financing  adequate to carry out the  Company's
business plan will be available on terms acceptable to the Company, or at all.

The Company has no commitments to make capital  expenditures for the fiscal year
ending  June 30,  2003.  Over the next two to five years,  the Company  plans to
utilize a combination of internally  generated funds from operations,  potential
debt and equity financing to fund its long-term growth.


                                       17
<PAGE>


CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with accounting  principles  generally  accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts  reported  in  the  our  consolidated   financial   statements  and  the
accompanying  notes.  The  amounts of assets  and  liabilities  reported  on our
balance sheet and the amounts of revenues and expenses  reported for each of our
fiscal  periods are affected by estimates and  assumptions,  which are used for,
but not limited to, the accounting for revenue recognition,  estimated allowance
for  doubtful  accounts,  the  realizability  of the  Company's  investments  in
affiliated  companies and the valuation of deferred taxes.  Actual results could
differ from these  estimates.  The following  critical  accounting  policies are
significantly  affected by  judgments,  assumptions  and  estimates  used in the
preparation of the financial statements:

REVENUE RECOGNITION

Securities and Exchange  Commission Staff  Accounting  Bulletin 101 ("SAB 101"),
"REVENUE RECOGNITION," outlines the basic criteria that must be met to recognize
revenue and provide  guidance  for  presentation  of revenue and for  disclosure
related to revenue recognition  policies in financial  statements filed with the
Securities  and Exchange  Commission.  Management  believes  that the  Company's
revenue recognition policy conforms to SAB 101.

Net  revenues  include  amounts  earned  under  product  transaction  sales  and
subscriptions. Product transaction revenues are recorded in accordance with EITF
99-19  "REPORTING  REVENUE  GROSS AS A  PRINCIPAL  VERSUS NET AS AN AGENT".  The
Company recognizes net revenues from product transaction sales when title to the
product  passes  to the  customer,  net  of  factoring  fees.  For  all  product
transactions with its customers, the Company acts as a principal, takes title to
all products sold upon shipment,  and bears  inventory risk for return  products
that the Company is not able to return to the supplier, although these risks are
mitigated through  arrangements with factories,  shippers and suppliers.  Due to
the Company not bearing credit risk on all  transactions,  the Company records a
portion of their  revenue  on a net  basis.  However,  for  financial  reporting
purposes the Company presents the details of gross transaction sales and related
costs  of  sales  in the  accompanying  statements  of  operations  for  all net
transactions.  The Company also  recognizes  revenue  from monthly  subscription
fees.   Subscriber   fees  represent   revenue   generated   through   one-time,
non-refundable setup fees and monthly hosting fees.  Subscription and subscriber
fees are  recognized  as revenue  after the  services  have been  provided.  The
Company also  recognizes  revenue from the ASAP trade show.  The ASAP trade show
generates  revenue through  exhibitor  booths sales,  corporate  sponsorship and
advertising. The revenue is recognized at the time of the related trade show.

Trade show and  conference  revenue is  recognized in the  accounting  period in
which the event is conducted.

INVESTMENTS IN JOINT VENTURES

The equity method is used to account for the Company's investments in the common
stock of C-ME.com Taiwan,  E-SouthEast Asia, Inc. (E-SEA), and Global Purchasing
Doctor,  Inc.  (GP.com).  because  the  Company  has  the  ability  to  exercise
significant influence over the investees' operating and financial policies,  but
does not exercise control.

STOCK BASED COMPENSATION

FASB  Interpretation  No. 44 ("FIN 44"),  "ACCOUNTING  FOR CERTAIN  TRANSACTIONS
INVOLVING  STOCK  COMPENSATION,  AN  INTERPRETATION  OF APB  25"  clarifies  the
application  of APB 25 for  (a) the  definition  of  employee  for  purposes  of
applying APB 25, (b) the criteria for determining  whether a plan qualifies as a
noncompensatory  plan, (c) the accounting  consequence for various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for


                                       18
<PAGE>

an exchange of stock compensation  awards in a business  combination.  FIN 44 is
effective July 1, 2000, but certain  provisions cover specific events that occur
after either  December 15,  1998,  or January 12, 2000.  The adoption of certain
other provisions of FIN 44 prior to June 30, 2000 did not have a material effect
on the financial statements.

Under Accounting  Principles Board Opinion No. 25,  "ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES,"  the intrinsic  value based method,  compensation  expense is the
excess,  if any,  of the fair  value of the  stock  at the  grant  date or other
measurement  date over the amount an  employee  must pay to  acquire  the stock.
Compensation  expense, if any, is recognized over the applicable service period,
which is usually the vesting period.

SFAS 123, "ACCOUNTING FOR STOCK-BASED  COMPENSATION," if fully adopted,  changes
the method of accounting for employee stock-based compensation plans to the fair
value based method.  For stock  options and  warrants,  fair value is determined
using an option  pricing  model that takes into  account  the stock price at the
grant date,  the exercise  price,  the  expected  life of the option or warrant,
stock  volatility  and the  annual  rate of  quarterly  dividends.  Compensation
expense,  if any, is recognized  over the applicable  service  period,  which is
usually the vesting period.  The adoption of the accounting  methodology of SFAS
123 is  optional  and  the  Company  has  elected  to  continue  accounting  for
stock-based  compensation  issued to employees using APB 25; however,  pro forma
disclosures,  as the Company adopted the cost recognition requirement under SFAS
123, are required to be presented.

SFAS 148, "ACCOUNTING FOR STOCK-BASED  COMPENSATION - TRANSITION AND DISCLOSURE,
AN AMENDMENT  OF FASB  STATEMENT  NO.  123," was issued in December  2002 and is
effective  for fiscal years ending  after  December 15, 2002.  SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
Statement  amends  the  disclosure  requirements  of  Statement  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.

RECENT ACCOUNTING PRONOUNCEMENTS

The  Company  continues  to assess the  effects of  recently  issued  accounting
standards.  The impact of all recently adopted and issued  accounting  standards
has  been  disclosed  in  the  footnotes  to  the  Company's  audited  Financial
Statements, Note 1.

ITEM 7. FINANCIAL STATEMENTS

The Company's audited Financial  Statements are set forth on pages F-1 thru F-23
in this Form 10-KSB.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS AND PROCEDURES

As of the end of the period  covered by this report,  Management  carried out an
evaluation  of the  effectiveness  of the design and  operation of the Company's
disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15(c) and
15d-15(c) which includes inquiries made to certain other of our employees. Based
on the  foregoing,  the  Principal  Executive  Officer and  Principal  Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective  to timely  alert them to any  material  information  relating  to the
Company, including its consolidating subsidiaries,  that must be included in the
Company's  periodic SEC filings.  In  addition,  there have been no  significant
changes  in the  Company's  internal  controls  or in other  factors  that could
significantly affect internal controls subsequent to the date of the most recent
evaluation.


                                       19
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

The  information  required by this item is included  under the caption  entitled
"Election of  Directors"  and  "Information  Concerning  Directors and Executive
Officers"  in the  Company's  definitive  proxy  statement on Schedule 14A to be
filed within 120 days of June 30, 2003, and is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

The  information  required by this item is included  under the caption  entitled
"Executive Compensation" in the Company's definitive proxy statement on Schedule
14A to be filed within 120 days of June 30, 2003, and is incorporated  herein by
reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this item is included  under the caption  entitled
"Security  Ownership  of  Certain  Beneficial  Owners  and  Management"  in  the
Company's definitive proxy statement on Schedule 14A to be filed within 120 days
of June 30, 2003, and is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this item is included  under the caption  entitled
"Certain  Relationships  and Related  Transactions" in the Company's  definitive
proxy  statement  on Schedule  14A to be filed within 120 days of June 30, 2003,
and is incorporated herein by reference.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

     EXHIBIT
     NUMBER          DESCRIPTION
     -------         -----------

      3.1*           Articles of Incorporation

      3.2*           Bylaws

      4.1**          Lock-Up Agreement

      4.2*****       Specimen  Stock  Certificate  for Shares of Common Stock of
                     the Company

      4.3*           Warrant  expiring October 15, 2002 issued by the Company to
                     Burlington  Coat Factory  Warehouse  Corporation on October
                     15, 1997

      4.4*****       Warrant expiring February 10, 2004 issued by the Company to
                     Imperial Bank on February 10, 1999

      4.5***         Warrant  expiring  May 25,  2005  issued by the  Company to
                     Factory 2-U on May 25, 2000

      10.1*          Lease of registrant's facilities

      10.2*          Participation   Agreement  with   Burlington  Coat  Factory
                     Warehouse Corporation

      10.3*          Contract with Family Bargain Corporation


                                       20
<PAGE>

      10.4*          1996 World Wide Magic Net, Inc. Stock Option Plan

      10.5*****      1999 Stock Option Plan

      10.6*****      2001 Stock Option Plan

      10.7*****      Software Sales Agreement to Global Purchasing Dotcom

      10.8*****      Software Sales Agreement to eSEA Co., LTD

      10.9*****      Software Sales Agreement to C-Me Taiwan

      10.10*****     Joint Venture  Agreement  with Good Support  International,
                     Limited

      10.11*****     Joint Venture Agreement with Vickem Patana Co., Ltd.

      10.12*****     Joint Venture Agreement with Abest Tech Company, Ltd.

      10.13*****     Factory 2-U Stores,  Inc. - Joint Marketing and Cooperation
                     Agreement

      21.1           List of Subsidiaries
      31.1           Rule 13a-14(a) Certification of Chief Executive Officer
      31.2           Rule 13a-14(a) Certification of Chief Financial Officer

      32.1           Section 1350 Certification of Chief Executive Officer

      32.2           Section 1350 Certification of Chief Financial Officer

*      Filed  on  May 6,  1999  as an  exhibit  to  the  Company's  Registration
       Statement  on  Form  SB-2  (File  No.   333-60487),   as  amended,,   and
       incorporated herein by reference.

**     Filed on January  27,  2000 as an exhibit to a report by the Company on a
       Form 8-A and incorporated herein by reference.

***    Filed on July 18, 2000 as an exhibit to a report by the Company on a Form
       8-K dated June 30, 2000 and incorporated herein by reference.

*****  Filed on September 29, 2000 as an exhibit to the Company's report on Form
       10-KSB for the fiscal year ended June 30, 2000 and incorporated herein by
       reference.

REPORTS ON FORM 8-K

The Company  filed no reports on Form 8-K during the fourth  quarter  ended June
30, 2003.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the fiscal year ended June 30, 2003,  the  Company's  fees for  professional
services rendered by its Independent Auditors were as follows:

(a) Audit Fees:  Aggregate fees billed or expected to be billed for professional
services  rendered  for the  audit of the  Company's  fiscal  year  2003  annual
financial  statements  and review of the  financial  statements in the Company's
reports on Form 10-QSB: $43,000.

(b) Audit Related Fees: $3,500.

(c) Tax Fees: $0.


                                       21
<PAGE>

(c) All Other  Fees:  The  aggregate  fees  billed  for all  other  professional
services provided to the Company (other than the services  described above under
(a), (b), and (c)) for the fiscal year ended June 30, 2003: None.

The Audit Committee has considered and determined that the services  rendered by
the independent  certified public accountants with respect to the foregoing fees
are  compatible  with  maintaining  their  independence  and  all  services  are
pre-approved by the Audit Committee.

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) 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.

                           By: /s/ Frank S. Yuan
                               ----------------------------------------
                                   Frank S. Yuan
                                   Chief Executive Officer and Director

                           Date:   OCTOBER 13, 2003
                                 -----------------------------

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

           By: /s/ Frank S. Yuan                       Date: October 14, 2003
               --------------------------------------       --------------------
                   Frank S. Yuan
                   Chief Executive Officer and Director

           By: /s/ Mary McNabb                         Date: October 14, 2003
               -------------------------------------         -------------------
                   Mary McNabb
                   Director

           By: /s/ John F. Busey                       Date: October 14, 2003
               -------------------------------------         -------------------
                   John F. Busey
                   Director

           By: /s/ Charles Rice                        Date: October 14, 2003
               -------------------------------------        --------------------
                   Charles Rice
                   Director

           By: /s/ Deborah Shamaley                    Date: October 14, 2003
               -------------------------------------        --------------------
                   Deborah Shamaley
                   Director

           By: /s/ James Vandeberg                     Date: October 14, 2003
               -------------------------------------        --------------------
                   James Vandeberg
                   Director

           By: /s/ Donald McNabb                       Date: October 14, 2003
               -------------------------------------        --------------------
                   Donald McNabb
                   Director


                                       22
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

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

                     REPORT ON AUDITED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002

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

FINANCIAL STATEMENTS
<TABLE>
<S>                                                                                               <C>
           Balance Sheet as of June 30, 2003                                                      F-2

           Statements of Operations for the years ended June 30, 2003 and 2002                    F-3

           Statements of Shareholders' Equity for the years ended June 30, 2003 and 2002          F-4

           Statements of Cash Flows for the years ended June 30, 2003 and 2002                    F-5


       NOTES TO FINANCIAL STATEMENTS                                                              F-6

</TABLE>

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Cyber Merchants Exchange, Inc.

We have audited the accompanying balance sheet of Cyber Merchants Exchange, Inc.
("the "Company"), as of June 30, 2003, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the two year period
ended June 30, 2003. These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Cyber Merchants Exchange,  Inc.
as of June 30, 2003,  and the results of its  operations  and its cash flows for
each of the years in the two year period ended June 30, 2003, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Squar, Milner, Reehl & Williamson, LLP

Newport Beach, California
August 5, 2003


                                      F-1
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                                  BALANCE SHEET
                                  JUNE 30, 2003

<TABLE>
<CAPTION>
<S>                                                                      <C>
ASSETS
Current assets:
   Cash                                                                  $     65,720
   Certificate of deposit                                                     100,000
   Accounts receivable                                                         89,801
   Inventory                                                                  189,365
   Prepaid expenses                                                            26,372
                                                                         ------------
Total current assets                                                          471,258
                                                                         ------------

Property and equipment, net                                                     6,902
Investments in overseas joint ventures, net                                   729,801
Other assets                                                                   11,368
                                                                         ------------
Total noncurrent assets                                                       748,071
                                                                         ------------
Total assets                                                             $  1,219,329
                                                                         ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                                 $    273,127
   Deferred revenue                                                           206,939
                                                                         ------------
   Total Current Liabilities                                                  480,066
                                                                         ------------
Shareholders' equity:
   Common stock, no par value; 40,000,000 shares authorized;
     7,472,673 shares issued and outstanding                                9,995,387
   Additional paid-in capital                                               3,624,461
   Accumulated deficit                                                    (12,880,585)
                                                                         ------------
Total shareholders' equity                                                    739,263
                                                                         ------------
Total liabilities and shareholders' equity                               $  1,219,329
                                                                         ============
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                      F-2
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                          Years Ended June 30,
                                                                       --------------------------
                                                                           2003           2002
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Revenues:
   Transaction sales                                                   $ 2,189,828    $ 2,025,256
   Cost of goods sold                                                    1,982,034      1,842,733
                                                                       -----------    -----------
   Net revenue from transaction sales                                      207,794        182,523
   Tradeshow revenue                                                       893,523        424,271
   Subscriber fees                                                           6,362         16,293
                                                                       -----------    -----------
Net revenue                                                              1,107,679        623,087
                                                                       -----------    -----------
Operating expenses:
   General and administrative                                            1,743,697      1,045,076
   Payroll related                                                         853,554        832,471
   Stock-based compensation                                                     --        101,097
   Depreciation and amortization                                            24,109         44,849
                                                                       -----------    -----------
Total operating expenses                                                 2,621,360      2,023,493
                                                                       -----------    -----------
Loss from operations                                                    (1,513,681)    (1,400,406)
Other income (expenses):
   Interest income                                                          45,110        100,490
   Equity in losses on investments in overseas joint ventures             (191,227)      (400,179)
   Amortization of negative goodwill                                       308,333        333,335
   Impairment write-down on investment in ABNet                                 --        (21,762)
   Impairment loss on convertible note receivable                         (600,000)            --
   Loss on disposal of investment, ABNet                                        --       (792,729)
                                                                       -----------    -----------
Total other income (expenses)                                             (437,784)      (780,845)
                                                                       -----------    -----------
Loss before income taxes                                                (1,951,465)    (2,181,251)
Income taxes                                                                   800            800
                                                                       -----------    -----------
Net loss                                                               $(1,952,265)   $(2,182,051)
                                                                       ===========    ===========
Basic and diluted net loss available to common shareholders per
   share                                                               $     (0.26)   $     (0.29)
                                                                       ===========    ===========
Weighted-average number of common shares outstanding                     7,472,673      7,583,369
                                                                       ===========    ===========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


                                      F-3
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY
                       YEARS ENDED JUNE 30, 2003 AND 2002

<TABLE>
<CAPTION>

                                       Common Stock            Additional                       Total
                              ----------------------------      Paid-In      Accumulated     Shareholders'
                                   Shares        Amount         Capital        Deficit         Equity
                              ------------    ------------    ------------   ------------    ------------
<S>                              <C>          <C>             <C>            <C>             <C>
BALANCE, July 1, 2001            7,583,673    $ 10,032,017    $  3,523,364   $ (8,746,269)   $  4,809,112
Disposal of investment
   of ABNet                       (111,000)        (36,630)             --             --         (36,630)
Amortization of unearned
   stock-based compensation             --              --         101,097             --         101,097
Net loss                                --              --              --     (2,182,051)     (2,182,051)
                              ------------    ------------    ------------   ------------    ------------
BALANCE, June 30, 2002           7,472,673       9,995,387       3,624,461    (10,928,320)      2,691,528
Net loss                                --              --              --     (1,952,265)     (1,952,265)
                              ------------    ------------    ------------   ------------    ------------
BALANCE, June 30, 2003           7,472,673    $  9,995,387    $  3,624,461   $(12,880,585)   $    739,263
                              ============    ============    ============   ============    ============

</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                      F-4
<PAGE>

                         Cyber Merchants Exchange, Inc.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          Years Ended June 30,
                                                                       --------------------------
                                                                           2003           2002
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Cash flows from operating activities:
   Net loss                                                            $(1,952,265)   $(2,182,051)
   Adjustments to reconcile net loss to net cash used in
     operating activities:
      Depreciation and amortization                                         24,109         44,849
      Amortization of negative goodwill                                   (308,333)      (333,335)
      Impairment loss on convertible note receivable                       600,000             --
      Bad debts                                                            140,155             --
      Equity in losses on investments in overseas joint ventures           191,227        400,179
      Loss on disposal of investment in ABNet                                   --        792,729
      Impairment write-down on investment in ABNet                              --         21,762
      Compensation expense for options and warrants granted                     --        101,097
      Changes in operating assets and liabilities:
          Accounts receivable                                              (79,586)       217,030
           Inventory                                                       (44,547)      (233,912)
           Prepaid expenses                                                146,842       (173,214)
           Accrued interest receivable                                          --         30,043
           Other assets                                                     (4,146)         4,275
          Accounts payable and accrued expenses                             39,440       (159,094)
          Deferred revenue                                                 206,939             --
                                                                       -----------    -----------
Net cash used in operating activities                                     (951,071)    (1,469,642)
                                                                       -----------    -----------
Cash flows from investing activities:
   Proceeds from maturity of certificates of deposit                            --      2,800,000
   Investment in certificate of deposit                                   (100,000)            --
   Investment in related party note receivable                                  --       (400,000)
   Repayments from related party note receivable and interest
     receivable                                                            407,000             --
   Investments in overseas joint ventures, net                                  --        (21,338)
   Purchases of property and equipment                                          --         (4,613)
                                                                       -----------    -----------
Net cash provided by investing activities                                  307,000      2,374,049
                                                                       -----------    -----------
Cash flows from financing activities:
   Proceeds from borrowings under line of credit                            40,000        816,745
   Repayments on borrowings under line of credit                           (40,000)    (1,216,745)
                                                                       -----------    -----------
Net cash used in financing activities                                           --       (400,000)
                                                                       -----------    -----------
Net (decrease) increase in cash                                           (644,071)       504,407
Cash, beginning of year                                                    709,791        205,384
                                                                       -----------    -----------
Cash, end of year                                                      $    65,720    $   709,791
                                                                       ===========    ===========
Supplemental disclosure of cash flow information:
   Cash paid during the year for:
     Interest                                                          $       243    $     8,401
                                                                       ===========    ===========
     Income taxes                                                      $       800    $       800
                                                                       ===========    ===========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                      F-5
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Cyber Merchants Exchange,  Inc. (the "Company" or "C-Me"), was established under
the laws of the State of California in July 1996 and was formerly known as World
Wide Magic Net, Inc.

C-Me  is a  business-to-business  international  trading  company  that  creates
efficiencies for retailers to source and finance international  purchases.  C-Me
builds private  extranets,  Internet Sourcing  Networks ("ISN"),  for its retail
partners.  Overseas  manufacturers  may subscribe to a retailer's ISN, by paying
the Company a subscription fee and/or transaction fee. The Company also provides
overseas  manufacturers  with a Virtual Trade Show, a vertical  marketplace  for
overseas   manufacturers  to  display  their  product  in  an  open  environment
accessible to any buyer around the world. In addition,  C-Me's Global  Financial
Platform (patent pending) allows U.S. retailers to purchase overseas merchandise
without  the  need of  issuing  a Letter  of  Credit.  Under  this  platform,  a
retailer's  credit  is  pre-approved  by  CIT  Commercial  Services  ("CIT"),  a
financial  institution,   under  standard  net  30-day  terms  on  international
purchases and the overseas  manufacturer  can get an advance of up to 80% of the
cost of the merchandise from Bank SinoPac, a financial institution.

The  Apparel  Sourcing  Association  Pavilion  ("ASAP")  Trade Show is a natural
extension of C-Me's core business  on-line  model.  ASAP is a global apparel and
textile sourcing show that brings leading manufacturers from around the world to
one venue to meet, greet and sell to buyers.  In the past seven years,  C-Me has
created a comprehensive  base of  manufacturers  from around the world.  Through
C-Me's  network of global  offices,  the Company  anticipates  that  hundreds of
international  manufacturers  will  exhibit at the ASAP Show twice a year in Las
Vegas, Nevada.

At June 30,  2003,  the  Company  has an  accumulated  deficit  of  $12,880,585,
negative working capital of $8,808 and a lack of profitable operational history.
The Company hopes to continue to increase  revenues from additional  transaction
sales and the continued growth of their ASAP Show. In the absence of significant
increases in revenues, the Company intends to fund operations through additional
debt and equity financing  arrangements (see Note 8). The successful  outcome of
future  activities cannot be determined at this time and there are no assurances
that if achieved, the Company will have sufficient funds to execute its intended
business plan or generate positive operating results.

The following is  approximate  select  unaudited  financial  information  of the
Company at September 23, 2003:

                                              Unaudited
                                               --------
Cash                                           $201,000
                                               ========
Certificate of deposit                         $100,000
                                               ========
Inventory                                      $260,000
                                               ========
Accounts receivable                            $395,000
                                               ========
Accounts payable                               $300,000
                                               ========


                                      F-6
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting periods.  Among the more significant  estimates included in
these financial  statements are the estimated  allowance for doubtful  accounts,
the  estimated  allowance  for  obsolete  inventory,  the  realizability  of the
Company's  investments in affiliated  companies and the valuation  allowance for
deferred income tax assets. Actual results could differ from those estimates.

RISKS AND UNCERTAINTIES

The   Company   operates   in  a  highly   competitive   consumer   product  and
high-technology  environment that is subject to intense competition,  government
regulation and rapid change. The Company's operations are subject to significant
risk  and  uncertainties  including  financial,   operational  and  other  risks
associated with the business, including the potential risk of business failure.

CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

Certain financial  instruments,  principally  accounts  receivable,  potentially
subject  the  Company  to credit  risk.  The  Company  performs  ongoing  credit
evaluations  of its  customers  but does not  require  collateral.  The  Company
maintains an allowance  for doubtful  receivables  and sales  returns based upon
factors surrounding the credit risk of specific customers, historical trends and
the Company's estimate of future product returns.  As of the balance sheet date,
no  allowance  is required nor provided  against  these  receivables,  which are
deemed to be  collected in the normal  course of business.  Although the Company
expects to collect amounts due, actual collections may differ from the estimated
amounts.

The Company has invested $100,000 in a certificate of deposit,  which matures on
January 15, 2004, and is held as collateral for the revolving  credit  agreement
with its bank.

Two customers accounted for approximately 51% of sales for fiscal 2002. However,
there were no  significant  sales  concentrations  for fiscal 2003 nor  accounts
receivable concentrations at June 30, 2003.

CASH AND CASH EQUIVALENTS

The Company  considers all highly liquid financial  instruments with an original
maturity of three months or less to be cash equivalents. The Company had no cash
equivalents at June 30, 2003.

INVESTMENTS IN OVERSEAS JOINT VENTURES AND ABNET

Investments in overseas joint ventures are accounted for under the equity method
(see Note 5). Prior to the  dissolution of the investment in ABNet (see Note 4),
the  investment  was accounted for under the cost method and valued at the lower
of cost or net  realizable  value with any  impairment  being  recognized in the
statements of operations at the time the impairment is determined.


                                      F-7
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORY

Inventory consists entirely of ready-to-wear garments and is stated at the lower
of standard cost or market.  Cost is determined on a weighted average basis that
approximates the first-in,  first-out method. Market is determined by comparison
with recent purchases or net realizable value.

Such net  realizable  value is based on  management's  forecast for sales of the
Company's  inventory  in the ensuing  years.  The  industry in which the Company
operates is characterized  by style and fashion  changes,  should demand for the
Company's  inventory  prove  to be  significantly  less  than  anticipated,  the
ultimate  realizable value of the Company's  inventories  could be substantially
less than the amount shown on accompanying balance sheet.

PROPERTY AND EQUIPMENT

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

Maintenance,  repairs  and minor  renewals  are  charged  directly to expense as
incurred.  Additions and betterments to property and equipment are  capitalized.
When assets are  disposed  of, the  related  cost and  accumulated  depreciation
thereon are removed from the accounts and any resulting gain or loss is included
in the statement of operations.

LONG-LIVED ASSETS

Prior to July 1, 2002, the Company  evaluated the  recoverability  of long-lived
assets in accordance with Statement of Financial  Accounting  Standards ("SFAS")
121,  "ACCOUNTING  FOR THE  IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED
ASSETS TO BE DISPOSED  OF." SFAS No. 121 required  recognition  of impairment of
long-lived assets in the event the book value of such assets exceeded the future
undiscounted  cash  flows  attributable  to  such  assets.  At  June  30,  2002,
management  determined  that the  Company's  long-lived  assets were impaired as
follows:

     o    Based in its analysis,  management  determined that it had incurred an
          impairment  loss of $21,762 in its  investment in ABNet,  prior to the
          disposal of such  investment  (see Note 4),  which was recorded in the
          accompanying  statement of  operations  during the year ended June 30,
          2002.

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 144,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  of," which  addresses  financial  accounting  and reporting for the
impairment or disposal of long-lived  assets.  SFAS 144 requires that long-lived
assets be reviewed for impairment  whenever  events or changes in  circumstances
indicate that their carrying  amounts may not be recoverable.  If the cost basis
of a long-lived asset is greater than the projected future undiscounted net cash
flows from such asset  (excluding  interest),  an impairment loss is recognized.
Impairment losses are calculated as the difference  between the cost basis of an
asset  and its  estimated  fair  value.  SFAS 144  also  requires  companies  to
separately report discontinued operations and extends that reporting requirement
to a  component  of an  entity  that  either  has  been  disposed  of (by  sale,
abandonment or in a  distribution  to owners) or is classified as held for sale.
Assets to be disposed are  reported at the lower of the  carrying  amount or the
estimated fair value less costs to sell. The Company adopted SFAS 144 on July 1,
2002. The provisions of this  pronouncement  relating to assets held for sale or
other  disposal  generally  are required to be applied  prospectively  after the
adoption date to newly initiated  commitments to plan to sell or dispose of such
asset, as defined, by management. As a result,


                                      F-8
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

management cannot determine the potential effects that adoption of SFAS 144 will
have on the  Company's  financial  statements  with  respect to future  disposal
decisions,  if any. Management believes that the impairment losses recognized on
long-lived assets,  including  intangible assets and other assets, are adequate.
There can be no  assurance,  however,  that market  conditions or demand for the
Company's  product or  services  will not change  which  could  result in future
long-lived asset impairment charges in the future.

REVENUE RECOGNITION

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

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

Transaction  revenues  are  recorded in  accordance  with EITF 99-19  "Reporting
Revenue Gross as a Principal versus net as an Agent". The Company recognizes net
revenues from product  transaction sales when title to the product passes to the
customer,  net  of  factoring  fees.  For  all  product  transactions  with  its
customers,  the Company  acts as a principal,  takes title to all products  sold
upon shipment,  and bears inventory risk for return products that the Company is
not able to return to the supplier,  although these risks are mitigated  through
arrangements  with factories,  shippers and suppliers.  For financial  reporting
purposes the Company presents the details of gross transaction sales and related
costs of sales in the accompanying statements of operations.

ASAP Trade Show
---------------

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

Subscription Fees
-----------------

The Company also recognizes revenue from monthly  subscription fees.  Subscriber
fees represent revenue generated through one-time, non-refundable setup fees and
monthly hosting fees. Subscription and subscriber fees are recognized as revenue
after the services have been provided.

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

INCOME TAXES

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards No. 109 ("SFAS 109"),  "Accounting  for Income Taxes." Under SFAS 109,
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences  are expected to be recovered or settled.  A valuation  allowance is
provided


                                      F-9
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

for significant deferred tax assets when it is more likely than not those assets
will not be recovered.

STOCK-BASED COMPENSATION

The Company accounts for stock-based  compensation issued to employees using the
intrinsic  value based  method as  prescribed  by  Accounting  Principles  Board
Opinion No. 25 ("APB 25"), "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." Under the
intrinsic value based method,  compensation  is the excess,  if any, of the fair
value of the stock at the grant date or other  measurement  date over the amount
an employee must pay to acquire the stock.  Compensation,  if any, is recognized
over the applicable service period, which is usually the vesting period.

SFAS No. 123 ("SFAS 123"),  "ACCOUNTING FOR STOCK-BASED  COMPENSATION"  if fully
adopted,  changes the method of accounting for employee stock-based compensation
plans to the fair value based method. For stock options and warrants, fair value
is  determined  using an option  pricing model that takes into account the stock
price at the grant date, the exercise price,  the expected life of the option or
warrant and the annual rate of quarterly  dividends.  Compensation  expense,  if
any, is recognized  over the  applicable  service  period,  which is usually the
vesting period.

SFAS No. 148 ("SFAS 148"), "ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION
AND DISCLOSURE,  AN AMENDMENT OF FASB STATEMENT NO. 123," was issued in December
2002 and is effective for fiscal years ending after December 15, 2002.  SFAS 148
provides  alternative  methods of transition for a voluntary  change to the fair
value method of accounting for stock-based employee  compensation.  In addition,
this  Statement  amends  the  disclosure  requirements  of SFAS  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.

The  adoption of the  accounting  methodology  of SFAS 123 is  optional  and the
Company has elected to continue  accounting for stock-based  compensation issued
to employees using APB 25;  however,  pro forma  disclosures,  as if the Company
adopted the cost  recognition  requirements  under SFAS 123,  are required to be
presented.

At June 30, 2003, the Company has three stock-based employee  compensation plans
(see Note 8). Stock-based employee compensation cost totaling $0 and $101,097 is
reflected in net loss for the years ended June 30, 2003 and 2002,  respectively,
as certain options granted under those plans had an exercise price less than the
market value of the underlying  common stock on the date of grant. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value  recognition  provisions  of SFAS 123 to  stock-based
employee compensation.


                                      F-10
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
                                                                       Years Ended June 30,
                                                                       2003           2002
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Net loss, as reported                                              $(1,952,265)   $(2,182,051)
    Deduct: total stock-based employee compensation expense
         Determined under fair value based method for all awards       (43,173)      (225,124)
                                                                   -----------    -----------
    Pro-forma                                                      $(1,995,438)   $(2,407,175)
                                                                   ===========    ===========
Basic and diluted net loss per share:
    As reported                                                    $     (0.26)   $     (0.29)
                                                                   ===========    ===========
    Pro-forma                                                      $     (0.27)   $     (0.32)
                                                                   ===========    ===========
</TABLE>

LOSS PER SHARE

Under SFAS No. 128,  "Earnings per Share",  basic earnings per share is computed
by dividing net income available to common shareholders by the  weighted-average
number  of  common  shares  assumed  to be  outstanding  during  the  period  of
computation.  Diluted  earnings per share is computed  similar to basic earnings
per share  except that the  denominator  is  increased  to include the number of
additional  common  shares  that would have been  outstanding  if the  potential
common shares had been issued and if the additional  common shares were dilutive
(totaling 202,000 and zero shares at June 30, 2003 and 2002, respectively, based
on the  Treasury  Stock  method),  because the Company has  incurred net losses,
basic and diluted  loss per share are the same as  additional  potential  common
shares would be anti-dilutive.

FAIR VALUE

"Disclosures About Fair Value of Financial  Instruments," requires disclosure of
fair value  information  about financial  instruments  when it is practicable to
estimate  that value.  The  carrying  amounts of the  Company's  cash,  accounts
receivable, accounts payable, accrued expenses and deferred revenues approximate
their  fair  values  due  to  the  short-term   maturities  of  those  financial
instruments.

ADVERTISING

The  Company  expenses  the cost of  advertising  when  incurred  as general and
administrative  expenses.  Advertising expenses were approximately  $139,000 and
$64,000  for  the  years  ended  June  30,  2003  and  2002,  respectively.  The
advertisement costs are primarily to promote ASAP show's brand, awareness and to
attract attendees.

COMPREHENSIVE INCOME

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 130
("SFAS 130"), "Reporting  Comprehensive Income," which establishes standards for
reporting and display of  comprehensive  income and its components in a full set
of  general-purpose  financial  statements.  The  adoption  of SFAS  130 has not
materially  impacted the Company's  financial position or results of operations,
as the Company has no items of comprehensive income.


                                      F-11
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 131
("SFAS  131"),   "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information." SFAS 131 changes the way public companies report information about
segments of their  business in their annual  financial  statements  and requires
them to report selected segment information in their quarterly reports issued to
shareholders.  It also requires  entity-wide  disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers (see Note 10).

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

"Accounting For Derivative  Instruments  and Hedging  Activities," as amended by
SFAS 137, 138, 140, 141 and 145 establishes  accounting and reporting  standards
for derivative instruments, including certain derivative instruments embedded in
other  contracts,  and for  hedging  activities.  It  requires  that  an  entity
recognize all  derivatives  as either assets or liabilities on the balance sheet
at their fair value.  The Company has no derivative or hedging  activities as of
June 30, 2003.

ACCOUNTING FOR WEB SITE DEVELOPMENT COSTS

The  Emerging  Issues  Task  Force  reached  a  consensus  on  Issue  No.  00-2,
"Accounting for Web Site Development  Costs" ("EITF 00-2"). The consensus states
that for specific web site  development  costs,  the  accounting  for such costs
should be accounted  for under AICPA  Statement of Position  98-1 ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use." Web site  maintenance  costs incurred and expensed under general
and  administrative  expenses in the accompanying  statements of operations were
insignificant to the Company for the year ended June 30, 2003 and 2002.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities" ("FIN 46"). This Interpretation  requires a variable
interest  entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities,  is
entitled to receive a majority of the entity's residual returns, or both. FIN 46
applies  immediately  to variable  interest  entities  created after January 31,
2003,  and to  variable  interest  entities  in which an  enterprise  obtains an
interest  after that date. It applies in the first fiscal year or interim period
beginning  after  June 15,  2003,  to  variable  interest  entities  in which an
enterprise holds a variable  interest that was acquired before February 1, 2003.
The Company is  evaluating  the  provisions  of FIN 46 and  determined  that the
provisions  of  FIN 46 may  require  consolidation  of  certain  overseas  joint
ventures during the quarter ending September 30, 2003.


                                      F-12
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

Significant recent Accounting Pronouncements include:

<TABLE>
<CAPTION>
PRONOUNCEMENT    TITLE                                                                               EFFECTIVE DATE
-------------    -----                                                                               --------------
<S>              <C>                                                                                 <C>
SFAS No. 142     Goodwill and Other Intangible Assets                                                July 1, 2002
SFAS No. 143     Accounting for Asset Retirement Obligations                                         July 1, 2003
SFAS No. 145     Rescission of FASB Statements No. 4, 44, and 64,                                    May 15, 2002
                 Amendment of FASB Statement No. 13, and Technical Corrections
SFAS No. 146     Accounting for Costs Associated with Exit or Disposal Activities                    January 1, 2003
SFAS No. 148     Accounting  for  Stock-Based   Compensation-Transition   and  Disclosure, an        March 31, 2003
                 amendment of FASB Statement No. 123
SFAS No. 149     Amendment of Statement 133 on Derivative Instruments and Hedging Activities         July 1, 2003
SFAS No. 150     Accounting for Certain  Financial  Instruments with  Characteristics  of Both       July 1, 2003
                 Liabilities and Equity
FIN 45           Guarantor's Accounting and Disclosure Requirements for Guarantees,  Including       December 31, 2002
                 Indirect  Guarantees of  Indebtedness of others - an  Interpretation  of FASB
                 Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34
FIN 46           Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51       February 1, 2003
</TABLE>

Other recent accounting pronouncements are discussed elsewhere in these notes to
the  financial  statements.  In the  opinion of  management,  recent  accounting
pronouncements  did not or will  not have a  material  effect  on the  financial
statements.

RECLASSIFICATIONS

Certain   reclassifications   have  been  made  to  the  fiscal  2002  financial
presentation to conform the current year's presentation.

NOTE 2 - AGREEMENT WITH CIT

On October 19,  2000,  the Company and CIT  Commercial  Services  entered into a
Factoring Agreement.  Under the agreement,  the Company sells and assigns to CIT
certain accounts  receivable,  as defined,  arising from transaction  sales. CIT
assumes the credit risk on a non-recourse  basis on each account  approved.  For
each sales transaction  assigned to CIT for collection,  CIT charges 1.5% of the
assigned  invoice  value as their  factoring  fee. The amount of factoring  fees
incurred  by the  Company  for the  years  ended  June 30,  2003  and 2002  were
insignificant.


                                      F-13
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 3 -PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30, 2003:

Software                                    $ 130,641
Computer equipment                            100,389
Furniture and fixtures                         29,783
Office equipment                               23,420
Leasehold improvements                          7,261
                                            ---------
                                              291,494
Accumulated depreciation and amortization    (284,592)
                                            ---------
                                            $   6,902
                                            =========

NOTE 4 - INVESTMENT IN ABNET (A RELATED PARTY)

In fiscal year 2000, the Company received  proceeds of approximately  $1,000,000
through the  issuance of 111,000  shares of its  restricted  common  stock.  The
shares were purchased by Abest Tech.  Company,  Ltd. d.b.a.  ABNet.tw ("ABNet").
The Company,  in turn,  acquired 1,500,000 shares of ABNet,  representing 15% of
the outstanding  common stock of ABNet,  for  $1,000,000.  The net result of the
transaction was an investment in ABNet of $1,000,000,  which represents the then
estimated fair value of the ABNet's common stock issued.  The Company  accounted
for the  investment in ABNet under the cost method as it had only a 15% interest
and had no ability to significantly  influence the decisions of management.  For
the year ended June 30,  2002,  the Company  recognized  an  impairment  loss of
$21,762,  based on management's  assessment of the operations and future revenue
of ABNet (see Note 1). In June  2002,  the  Company  entered  into an  agreement
whereby the Company  returned the 1,500,000  shares of ABNet common stock and in
turn ABNet returned the 111,000 shares of the Company's common stock, (which was
then freely trading) which the Company then cancelled. The Company accounted for
the  transaction  as a disposition  of the  investment in ABNet by recording the
estimated  fair value of the  company's  common stock  returned in the amount of
$36,630 (based on the market price at the date of disposition) as a reduction in
common  stock  and a loss  on  disposition  of  investment  of  $792,729  in the
accompanying  statement of operations for the remainder of the net book value of
the related investment.

NOTE 5 - INVESTMENTS IN OVERSEAS JOINT VENTURES

On December  22,  1999,  the Company  entered  into an agreement to form a joint
venture in Taiwan named C-Me  Technology Co., Ltd. ("C-Me Taiwan") to facilitate
the buying and selling activities between U.S.-based  retailers and Taiwan-based
exporters  through the Company's  web-based  communication  system.  The Company
invested  $300,000  (which was used to purchase  software back from the Company,
see below) for a 30% interest in February 2000 and accounts for this  investment
under the equity  method.  The Company  invested an  additional  $200,000 for an
additional 10% interest in May 2001. For the years ended June 30, 2003 and 2002,
the Company  recognized an  investment  loss in the  accompanying  statements of
operations  from this  joint  venture of  approximately  $27,000  and  $100,000,
respectively, based on the Company's equity ownership percentage.

On March 11, 2000, the Company entered into an agreement with Vickem Patana Co.,
Ltd., a Thailand  Corporation,  to form a joint venture named  E-SouthEast Asia,
Inc. ("E-SEA"), a Delaware corporation, which will use the Company's proprietary
web-based communication system to facilitate the front-end merchandise sourcing.
The Company invested $300,000 during fiscal year ended June 30, 2000 (which


                                      F-14
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 5 - INVESTMENTS IN OVERSEAS JOINT VENTURES (CONTINUED)

was used to purchase software back from the Company (see below)).  During fiscal
years ended June 30, 2001 and 2002, the Company invested an additional  $100,000
and $21,338,  respectively  for a total equity  interest  approximating  47% and
accounts for this investment  under the equity method.  For the years ended June
30, 2003 and 2002, the Company recognized an investment loss in the accompanying
statements of operations  from this joint venture of  approximately  $65,000 and
$185,000,  respectively,  based on the Company's  equity  ownership  percentage.
Management  together  with the  joint  venture  partners  decided  to close  the
operations as of June 30, 2003.  The  Company's net  investment at June 30, 2003
was zero; therefore no impairment adjustment is necessary.

On March 25,  2000,  the Company  entered  into an  agreement  with Good Support
International Limited, a British Virgin Islands Company, to form a joint venture
named Global Purchasing Dotcom, Inc. ("GP.com"), a Washington corporation, which
will focus on implementing  several  targeted  businesses in China's  e-commerce
market.  The Company  invested  $400,000  during fiscal year ended June 30, 2000
(which was used to purchase software back from the Company (see below)).  During
fiscal year ended June 30, 2001, the Company invested an additional $600,000 for
a total  interest  of 50% and  accounts  for this  investment  under the  equity
method,  as it has no  ability  to  significantly  influence  the  decisions  of
management.  As of June 30, 2003 and 2002, the Company  recognized an investment
loss in the  accompanying  statements of  operations  from this joint venture of
approximately $100,000 and $116,000, respectively, based on the Company's equity
ownership percentage.

During fiscal year 2000, each of C-Me Taiwan,  E-SEA, and GP.com entered into an
agreement  to  purchase  the  Company's  software  for  $300,000,  $300,000  and
$400,000,  respectively.  The Company has  reduced  the  carrying  amount of its
investment  in each of the joint  ventures by the amount of the  software  sale.
These  amounts  are  recognized  in income  as an  adjustment  to the  Company's
investments  in the  overseas  joint  ventures on a  straight-line  basis over a
three-year  period, the estimated life of the software sold. As of June 30, 2003
and 2002, the Company recognized income in the statements of operations from the
amortization of these software sales in the amount of approximately $333,000 and
$308,000,  respectively.  The respective  joint  ventures  amortized the cost of
software over the same three-year  period. As a result,  the total  amortization
expense  recognized by the joint  venture  companies for the year ended June 30,
2003 was approximately $308,000, which is a portion of the total losses on joint
ventures of approximately $409,000 (see below).

During fiscal year 2002 and 2003, the company entered into agreements with third
parties to form joint ventures in Bangladesh,  Korea,  Hong Kong,  Indonesia and
Sri Lanka named C-Me  Bangladesh,  C-Me Korea C-Me Hong Kong, C-Me Indonesia and
C-Me Sri Lanka,  respectively,  in which all will use the Company's  proprietary
web-based   communication  systems  to  facilitate  the  front  end  merchandise
sourcing.  The Company is not required to invest money into the joint  ventures.
Per the joint venture  agreements,  the Company is to provide its technology and
all costs to  operate  the joint  ventures  are to be funded by the third  party
joint venture partners. Profits are first to be distributed to the joint venture
partners  until the joint venture  partners are reimbursed for all costs paid by
the third  parties on behalf of the joint  ventures,  then all  profits  will be
allocated  on a 50%  basis to each  partner.  As of June  30,  2003,  the  joint
ventures are fully  operational and are promoting the Company and the ASAP show,
however the operations were insignificant.

As of June 30,  2003,  and for the  years  ended  June 30,  2003 and  2002,  the
investment in respective  joint  ventures are  summarized as follows (which were
audited in  conformity  with  accounting  principals  generally  accepted in the
United State of America by other accountants):


                                      F-15
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 5 - INVESTMENTS IN OVERSEAS JOINT VENTURES (CONTINUED)

<TABLE>
<CAPTION>
                                     C-Me Taiwan      E-SEA          GP.com         Total
-------------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>
Net investment at July 1, 2001     $    81,659    $    27,779    $   548,763    $   658,201
Investment                                  --         21,338             --         21,338
Amortization of negative
   goodwill                            100,000        100,000        133,335        333,335
Equity in loss of joint ventures      (100,222)      (184,254)      (115,703)      (400,179)
                                   -----------    -----------    -----------    -----------
Net investment at June 30, 2002         81,437        (35,137)       566,395        612,695
Amortization of negative
   goodwill                             75,000        100,000        133,333        308,333
Equity in loss of joint ventures       (26,708)       (64,863)       (99,656)      (191,227)
                                   -----------    -----------    -----------    -----------
Net investment at June 30, 2003    $   129,729    $        --    $   600,072    $   729,801
                                   ===========    ===========    ===========    ===========
</TABLE>

The following is the condensed  financial  information  of each of the Company's
overseas joint ventures as of and for the year-ended June 30, 2003:

<TABLE>
<CAPTION>
                                     C-Me Taiwan      E-SEA          GP.com         Total
-------------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>
Current assets                     $     7,086    $     2,132    $ 1,160,007    $ 1,169,225
                                   -----------    -----------    -----------    -----------
Total assets                       $   106,872    $   132,132    $ 1,209,441    $ 1,448,445
                                   ===========    ===========    ===========    ===========
Current liabilities                $    41,458    $        25        $$9,295    $    50,778
                                   -----------    -----------    -----------    -----------
Total liabilities                  $    41,458    $    45,177    $     9,295    $    95,930
                                   ===========    ===========    ===========    ===========
Total stockholders' equity         $    65,414    $    86,955    $ 1,200,146    $ 1,352,515
                                   ===========    ===========    ===========    ===========
Sales                              $    81,796    $    10,473    $    31,581    $   123,850
                                   -----------    -----------    -----------    -----------
Cost of sales                      $    35,142    $        --    $        --    $    35,142
                                   ===========    ===========    ===========    ===========
Net loss                           $   (66,770)   $  (143,174)   $  (199,311)   $  (409,255)
                                   ===========    ===========    ===========    ===========
</TABLE>

NOTE 6 - CONVERTIBLE NOTE RECEIVABLE

In June 2001, the Company loaned $600,000 to an unrelated  non-public company in
Taiwan for a  convertible  note  receivable  ("Note").  The Note,  which accrued
interest at 6% per annum, was payable in monthly  installments of interest only,
with the entire principal  balance plus any unpaid and accrued interest due June
12,  2003.  The  Note  was  convertible  into  common  stock  of this  unrelated
non-public  company at the discretion of the Company at $3 per share,  which was
estimated  by both the Company and the note maker to be the fair market value of
the common stock at the time of investment.

Due to the accumulated losses of this unrelated  non-public company, the Company
has  significant  doubts  of the  payees'  ability  to  repay  the note in full.
Management  also believes that it is not in the best interest for the Company to
convert  this  note into this  unrelated  non  public  company's  common  stock,
therefore,  the board of  directors  of the Company has decided to write off the
balance  of the  note in the  amount  of  $600,000,  which  is  included  in the
statement of  operations  for the year ended June 30,  2003.  The payee has been
current on the  interest  payments  as of the date of this  filing.  The Company
decided to extend


                                      F-16
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 6 - CONVERTIBLE NOTE RECEIVABLE (CONTINUED)

this  convertible  note for an  additional  three years to June 12, 2006 with 3%
interest per annum, to be paid monthly.

NOTE 7 - INCOME TAXES

Income tax expense for the years ended June 30, 2003 and 2002  differed from the
amounts  computed by applying the U.S.  Federal income tax rate of 34 percent to
the loss before income taxes as a result of the following:

<TABLE>
<CAPTION>
                                                                                        2003           2002
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
Computed "expected" tax benefit                                                    $  (663,000)   $  (742,000)
Adjustment in income taxes resulting from:
    Valuation allowance                                                                707,800        903,200
    Deferred income                                                                     84,000             --
    Other                                                                                1,000        (16,400)
    State and local income taxes, net of federal                                      (129,000)      (144,000)
                                                                                   -----------    -----------
                                                                                   $       800    $       800
                                                                                   ===========    ===========

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets at June 30, 2003 are presented below:

Deferred tax assets:
    Net operating loss carryforwards                                                              $ 3,757,000
    Stock compensation expense                                                                      1,240,000
    Other                                                                                              14,000
                                                                                                  -----------
Total                                                                                               5,011,000
    Less valuation allowance                                                                       (5,011,000)
                                                                                                  -----------
    Net deferred tax assets                                                                       $        --
                                                                                                  ===========
</TABLE>

The net change in the total  valuation  allowance  for the years  ended June 30,
2003 and 2002 was an increase of $707,800 and $903,200, respectively.

As of June 30,  2003,  the  Company  had net  operating  loss carry  forwards of
approximately  $9,773,000  and  $4,916,000  available to offset  future  taxable
Federal and State  income,  respectively.  The Federal and State carry  forwards
expire in varying amounts through 2023.

Due to the change in ownership  provisions of the Internal  Revenue Code Section
382, net operating loss carryforwards for Federal and State income tax reporting
purposes  are  subject to annual  limitations.  Should an  additional  change in
ownership occur, net operating loss carryforwards may be limited as to their use
in future years.


                                      F-17
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 8 - SHAREHOLDERS' EQUITY

COMMON STOCK

In June 2002, the Company entered into an agreement whereby the Company returned
the  1,500,000  shares of ABNet  common  stock and in turn  ABNet  returned  the
111,000 shares of the Company's  common stock,  (which was then freely  trading)
which the Company then cancelled (see Note 4).

OPTIONS

The Company's 1996 Stock Option Plan (the "1996 Plan")  provides for granting of
stock options to employees and non-employee directors.  The Company has reserved
250,000  shares of common stock for issuance  under the 1996 Plan. The terms and
conditions of grants of stock options are  determined by the Board of Directors.
Generally,  one-half of the granted options are exercisable after the employee's
first year of employment. The remaining options are exercisable after the end of
the employee's third year of employment.  The options granted will expire within
three months after termination of employment.

The Company's 1999 stock option plan (the "1999 Plan")  provides for granting of
stock options to employees,  officers,  directors,  and other  entities who have
made contributions to the Company.  The Company has reserved 2,500,000 shares of
common stock for issuance under the 1999 Plan. The Board of Directors determines
the terms and  conditions  of granting  stock  options.  Generally,  the vesting
period is two years,  allocated as follows: the first 25% of options granted are
exercisable after the first six months of employment, then 4.16% are vested each
month  thereafter.  The 1999 Plan  provides  for the useful  life of the options
granted to be 10 years  starting  from the date of grant.  The  options  granted
expire within three months after the termination of employment.

The Company's 2001 stock option plan ("2001 Plan") provides for granted of stock
options to  employees,  officers,  director,  and other  entities  who have made
contributions  to the  Company.  The Company has  reserved  2,000,000  shares of
common stock for issuance under the 2001 Plan. The Board of Directors determines
the terms and  conditions  of granting  stock  options.  Generally,  the vesting
period is two years,  allocated as follows: the first 25% of options granted are
exercisable after the first six months of employment, then 4.16% are vested each
month  thereafter.  The 2001 Plan  provides  for the useful  life of the options
granted to be 10 years  starting  from the date of grant.  The  options  granted
expire within three months after the termination of employment.

For the year  ended  June 30,  2002,  the  Company,  pursuant  to the 1999 plan,
granted  options to purchase an aggregate of 80,000 shares of restricted  common
stock, at an exercise price of $0.40 per share (estimated to be in excess of the
fair  market  value of the  Company's  common  stock on the date of  grant),  to
various employees of the Company. The options vest through December 2003 and are
exercisable  through  December 2011. In addition,  the Company,  pursuant to the
2001 plan, granted options to purchase an aggregate 142,500 shares of restricted
common  stock,  at  exercise  prices  ranging  from  $0.20  to $0.45  per  share
(estimated  to be the fair market  value of the  Company's  common  stock on the
dates of grant), to various  employees of the Company.  The options vest through
December 2003 and are exercisable through December 2011.

During the year ended June 30,  2003,  the  Company,  pursuant to the 1999 plan,
granted  options to purchase an aggregate of 50,000 shares of restricted  common
stock,  at an exercise price of $0.24 per share  (estimated fair market value of
the Company's  common stock on the date of grant),  to various  employees of the
Company.  The options vest through  December  2004 and are  exercisable  through
December  2012.  In addition,  the Company,  pursuant to the 2001 plan,  granted
options to purchase an aggregate of 140,000


                                      F-18
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 8 - SHAREHOLDERS' EQUITY (CONTINUED)

shares  of  restricted  common  stock,  at  exercise  prices  of $0.24 per share
(estimated  fair  market  value  of the  Company's  common  stock on the date of
grant), to various  employees of the Company.  The options vest through December
2004 and are exercisable through December 2012.

The  Company  recorded  compensation  expense  of  $101,097  for the  vesting of
previously  issued  options  during the fiscal  year  ended  June 30,  2002.  No
compensation expense was recorded during the fiscal year ended June 30, 2003.

A summary of changes in stock options during each year is presented below:

                                                        Weighted Average
                                     Stock Options       Exercise Price
                                     -------------      ----------------
Balance, July 1, 2001                   1,737,539            $4.02
Options granted                           222,500             0.38
Options cancelled                        (532,154)            4.07
                                       ----------            -----
Balance, June 30, 2002                  1,427,885             3.54
Options granted                           190,000             0.24
Options cancelled                         (36,000)            3.18
                                       ----------            -----
Balance, June 30, 2003                  1,581,885            $3.14
                                       ==========            =====
Options exercisable at June 30, 2003    1,470,635            $3.36
                                       ==========            =====

The following table summarizes  information about the stock options  outstanding
at June 30, 2003:

<TABLE>
<CAPTION>
                                      Options Outstanding                                  Options Exercisable
                        ---------------------------------------------------        --------------------------------
                                              Weighted
                                               Average            Weighted                               Weighted
                                              Remaining           Average                                 Average
                                             Contractual          Exercise                               Exercise
  Exercise Price              Number            Life               Price                 Number            Price
-------------------     -------------------------------------------------------------------------------------------
<S>                         <C>             <C>                    <C>                <C>                 <C>
  $0.20 to $0.45              425,000       8.39 years             $0.31                313,750           $0.33
  $3.00 to $3.50              741,500       6.27 years             $3.26                741,500           $3.26
  $4.00 to $6.50              415,385       6.73 years             $5.84                415,385           $5.84
                        -------------------------------------------------------------------------------------------
Total                       1,581,885       6.96 years             $3.14              1,470,635           $3.36
===================     ===========================================================================================
</TABLE>


                                      F-19
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 8 - SHAREHOLDERS' EQUITY (CONTINUED)

The fair value of the stock options granted during the years ended June 30, 2003
and 2002 was $42,184 and $61,375,  respectively,  on the date of grant using the
Black  Scholes  option-pricing  model.  The  pricing  assumptions  used  were as
follows:

                                        YEAR ENDED            YEAR ENDED
                                      JUNE 30, 2003          JUNE 30, 2002
                                      -------------          -------------
Discount rate - bond yield rate          3.50%                  3.75%
Volatility                                272%                   222%
Expected life                               3                      3
Expected dividend yield                    --                     --
                                          ===                    ===

WARRANTS

On October 15, 1997, the Company  entered into an agreement with Burlington Coat
Factory Warehouse Corporation ("BCF"). Under the agreement,  the Company and BCF
plan to 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 overseas  manufacturers.  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 (up to a maximum  of  828,118  shares) of common
stock of the Company on a fully diluted basis, subject to certain conditions and
restrictions as defined in the warrant agreement. The warrants agreement expired
on October 15, 2002.

On May 25, 2000,  the Company  entered into a joint  marketing  and  cooperation
agreement  with Factory  2-U. As a part of the  agreement,  the Company  granted
Factory  2-U a warrant  that  allowed  Factory  2-U to purchase up to 10% of the
issued and outstanding  shares of the Company's common stock  immediately  after
its June 2000 private  placement at the same price at which the shares were sold
in the private  placement.  The maximum  shares  Factory 2-U could purchase were
838,119 shares at $4.878 per share. In accordance with SFAS No. 123, the Company
recognized  an expense of $684,738  in the fiscal 2000 for the  granting of this
warrant. The warrant will expire on May 25, 2005.

In April  2003,  the  Company  issued a  Private  Placement  Memorandum  ("PPM")
offering  qualified  investors 8% convertible  preferred  shares  ("Shares") and
warrants  ("Warrants"),  collectively  the  "Units",  in  exchange  for  a  cash
investment in the Company for an aggregate of  $1,250,000.  The Company  offered
125 Units  priced at $10,000 per Unit.  Each Unit  consists of 20,000  shares of
preferred stock with 8% annual  dividend and 5,000 Warrants,  to purchase common
stock at $0.50 per share, immediately exercisable for a term of five years. This
convertible  stock  offering does not have any  commitments or investments as of
the date of this filing.  The  Company's  entered  into an  agreement  with C.K.
Cooper & Company  ("CKCC"),  a NYSD member investment banker based in Irvine, CA
as its  placement  agent and financial  consultant  for the PPM. The Company has
agreed to pay CKCC sale commissions equal to 8% of the gross proceeds,  up to 3%
of which may be re-allowed to  participating  broker-dealers.  In addition,  the
Company will pay CKCC 10,000  warrants,  exercisable  at 120% of the fair market
value on the date  earned,  immediately  vesting and  expiring  three years from
issuance, upon the closing of the initial $250,000 investment. In addition, CKCC
will receive 5,000 warrants each month ("Monthly Warrants")


                                      F-20
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 8 - SHAREHOLDERS' EQUITY (CONTINUED)

up to twelve  months,  with a minimum of six months,  beginning May 1, 2003. The
Monthly  Warrants  shall be  exercisable at 120% of the fair market value of the
Company's  common stock on the first trading day of the month and expiring three
years from  issuance.  As of June 30, 2003,  the Company  issued 10,000  monthly
warrants and the related expense was insignificant.

The following  represents a summary of warrants  outstanding for the years ended
June 30, 2003 and 2002:

<TABLE>
<CAPTION>
                                                Year Ended June 30,
                                 --------------------------------------------------
                                           2003                       2002
                                 -----------------------   ------------------------
                                               Weighted                    Weighted
                                                Average                    Average
                                  Warrants       Price      Warrants        Price
                                 ---------       -----      ---------       ----
<S>                              <C>             <C>        <C>             <C>
Outstanding, beginning of year   1,697,052       4.59       1,697,052       4.59
   Granted                          10,000                                    --
   Exercised                            --                                    --
   Cancelled/Forfeited             837,933       4.12              --         --
                                 ---------       ----       ---------       ----
Outstanding, end of year           869,119       4.90       1,697,052       4.59
                                 =========       ====       =========       ====
Exercisable, end of year           869,119       4.90       1,697,052       4.59
                                 =========       ====       =========       ====
</TABLE>

A detail of the warrants  outstanding  and exercisable as of June 30, 2003 is as
follows:

                                  Warrants Outstanding and Exercisable
                               -------------------------------------------
                                                 Weighted     Weighted
                                                 Average       Average
                                   Number       Remaining     Exercise
Range of Exercise Prices        Outstanding        Life         Price
                               ------------    ------------  -----------
       $0.26-$0.30                   10,000      2.9 years      $0.28
       $4.88                        839,119      1.9 years      $4.98
       $8.00                         20,000      .01 years      $8.00
                               ------------
                                    869,119
                               ============

NOTE 9 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASE

The  Company  leases  office  space  under  a  non-cancelable   operating  lease
agreement, the lease provides for monthly lease payments approximating $5700 and
expires on March 31, 2006.  Future minimum lease  payments under  non-cancelable
operating leases as of June 30, 2003 approximate:


                                      F-21
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

 YEARS ENDING JUNE 30,
 ------------------------------------
          2004                                $       70,000
          2005                                        70,000
          2006                                        55,000
                                              --------------
                                              $      195,000
                                              ==============

Rent  expense  for the  years  ended  June 30,  2003 and 2002 was  approximately
$68,000 and $57,000, respectively.

LITIGATION

The  Company  may be  involved  from time to time in various  claims,  lawsuits,
disputes with third parties,  actions involving allegations or discrimination or
breach of contract actions  incidental in the normal operations of the business.
The Company is currently not involved in any such  litigation  which  management
believes  could have a material  adverse  effect on its  financial  position  or
results of operations.

LINE OF CREDIT

The Company has a  non-revolving  line-of-credit  (the  "Line") with a financial
institution, which expires on January 15, 2004 and provides for borrowings up to
maximum of $100,000. The Line, which accrued interest at the index rate (4.0% at
June 30,  2003)  plus  1.5%,  was  collateralized  by a  certificate  of deposit
totaling approximately $100,000 and was guaranteed by an officer of the Company.
The Line contained financial and non-financial covenants,  which the Company was
in  compliance  with at June 30, 2003.  There was no balance on the Line at June
30, 2003.


                                      F-22
<PAGE>

                         Cyber Merchants Exchange, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 10 - BUSINESS SEGMENTS

Reportable  business segments for the years ended June 30, 2003 and 2002 were as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                               2003           2002
<S>                                                        <C>            <C>
Net sales from continuing operations:
          Transaction sales                                $   207,794    $   182,523
          ASAP Show                                            893,523        424,271
          Other                                                  6,362         16,293
                                                           -----------    -----------
                                                           $ 1,107,679    $   623,087
                                                           ===========    ===========
Operating profit (loss) from continuing operations:
          Transaction sales                                $  (983,745)   $  (869,299)
          ASAP Show                                           (529,413)      (531,901)
          Other                                                   (523)           794
                                                           -----------    -----------
                                                           $(1,513,681)   $(1,400,406)
                                                           ===========    ===========
Depreciation and amortization - continuing operations:
          Transaction sales                                $    24,109    $    44,849
          ASAP Show                                                 --             --
          Other                                                     --             --
                                                           -----------    -----------
                                                           $    24,109    $    44,849
                                                           ===========    ===========
Identifiable assets - continuing operations:
          Transaction sales                                $ 1,219,329
          ASAP Show                                                 --
          Other                                                     --
                                                           -----------
                                                           $ 1,219,329
                                                           ===========
Capital expenditures
          Transaction sales                                $        --    $     4,613
          ASAP Show                                                 --             --
          Other                                                     --             --
                                                           -----------    -----------
                                                           $        --    $     4,613
                                                           ===========    ===========
</TABLE>

Net sales as reflected above consist of sales to unaffiliated  customers only as
there were no significant intersegment sales during 2003 and 2002.

Two transaction  sales customers  accounted for 55% of net segment sales for the
year ended June 30, 2002. However, there was no significant concentration on net
segment sales for the year ended June 30, 2003.


                                      F-23