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, 2002
                                       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)

600 S. Lake Avenue, Suite 208    Registrant's telephone number:
    Pasadena, California               (626) 793-5000                   91106
------------------------------                                        ----------
    (Address of principal                                             (Zip Code)
     executive offices)

    Securities registered under Section 12(b) of the Act:
         (Title of Class)                   Name of exchange 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:  $623,087.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on September 25, 2002,  computed by reference to the closing price of
that date, was $2,275,010, 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 25, 2002, 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, 2002

Part I                                                                     Page
Item 1   Description of Business............................................. 3
Item 2   Description of Property.............................................27
Item 3   Legal Proceedings...................................................27
Item 4   Submission of Matters to a Vote of Security Holders.................28

Part II
Item 5   Market for Common Equity and Related Stockholder Matters............29
Item 6   Management's Discussion and Analysis of Financial Condition
         and Results of Operations...........................................30
Item 7   Financial Statements................................................34
Item 8   Changes In and Disagreements With Accountants on Accounting
         and Financial Disclosure............................................35

Part III
Item 9   Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act...................35
Item 10  Executive Compensation..............................................35
Item 11  Security Ownership of Certain Beneficial Owners and Management......35
Item 12  Certain Relationships and Related Transactions......................35
Item 13  Exhibits and Reports on Form 8-K....................................35

Signatures...................................................................37

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

C-Me has adopted a  buyer-centric  business  focus by creating  its  proprietary
Internet Sourcing  Network(TM)  ("ISN"),  which consists of specialized  private
extranets for  retailers  that  centralizes  the  merchandise  review and search
process.  Its current large retail  partners  include  Burlington  Coat Factory,
Factory 2-U Stores, and Bermo  Enterprises.  C-Me has built or is in the process
of building  each of these  retailers  their own private ISN. C-Me also provides
services  through its ISN to other  retailers,  including  Value City Department
Stores, Ross Stores and 99 cents only Stores.

                                       3
<PAGE>

In January  2001,  the Company began to focus and continues to focus on sourcing
overseas  goods for small  retailers and off-price  retailers such as Value City
Department Stores,  Ross Stores,  Factory 2-U Stores, Ames Department Stores and
others who do not have their own import departments.  The Company is using email
to show the  overseas'  stock  lots,  or close  out,  merchandise  in a standard
format, and then C-Me's sales staff personally  presents  pre-qualified goods to
the  retailer who  responds to the  Company's  email  marketing.  The  Company's
management   team  believes  that  having  both  an  efficient  and  easy-to-use
electronic trading system and a national sales force in place will significantly
contribute to the Company's ability to successfully compete in the marketplace.

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

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

C-Me continues to expand  internationally.  As of June 30, 2002, the Company has
formed joint ventures in Taiwan, China, Thailand, Hong Kong, Korea,  Bangladesh,
and  the  Philippines.  C-Me's  strategy  is to  partner  with  reputable  local
companies in countries throughout the world to expand its international network.
Through  these  joint  ventures,  localized   merchandise-sourcing  offices  are
established.  In addition to these joint  ventures,  C-Me has sourcing agents in
Turkey, Pakistan, Vietnam,  Bangladesh, Sri Lanka, and Indonesia.  Through these
sourcing  agents,  C-Me's  retail  partners  are  expected  to be able to source
international  merchandise  directly  and the  Company is expected to be able to
attract leading  manufacturers to attend its ASAP Show. The Company believes its
business   model   will  be   successful   by   providing   a   direct,   global
merchandise-sourcing  channel for  retailers  to enable  them to increase  their
vendor base and the Company's network.

THE 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:

                                       4
<PAGE>


                               Percentage of
                               Ownership by   State/Province of       Date of
Name of Joint Venture            the C-Me       Incorporation      Incorporation
-----------------------------  -------------  -----------------    -------------
Global Purchasing Dotcom, Inc.       50%           Washington          June 2000
E-SouthEast Asia, Inc.               47%            Delaware           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

The  Company's  joint  venture  partners are its active sales agents for finding
vendors, sourcing merchandise and promoting the ASAP Show.


                                       5
<PAGE>

INDUSTRY OVERVIEW

The retail industry is characterized by intense  competition,  consolidation and
tightening of profit  margins.  Consumers are  increasingly  more discerning and
consequently  demand  that  retailers  offer  more  value in  return  for  their
purchasing dollar.

To attract and keep consumers,  retailers must offer more desirable products and
prices,  while optimizing  factors such as product variety,  inventory  carrying
costs,  retail  prices and costs of goods.  The average large  department  store
carries a large number of stock keeping units ("SKUs") at any time,  each unique
in terms of product  style,  size,  color,  features,  packaging,  and so forth.
Retailers need to source these SKUs from hundreds,  or in some cases  thousands,
of  vendors  worldwide.   Retail  industry  vendors  include  direct  factories,
suppliers, manufacturers, jobbers and importers.

Sourcing-related  communications  between  retailers  and  their  vendors  is  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,  or  through  travel  and  personal  visits.  This  manner of
maintaining  retail-supply  communications  is  time-consuming,  challenging and
expensive.  In addition,  retailers are  decreasing the number of their vendors,
primarily  leveraging  certain  vendor  relationships  to be able to enhance and
control the management of their supply chain.

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.  However,  retailers
appear to be reluctant to explore automated  merchandise  sourcing  solutions at
this time. The Company  believes that  retailers need to first address  internal
management  and  control  processes  in order to  effectively  utilize  Internet
sourcing  capabilities.  Currently,  many retailers are  structured  without the
necessary  flexibility  for the retail  buyer to easily  access and  utilize the
benefits of the Internet.

Recently   many    Internet-based    businesses,    including   those   in   the
business-to-business e-commerce industry, have experienced difficulties with the
acceptance of their products and/or services.  This is particularly true for the
retail-based  e-commerce  businesses  that are  finding  the retail  industry in
general is technologically  behind other industries.  Retailers are reluctant to
move away from their existing systems and processes, and they prefer to interact
with a salesperson.  The Company found that custom  implementation of its global
sourcing  services for a large  retailer is time  consuming and  expensive.  The
Company also found that many vendors and manufacturers are so small that they do
not even own a computer and are unable to interact through the Internet.

Letters  of  credit  have  been  used in  connection  with  international  trade
transactions  between sellers and buyers for some time but the Company  believes
that  the  letter  of  credit  is  not  the  most   desirable  way  to  transact
international  purchases.  A buyer  may place an order  with a  seller,  but the
seller  may not ship or even begin to produce  ordered  goods  until a letter of
credit  is in place.  Additional  problems  associated  with  letters  of credit
include  a  limited   credit  line,  and  a  time   consuming,   cumbersome  and
administrative challenging process of obtaining a letter of credit. Furthermore,
there are risks,  not just monetary  costs related to letter of credit fraud for
both buyers and sellers. The Company, through its creation of the GFP eliminates
the need for letters of credit and thus the burdens involved with them.

                                       6
<PAGE>

MARKET OPPORTUNITY

Retail  buyers  spend a  majority  of their  time  sourcing  (searching  for and
locating)   merchandise   and  vendors.   The  buying  process  is  complex  and
multi-faceted.  A retail buyer's decision process involves  selecting  qualified
vendors based primarily on production volume, delivery,  quality, and price. The
buyer's objectives commonly include achieving pre-set goals for sales,  turnover
rates, expense levels, margins and profitability, and updating product selection
to meet fashion trends.

The market for  e-commerce  sourcing  solutions for retailers is at a very early
stage.  However, both retailers and vendors are beginning to turn to information
technology to better manage their  relationships  and merchandise  flow.  Retail
organizations must change established business practices and conduct business in
new ways.  C-Me  believes  that the  e-commerce  market is at the beginning of a
long-term  expansion driven by adoption of the Internet as a marketing venue and
data highway.

The challenge is coming up with an affordable e-commerce solution that addresses
both the  front-end  and  back-end  problems  facing the retailer and its supply
chain  vendors.   C-Me's  services  are  designed  specifically  to  meet  these
challenges  and to provide a means for  retailers to source  merchandise  from a
larger international marketplace.

The ASAP Show continues to grow each year. The Company  believes that the number
of vendors will continue to grow as it broadens its overseas network through its
joint venture  partners and directly.  The Company also anticipates that vendors
and buyers  attending the show will promote it on behalf of the Company and make
other buyers and vendors aware of it.

C-ME'S SOLUTION

C-Me has  continued to implement  its business  plan to become an  international
electronic  trading  company.  During  the last six  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 relationships with
localized  sourcing offices during the last six 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,  ASAP Show has become  increasingly more popular among retailers
and vendors and is  expected  to  continue  to be a source of  promotion  of the
Company's other services available to the apparel industry.

Overview of the C-Me Services
-----------------------------

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

A.  International Electronic Trade Business

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 solution

                                       7
<PAGE>

         the ISN creates is a simple one. The ISN enables  retailers and vendors
         located throughout the world to meet up and conduct business privately,
         using any Internet  connection without investing in expensive hardware,
         software or training.  Once a vendor  subscribes  to a retailer's  ISN,
         they can receive  feedback  about  particular  merchandise  reviewed by
         buyers and  receive  information  about the  long-term  and  short-term
         merchandising  needs of the  retailer.  The vendor can then  change its
         strategies  to meet these needs by updating its product line - all over
         the same  Internet  connection.  Vendors also receive an  "open-to-buy"
         broadcast,  of what a retailer is  sourcing  during a  particular  time
         period.  Vendors 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 universe of retail
         buyers.  Vendors  may  display  product  free of  charge,  if they also
         subscribe to an ISN.

     3.  Global Financial Platform ("GFP")

         The  Company's  innovative  GFP  eliminates  the need  for  traditional
         letters of credit for  international  purchases made by retailers.  CIT
         Commercial  Services,  a global  source for  factoring,  financing  and
         leasing capital,  and Bank SinoPac in Taiwan  participate in the GFP to
         allow exporters in Taiwan, Hong Kong and Vietnam to ship merchandise to
         C-Me's retailers with pre-approved credit established by CIT Commercial
         Services.  Each party makes an effort to expedite  transactions between
         an  exporter  and  retailer  while  guaranteeing  that the terms of the
         contract are fulfilled.  In addition,  foreign manufacturers can obtain
         potential  working capital  financing from Bank SinoPac.  It is through
         the  GFP  that  exporters,  retailers,   international  banks  and  CIT
         Commercial  Services will be linked to the platform,  which is designed
         to provide  rapid  access to the  innovative  payment  method of global
         purchasing.  The  GFP  can be  employed  for  any  international  sales
         transaction  provided that the retailer's credit is first approved with
         CIT  Commercial  Services.  Even  retailers  that do not source through
         C-Me's ISN or VTS may still  utilize the GFP. C-Me charges a percentage
         transaction fee on all purchase orders written under the GFP.

     4.  Direct International Electronic Trade by C-Me

         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 force
         hand carries a sample to the buyer with the goal of securing a purchase
         order.  Through  C-Me's GFP, a U.S.  buyer can purchase  the  Company's
         overseas  merchandise  without issuing a letter of credit,  and without
         being concerned about the quality of the goods that they purchase.  The
         Company can earn the difference  between the price sold to the retailer
         and the cost from the overseas manufacturer, which equates to 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,  Burlington Coat Factory,  Value City Department  Stores,  Ross
         Stores, 99 cents only Stores, Ames Department Stores and other discount
         chains.

                                       8
<PAGE>

B.  Web Design and Hosting

         Many vendors do not have an Internet  commerce strategy and most do not
         have a Web presence.  C-Me solves this by providing a free template Web
         page and shared  domain name to those  vendors who subscribe to an ISN.
         Additionally,  C-Me offers fee-based  customized Web design and hosting
         services to meet the  e-commerce  needs of other vendors who do not use
         its ISN.

C.  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 1,500 and 3,500 for the  February and August
         2002 shows, respectively. The attending exhibitors were 120 and 200 for
         the  February  and August  2002 ASAP  trade  shows,  respectively.  The
         participating countries were 10 and 18 for the February and August 2002
         trade  shows,  respectively.  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 vendors 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  CIT
         Commercial  Services  utilizes  the  benefits  of  accounts  receivable
         factoring  for sellers and credit  checks 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 halted 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 vendors to sell  merchandise  directly to consumers.  The FOM is
         being designed to supplement C-Me's  business-to-business  solutions by
         giving  vendors  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.  Vendors
         selling on the FOM will pay  transaction  commission  fees. The Company
         has  halted  its plans to  release  the FOM until  economic  conditions
         improve.

Benefits of the ISN to Retailers and Vendors
--------------------------------------------

The Company's primary focus is its ISN, which creates a merchandise sourcing and
information  pipeline for the retail industry.  The worldwide retail industry is
fragmented,  with thousands of buyers and sellers  connecting  sporadically  and
inefficiently.  The Company  believes its virtual  pipeline can eliminate costs,
redundancies and system  integration  barriers  currently facing retailers,  and
expedite  the flow of usable  product  information  to  retailers  from  vendors
through its low-cost,  low-technology,  real-time feedback communication system.
The Company's management understands not only the individual retailer's business
but also the retail industry as a whole. Although the retail industry is slow to
accept computer  technology and Internet  platforms as business  solutions,  the
Company is committed to marketing and implementing  services that meet the needs
of  retailers  and  their  vendors.  The  Company  is using  its  joint  venture
organizations to educate and incorporate vendors into its network.

                                       9
<PAGE>

Additional Benefits of the ISN to Retailers
-------------------------------------------

Key benefits of the Company's  services  specifically  to retailers  include the
following:

     o   Efficiency - C-Me can build and maintain a customized  Web-based system
         that  streamlines  and  automates the  front-end  merchandise  sourcing
         process  and  provides   instantaneous   visual   access  to  available
         merchandise on a 24/7 basis. Buyers can only view products within their
         merchandising categories.

     o   Cost - The  solution  can be  delivered  at no cost to the retailer and
         without  legacy  system   integration   and  without   eliminating  the
         "touch-and-feel" necessary to retail buyers.

     o   Expediency  - The ISN can push the most  updated  product  information,
         including pictures,  to the Company's retail partners in a standardized
         format,  which  the  buyers  can  immediately  view in a  user-friendly
         environment.

     o   Scalability - The  ISN  is completely  scalable  to service hundreds of
         buyers in thousands of buying categories.

     o   Sourcing  Benefits  - The ISN can  facilitate  new  relationships  from
         C-Me's international  database of vendors. Each electronic  transaction
         through the ISN may be  completed in less than one week rather than the
         normal three to four-week  cycle.  The  shortened  transaction  time is
         especially  important  for  off-price  retailers  with  faster  turning
         inventory,  and for vendors who turn idle  inventory to immediate  cash
         flow.

     o   Open to Buy  Broadcasts  - Retailers  can utilize the ISN to  broadcast
         their  open-to-buy  information  and future  made-to-order  information
         through the Company's  ISN. In this way,  C-Me's  international  vendor
         community can respond to their broadcasts in a proactive manner.

Additional Benefits of the ISN to Vendors
-----------------------------------------

C-Me's services give vendors direct access to targeted retail buyers,  knowledge
about  a  retailer's   procurement  cycle,  the  ability  to  receive  broadcast
open-to-buy information from retailers, and 24-hour, real-time access to the ISN
to diversify  their  product  lines by adding,  changing  and  updating  product
information. C-Me creates value for vendors by:

     o   Matching  Buyers and Sellers  Securely - The Company's  system works by
         guaranteeing that the right buyer views every product a vendor wants to
         sell, making business more time and cost efficient.

     o   Offering  Dynamic  Response - The Company  creates  value by  providing
         specific feedback from retailers on products, which vendors can utilize
         to design and market their products.

     o   Providing an Affordable  and Complete  Solution - Vendors pay a nominal
         subscription fee for a complete e-commerce solution. Auxiliary services
         include Web design and hosting free template home pages.

                                       10
<PAGE>

     o   Delivering  Open-to-Buy Requests - The Company brings significant value
         to vendors by delivering a retailer's buying needs  ("open-to-buy")  to
         vendors on a weekly basis, providing a proactive selling opportunity.

Benefits of the GFP to Retailers and Vendors
--------------------------------------------

C-Me believes that the GFP has  dramatically  simplified  the import  process by
replacing  traditional  letters of credit with CIT  Commercial  Services  credit
assurance of its retail partners. Key benefits include the following:

     o   Time  Savings  - The GFP is  designed  to  eliminate  the time it would
         otherwise  take for a buyer to obtain a letter of  credit.  Transaction
         delays  may be  detrimental  to a buyer that  needs the  ordered  items
         quickly. In the meantime, it may also be detrimental to a seller's cash
         flow associated with the transaction that is not forthcoming because of
         processing delays with a letter of credit.

     o   Efficiency - The GFP is designed to streamline the  transaction  cycle.
         As long as the buyer's credit is approved by CIT Commercial Services in
         advance and the purchase order is written to C-Me, C-Me will mirror the
         purchase order to the seller.  The seller is  responsible  for shipping
         quality goods on a timely basis.

     o   Standard Payment Terms - The computer and high tech industries purchase
         overseas  merchandise with net 30 days or longer payment terms, without
         issuing a letter of credit.  The Company  believes  that with its GFP a
         traditional commodity business can now enjoy the same benefits.

     o   Landed  Duty  Paid  Quotations  - The  benefits  of  landed  duty  paid
         quotations are to eliminate  U.S.  buyers as the importer of record and
         all the hassles associated with that. The GFP requires that the foreign
         manufacturer  becomes  the  importer of record and owns the goods until
         they are  inspected  and approved by the U.S.  buyer.  Landed duty paid
         price quotations make it easier for buyers to compare import costs.

     o   Increased  Line of Credit - Retailers may enjoy an  additional  line of
         credit offered by CIT  Commercial  Services that free of any collateral
         or security requirements.

     o   Cash Advances for Vendors - C-Me vendor  partners  with overseas  banks
         may  receive  accounts  receivable  financing  for  up to  80%  of  the
         receivable  amount once they have  shipped the  merchandise  instead of
         having  to wait for the  retailer  to pay,  which  can take at least 30
         days.

     o   Decreased Risk - C-Me's GFP is designed to reduce the risk of fraud for
         both buyers and sellers. It is the vendor's responsibility to make sure
         the quality of the  merchandise is equivalent to the samples  presented
         to the  buyer.  The buyer  will pay CIT  Commercial  Services  when the
         invoice is due. If the buyer does not pay due to financial reasons, CIT
         Commercial  Services will pay. On the other hand, if the quality of the
         merchandise received by the buyer is not as consistent with the samples
         provided,  the buyer then has the ability to charge back the vendor for
         the disputes.

Benefits of the ASAP Global Sourcing Show
-----------------------------------------

     o   Advantage to the Attendee - ASAP Show is held in  conjunction  with the
         world's largest apparel convention week in Las Vegas. ASAP's mission is
         to assist buyers by providing a means to conveniently  shop, source and
         compare products from around the world under one roof.

                                       11
<PAGE>

     o   Advantage to the Exhibitors - Most of the full-package turn-key garment
         manufacturers  located  outside the U.S. do not have the opportunity to
         promote  their  production  capabilities  and products to multiple U.S.
         buyers.  The Company is not aware of any other trade show  besides ASAP
         Show  that  assists  vendors  with the  promotion  of their  production
         capabilities and products to U.S. buyers.

     o   Advantage to C-Me - ASAP Show helps  brand,  expose and promote C-Me as
         the premier retail merchandise sourcing house in the U.S..

SUPPORTING TECHNOLOGY

The Company has developed three proprietary technologies designed to improve the
efficiency of its ISN services:

     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
     vendor's  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.

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

     The  Company's  FOCASTING(TM)  software  enables  retail  buyers  to create
     individual Web pages filled with only those products that fall within their
     buying responsibilities,  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 men's jeans
     buyer 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 vendors 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
     vendor,  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 vendors 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.  These
     interactive  features  available  through  DEPS(TM)  are  intended  to give
     vendors  a  competitive  edge by  providing  a means of rapid  response  to
     buyers' needs and vendors' products.

                                       12
<PAGE>

MARKETING PLANS AND SALES

General Marketing Plans
-----------------------

C-Me has targeted its service solutions to off-price and discount retailers, and
their merchandise suppliers.  C-Me now also markets its own merchandise directly
to individual  buyers within these retail  organizations  for  transaction-based
sales.

C-Me,  along with its overseas  joint venture  companies,  partners with foreign
governments  and their trade  promotion staff to promote it's the Company's ASAP
Show. C-Me, the organizer and host of ASAP Show, is aggressively  promoting ASAP
Show through direct mail,  e-mail  marketing,  trade  magazines,  newspapers and
advertisements.  ASAP  Show  provides  matchmaking,  educational  seminars,  and
conferences.  These  services  help to  promote  ASAP Show and set it apart from
other traditional trade shows.

Beginning in January  2001,  C-Me  established  an internal  sales and marketing
force  with the  objective  of  building  direct  relationships  with its retail
customers and better  facilitating  customer product feedback and program needs.
Through its team of national sales  executives  located in key market areas, the
Company  continues  to explore  opportunities  to expand  its  transaction-based
services with new retailers by prospecting  for new retailers to add to its ISN.
The Company continues to leverage existing retailer and vendor  relationships by
offering additional services provided by C-Me, such as program development,  Web
design and hosting,  open to buy broadcasts and product  marketing.  The Company
also  continues  to market its ISN  directly,  and  through its  overseas  joint
venture companies, to retailers and vendors.

The Company is marketing its GFP financial  platform by building a relationships
with large  retailers and importers who can demonstrate the process and generate
referrals.

Specific Marketing Plans
------------------------

Management has established or is in the process of establishing affiliations and
contracts  with several  retailers.  To date, the Company has two primary retail
partners:  Burlington Coat Factory Warehouse Corporation ("BCF") and Factory 2-U
Stores, Inc. ("F2U"). Under the terms of the BCF contract, the Company has built
an exclusive ISN for BCF free of charge. In return, BCF will provide the Company
with a list of its existing  vendors and assist the Company in marketing the ISN
to these vendors.  BCF will also receive 50 percent of the monthly  hosting fees
collected  from  vendors  who join BCF's ISN.  The  Company  has issued to BCF a
warrant to purchase shares of common stock of the Company.

The Company's second retail partner is F2U. Under the terms of the F2U contract,
the Company has built an exclusive ISN free of charge. In return, F2U has agreed
to  mandate  its  vendors  to join the ISN.  F2U will  receive 33 percent of the
subscription  fees  collected  from  vendors who join F2U's ISN. The Company has
issued to F2U a warrant to purchase shares of common stock of the Company.

In January 2001, C-Me announced a tri-party  financial  platform and alliance in
which  CIT  Commercial  Services,  the  leading  global  source  for  factoring,
financing and leasing capital.  Bank SinoPac in Taiwan will advance up to 80% of
the receivable to exporters in Taiwan when they ship merchandise to pre-approved
retailers in the United States. Foreign manufacturers may also be able to obtain
working capital financing from Bank SinoPac. The GFP links exporters, retailers,
international banks, which provides rapid access to innovative global purchasing
without a letter of credit.

C-Me has signed a three-show  contract with Fred Nassiri to be his sub-tenant at
the Las Vegas Hilton Convention and Casino Center starting August 2002.

                                       13
<PAGE>

Sales and Potential Revenue Streams
-----------------------------------

The Company's  primary  source of revenue over the next 12 months is anticipated
to be transaction-based  profit margins generated by retailers' purchases of the
Company's goods.  The Company has moved into this role primarily  because of the
slow acceptance of retailers to implement or participate its ISN. C-Me has found
that domestic vendors are unwilling to pay subscription  fees for the ISN due to
an  insufficient  number of retailers  utilizing the system.  Until  significant
numbers of retailers actively utilize the network, the Company will be unable to
depend solely on revenue generated from  subscription fees paid by vendors.  The
Company  envisions  made-to-order and programmed goods as a viable new source of
revenue for 2002.

The Company also anticipates  generating revenue in the form of transaction fees
associated with buyers  utilizing the GFP to finance their purchases  outside of
the Company's ISN.

Finally,  the Company  expects to continue  to  generate  revenue  from its ASAP
Global   Sourcing  Show  through   exhibitor   participation   fees,   corporate
sponsorships, and advertisement fees.

COMPETITION

International Electronic Trade Business
---------------------------------------

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. On the back-end,  the emergence of Internet Protocol ("I/P") standards
creates an opportunity for tighter  inter-operation between the business systems
of supply chain trading partners.

The Company's  primary  competitors  of the Company's  international  electronic
trade business are as follows:

      o  QRS   enables   retailers   and   vendors   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  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.

      o  Global  Sources  is an  enabler  of global  merchandise  trade.  Global
         Sources  develops and operates  independent  Internet  marketplaces and
         offer 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.   Global   Sources   enables   trade   for  an   established,
         independently certified community of more than 259,000 active buyers in
         230 countries and  territories.  These buyers  purchase direct goods in
         volume for resale and generate more than 2.7 million inquiries annually
         for over 110,000 suppliers through Global Sources Online.

      o  PurchasePro is a business-to-business  e-commerce software company that
         provides  solutions  to help  businesses  of all sizes buy,  sell,  and
         market   better.   PurchasePro   also   operates  a  commerce   network

                                       14
<PAGE>

         interconnecting  more than 250,000  businesses and powering hundreds of
         private  and  public  marketplaces  with its  highly  scalable,  hosted
         e-commerce software.  PurchasePro offers fully functional  marketplaces
         with thousands of buyers and sellers ready to transact  business can be
         operational   in   45   days   or   less.   PurchasePro   offers   four
         industry-leading   marketplace   products:   e-Source;   e-MarketMaker;
         e-Procurement; and v-Distributor. Customers buy memberships in order to
         access buying and selling communities, or "e-marketplaces".  One of its
         services is the group-buying discount.

      o  VerticalNet is an enterprise  software  provider that helps  businesses
         leverage the Internet to increase  efficiencies  in their  internal and
         external business processes.  Additionally,  VerticalNet's Small/Medium
         Business  Group provides  industry-specific  online sales and marketing
         products and services to small- and medium-sized suppliers. VerticalNet
         provides marketing solutions that connect suppliers with large pools of
         buyers  within  its 59  industry-specific  marketplaces,  other  public
         marketplaces,  and  private  buying  communities.  The company has also
         enhanced its Web- sites with online auction capabilities.

      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 route 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  Web-site
         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.

Additional auction  competitors of C-Me are as follows:  Merchandise-online.com,
Redtagbiz.com and Retailexchange.com.

ASAP Show
---------

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 vendors  located  throughout  the
world, but currently with an emphasis on vendors 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

                                       15
<PAGE>

         most widely recognized  organizer of apparel and fashion industry trade
         shows.  The shows  encompass  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
         International  Fashion Fabric Exhibition and I-TexStyle for the textile
         and sourcing markets.

      o  The Off-Price  Specialist  Show - The Off-Price  Specialist Show is the
         premiere show for  off-price  apparel and  accessories.  Four shows are
         held  each  year in Las  Vegas  and New York are host to  thousands  of
         attendees  ranging from major merchants to single  storeowners  looking
         for bargains.

      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.

      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.

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
focused on serving buyers' needs.

RESEARCH AND DEVELOPMENT

The Company  currently  provides two technical  services to its  customers:  the
Internet Sourcing Network and the Virtual Trade Show. Both services are embedded
with custom Web-site design. The Company also has three supporting technologies:
(i) Product Driven Search Engine; (ii) Focused  Broadcasting;  and (iii) Dynamic
End-User Profile System.  All of these  technologies  were developed in 1997 and
1998. In fiscal year 2001, the Company spent an insignificant amount on research
and development,  but spent  substantial  amounts on Web-site  maintenance costs
(approximately  $350,000).  Any funding of research and development will be used
to continue  development of the services offered and supporting  technologies of
the Company.

The  Company  is  expected  to spend an  insignificant  amount on  research  and
development  in the near  future as the  Company  is  evaluating  the  potential
benefits of two  services:  Wholesale  Auction  Center and Factory  Outlet Mall.
Development of these two services has currently halted until economic conditions
improve.  Until  the  Internet  Sourcing  Network  is more  broadly  implemented
throughout  the retail  industry,  the Company will evaluate  three  alternative
avenues of use for its two services: (i) internal development; (ii) outsourcing;
or (iii) purchasing  on-shelf software.  The decision of spending a large amount
of  resources  on research and  development  will be based upon the  competitive
environment, product availability, and relative costs and performance.

                                       16
<PAGE>

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  buyers in the United States.  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,  SMEs,  retailers,  international banks and CIT Commercial
Services are linked to 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  retailers  without  payment  risk.  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)

         Statistics   show  that   approximately   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 and E-escrow  companies
cannot resolve,  in a cost effective  manner,  these issues primarily because of
the logistics and inspection costs involved. Insurance companies charge premiums
that approximate a 10% fee of the transaction amount.

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.  In 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 risk because the factoring  corporation
has assumed the credit risk of the pre-approved buyer.

The Company currently has patent applications pending on an Auction with Methods
and  Mechanisms  to Avoid Fraud  ("Auction")  The  Company has  received a first

                                       17
<PAGE>

Patent Office action  regarding the Auction  application that rejects the claims
currently  pending.  The Company intends on responding to this action in pursuit
of a patent on the Auction.

In addition,  the Company has trademarked  the following trade names:  ASAP(TM);
DEPS(TM); FOCASTING(TM); and Internet Sourcing Network(TM).

GOVERNMENT REGULATION

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.  Any
violation of the WTO  conditions  will have a material  effect on the  Company's
core business.

Government regulation of the Internet is 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 26, 2002, the Company had 12 full-time employees and 1 part-time
employee  classified as follows:  2 full-time  executive  officers;  4 full-time
administrative  personnel;  6  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

Shareholders  and  prospective  purchasers of the Company's  Common Stock should
carefully  consider  the  following  risk  factors  in  addition  to  the  other
information  appearing  in this Annual  Report on Form 10-KSB and the  Company's
other filings with the Securities and Exchange Commission.

Industry Risks
--------------

         THERE IS NO ASSURANCE OF FUTURE INDUSTRY GROWTH.

There can be no assurance that the marketplace in which the Company  operates is
as large as reported in market data or that such projected  growth will occur or
continue.  Market data and  projections  are  inherently  uncertain,  subject to
change and often dated.  In  addition,  the  underlying  market  conditions  are
subject to change based on economic  conditions,  consumer preferences and other
factors that are beyond the  Company's  control.  A slower pace of growth within
the industry will have a significant  negative  impact on C-Me's  operations and
projections for growth.

         THE INTERNET INDUSTRY IS  EXPERIENCING CONSOLIDATION THAT MAY INTENSIFY
         COMPETITION.

The Internet industry has recently experienced  substantial  consolidation and a
proliferation of strategic transactions.  The Company expects this consolidation
and strategic  partnering to continue.  Acquisitions or strategic  relationships
could harm it in a number of ways. For example:

        o competitors  could  acquire or  partner with  companies with which the
          Company has strategic  relationships and discontinue the relationship,
          resulting in the loss of  opportunities  for its products and services

                                       18
<PAGE>

          or the loss of certain  enhancements  or  value-added  features to its
          products and services;

        o a  competitor  could be acquired by a party with significant resources
          and  experience  that could  increase the ability of the competitor to
          compete with the Company; and

        o other   companies with  related  interests  could combine to form new,
          formidable   competition,   which  could  preclude  the  Company  from
          obtaining  access  to  certain  markets  or  content,  or which  could
          dramatically   change  the  market  for  the  Company's  products  and
          services.

        THE COMPANY'S  FUTURE REVENUE   DEPENDS  SIGNIFICANTLY  ON THE VOLUME OF
        INTERNET USE AND THE ACCEPTANCE  OF THE INTERNET AS A COMMERCIAL MEDIUM.

If use of the  Internet  and  growth  of  the  market  for  business-to-business
exchanges  do not  continue,  the Company may not achieve the  critical  mass of
customers necessary for sustaining revenues and achieving profitable operations.
The Company's future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of business
by target consumers. Rapid growth in the use of and interest in the Internet has
occurred  only  recently.  As a result,  acceptance  and use may not continue to
develop at  historical  rates,  and a  sufficiently  broad base of retailers and
vendors  may not use the  Internet  and  other  online  services  as a medium of
commerce.

The  Company's  future  revenue  will  depend  significantly  on the  widespread
acceptance  and continued use of the Internet as a source of  information  and a
commerce  vehicle.  Rapid  growth in Internet  use is a recent  trend and market
acceptance of the Internet as a commercial medium is highly uncertain.

The Internet may not be accepted as a viable  commercial medium for distribution
of  information  and  engaging in commerce  for a number of reasons,  including,
without limitation:

        o inadequate development of the network infrastructure;
        o inadequate development of enabling technologies; and
        o concerns about privacy and security among users.

        THE  COMPANY'S  BUSINESS IS  DEPENDENT ON ITS ABILITY TO MAKE USE OF NEW
        COMPUTER  TECHNOLOGIES  AND ON  THE SUCCESS OF THE INTERNET AS A VEHICLE
        OF COMMERCE.

The market for Internet access is characterized by rapidly changing  technology,
evolving  industry  standards,  changes in users' needs and frequent new service
introductions.  The Company's future success will depend, in part, on the use of
leading  technologies to provide  seamless access to and service through its Web
site. There can be no assurance that the Company will be successful in using new
technologies effectively, developing new services or enhancing existing services
on a timely basis.

The  Company's  success  also  depends on  continued  use and  expansion  of the
Internet.  The  Internet  infrastructure  may not be able to support the demands
placed on it by continued  growth.  The growth in volume of Internet traffic may
create  instabilities  in its structure such as shortages in Internet  addresses
and overworked search engines.  Such instabilities may have an adverse affect on
its operations  and business if they are not addressed.  The Internet could also
lose its viability due to delays in the development or adoption of new standards
and  protocols  to handle  increased  levels  of  Internet  activity,  security,

                                       19
<PAGE>

reliability,  cost,  ease of use,  accessibility,  and quality of  service.  The
Company's network infrastructure may be vulnerable to computer viruses,  hacking
or similar disruptive  problems caused by users, other connected Internet sites,
the  interconnecting  networks  and the  various  telephone  networks.  Computer
viruses or problems caused by third parties could lead to interruptions,  delays
or cessation in service to the Company's member retailers.

The Company's success will depend, in large part, upon third parties maintaining
the Internet  infrastructure  to provide a reliable  network  backbone  with the
speed,  data  capacity,  security and hardware  necessary for reliable  Internet
access and services.

        THE COMPANY'S BUSINESS  WILL BE SEVERELY IMPACTED IF  TELECOMMUNICATIONS
        CARRIERS AND OTHER  SUPPLIERS  ON WHICH IT DEPENDS ARE UNABLE TO PROVIDE
        UNINTERRUPTED SERVICES.

The Company relies on providers such as the local telephone  companies and other
companies to provide data communications via local  telecommunications lines and
leased long-distance lines. The means of ordering and paying for products may be
disrupted  or  eliminated  if the Company  experiences  disruptions  or capacity
constraints  in  its  telecommunications  services.  There  may be no  means  of
replacing these services on a timely basis or at all.

In addition,  the inability or  unwillingness  of any third-party to provide the
Company point of presence access or its inability to secure alternative point of
presence  arrangements  could  significantly  limit its  ability to service  its
existing  customers  and expand to new  markets,  which could,  in turn,  have a
material  adverse  effect on its  business,  financial  condition and results of
operations.

        GOVERNMENT   REGULATION  OF  THE  INTERNET  COULD  ADVERSELY  AFFECT THE
        COMPANY'S PROFITABILITY.

Increased government  regulation,  or the application of existing laws to online
activities,  could inhibit Internet growth, expose the Company 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 the
Company's  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 United States and 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.

Existing or future legislation could limit growth in use of the Internet,  which
would curtail the Company's  revenue growth.  Statutes and regulations  directly
applicable to Internet  communications,  commerce and  advertising  are becoming
more prevalent. The law remains largely unsettled,  however, even in areas where
there has been legislative  action.  It may take years to determine  whether and
how existing laws governing intellectual  property,  privacy, libel and taxation
apply to the  Internet,  electronic  commerce  and online  advertising.  Any new
regulation or taxation of Internet commerce could damage the Company's business,
affect the  profitability  and perhaps the viability of the  Company's  business
plan,  and  cause the  price of the  Company's  common  stock to  decline.  Such
regulation  or taxation  could prove to be  burdensome,  and impose  significant
additional  costs  on  the  Company's  business  or  subject  it  to  additional
liabilities.

Most of the laws that  relate  to the  Internet  have not yet been  interpreted.
Changes to or the interpretation of these laws could:

        o limit the growth of the Internet;

                                       20
<PAGE>

        o create  uncertainty in  the  marketplace  that could reduce demand for
          the Company's products and services;
        o increase the Company's cost of doing  business;
        o expose  the  Company   to  significant  liabilities  associated   with
          content  available on its Web-sites or distributed or accessed through
          its products or services;
        o lead  to  increased product  development  costs, or otherwise harm the
          Company's business; and/or
        o decrease the rate  of  growth of the Company's user base and limit its
          ability to effectively communicate with and market to its user base.

As Internet  commerce  continues to evolve,  increasing  regulation  by federal,
state,  or foreign  agencies  becomes more likely.  Regulation  is likely in the
areas of user privacy,  pricing,  content, and quality of products and services.
Taxation of Internet use, or other charges imposed by government  agencies or by
private organizations for accessing the Internet,  may also be imposed. Laws and
regulations applying to the solicitation,  collection, or processing of personal
or consumer information could limit the Company's activities.  In addition,  any
regulation  imposing  fees for Internet use could result in a decline in the use
of the  Internet  and the  viability  of Internet  commerce,  which could have a
material adverse effect on the Company's  business,  results of operations,  and
financial condition.

Company Risks
-------------

        THE  COMPANY HAS A LIMITED OPERATING  HISTORY,  WHICH MAKES IT DIFFICULT
        TO EVALUATE THE COMPANY'S BUSINESS.

The Company was incorporated in July 1996 and has a limited  operating  history.
In fiscal 2000, the Company developed and built its operating assets,  including
its proprietary  software and its network server.  C-Me is a new company and has
no history of earnings or profit.  There is no  assurance  that the Company will
operate  profitably  in the  future.  As such,  there is no  assurance  that the
Company will generate a return on your investment in the future.

The  Company has  limited  financial  results on which you can assess its future
success.  The  Company's  prospects  must be  considered  in light of the risks,
expenses and difficulties frequently encountered by growing companies in new and
rapidly evolving markets.

To address the risks and uncertainties faced by the Company, it must:

        o establish  and  maintain  broad market  acceptance of its services and
          convert that acceptance into direct and indirect sources of revenues;

        o maintain and  enhance its  presence as a viable and attractive  option
          to retailers;

        o continue  to  timely and  successfully  develop new products,  product
          features and services,  and increase the functionality and features of
          its existing products;

        o successfully respond to competition from others; and

        o develop  and  maintain  strategic   relationships  to  enhance  the
          distribution, features and utility of its products and services.

                                       21
<PAGE>

The  Company's  business  strategy may be  unsuccessful  and it may be unable to
address the risks it faces in a cost-effective  manner, if at all. The Company's
inability to successfully address these risks will harm its business.

        THE  COMPANY  HAS  NOT  PRODUCED A PROFIT AND CANNOT BE CERTAIN  THAT IT
        WILL  PRODUCE  A PROFIT  OR  REMAIN  PROFITABLE  IF IT DOES  GENERATE  A
        PROFIT.

The Company is not  profitable and may never become  profitable.  If the Company
does achieve profitability, it cannot be certain that it will remains profitable
nor  that  profits  will  increase  in the  future.  The  Company  has  incurred
significant  losses  since its  inception  and may never  generate  or sustain a
profit. For the fiscal year ended June 30, 2002, the Company reported a net loss
of  $2,182,051.   The  Company  devotes  significant  resources  to  developing,
enhancing,  selling and marketing its products and  services.  As a result,  the
Company will need to generate  significant  revenues to maintain  profitability.
The  Company  may not be able to  continue  its  historical  growth or  generate
sufficient  revenues to sustain or  increase  profitability  on a  quarterly  or
annual basis in the future.

        THE   COMPANY  EXPECTS  TO  DEPEND  ON  REVENUE  FROM ITS  DOMESTIC  AND
        INTERNATIONAL   INTERNET  SOURCING  NETWORKS,  VIRTUAL TRADE SHOW,  ASAP
        GLOBAL SOURCING  SHOW AND WEB DESIGN AND HOSTING.

The  Company   expects  to  depend   primarily  on  revenue  from  the  complete
implementation  of its domestic and international  Internet  Sourcing  Networks,
Wholesale  Auction  Center,  and Factory  Outlet  Mall,  and on revenue from the
existing  Virtual Trade Show, and continuing  revenue from ASAP Global  Sourcing
Show,  Web-site design and hosting for its  subscribers.  The Internet  Sourcing
Network has not  generated  any revenue and there is no  guarantee  that it will
generate revenue in the future.  The Wholesale Auction Center and Factory Outlet
Mall are in development;  there is no guarantee either of these services will be
implemented  or  generate  any  revenue.  The Virtual  Trade  Show,  ASAP Global
Sourcing  Show and Web site design and  hosting  have  generated  revenue in the
past.  However,  there is no  guarantee  that these  services  will  continue to
generate  revenue or that that the  revenue  generated  will meet the  Company's
expectations.

        THE COMPANY'S OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY

As a result of the Company's  limited operating history and the rapidly changing
nature of the markets in which it competes,  the Company's  quarterly and annual
revenues and  operating  results are likely to fluctuate  from period to period.
These  fluctuations  may be  caused by a number  of  factors,  many of which are
beyond the Company's  control.  These factors include the following,  as well as
others discussed elsewhere in this section:

        o how  and  when the Company  introduces  new  products and services and
          enhances its existing products and services;
        o the   Company's   ability   to   establish   and  maintain   strategic
          relationships;
        o the Company's ability to attract,  train and retain key personnel;
        o the Company's  ability to form and maintain  strategic  alliances with
          retail businesses;
        o the emergence and success of new and existing competition;
        o varying   operating  costs and  capital  expenditures  related  to the
          expansion of the Company's  business  operations  and  infrastructure,
          domestically  and   internationally,   including  the  hiring  of  new
          employees;

                                       22
<PAGE>

        o technical  difficulties with  the Company's products, system downtime,
          system failures or interruptions in Internet access;
        o costs related to the acquisition of businesses or technology; and
        o costs of litigation and intellectual property protection.

In  addition,  because the market for the  Company's  products  and  services is
relatively new and rapidly changing, it is difficult to predict future financial
results.  To the extent that these predictions  prove inaccurate,  the Company's
revenues and operating expenses may fluctuate.

For these reasons,  you should not rely on  period-to-period  comparisons of the
Company's  financial  results as  indications of future  results.  The Company's
future  operating  results  could fall below the  expectations  of public market
analysts or investors  and  significantly  reduce the market price of its common
stock.  Fluctuations in the Company's operating results will likely increase the
volatility of its stock price.





        THE COMPANY FACES INTENSE COMPETITION FROM MANY ENTITIES.

The marketplace for  business-to-business  e-commerce is highly  competitive and
relatively  new,  constantly  changing and intensely  competitive.  As retailers
depend more upon the Internet as a source for product, more companies will enter
the market and compete  directly  with the  Company.  The Company  expects  that
competition will continue to intensify.

The Company has identified and continues to identify numerous companies that are
better funded, have more experience and more significant resources and that have
entered or are planning to enter  business-to-business  e-commerce.  Barriers to
entry  are  minimal  and  current  and new  competitors  can  launch  sites at a
relatively  low cost.  Should  these  companies  decide  to enter the  Company's
specific  market,  there  is no  guarantee  that it will be able to  effectively
compete with them.  Currently,  the Company's main on-line sourcing  competitors
include  Sourcing  Link,  Purchase  Pro.com,   Vertical  Net,  Tradeout.com  and
Tradeweave.com. Its main procurement competitors include QRS Corporation, Ariba,
Commerce One and Retek.  Price  concessions or the emergence of other pricing or
distribution  strategies of  competitors  may diminish the  Company's  revenues,
impact its margins or lead to a reduction in its market share, any of which will
harm its business.

        THE  COMPANY'S  DEPENDENCE ON ALLIANCES WITH  BUSINESSES AND GOVERNMENTS
        OUTSIDE OF THE UNITED STATES INVOLVES RISKS.

The  Company  depends  on its  ability  to  establish  and  maintain  successful
alliances with businesses and governments  located outside of the United States.
If the Company is unable to establish and maintain such  alliances,  it will not
be able to implement the business plan in its current configuration,  which will
affect both its 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 its ability to provide global merchandise sourcing to
its retail partners.

The Company is subject to the normal risks of doing business internationally, as
well as risks specific to  Internet-based  companies in foreign  markets.  These
risks include:

                                       23
<PAGE>

        o delays   in   the  development  of   the  Internet  as a  vehicle  for
          business-to-business transactions in international markets;
        o difficulties   in  managing  operations due to distance,  language and
          cultural differences;
        o unexpected changes in regulatory requirements;
        o export and  import  restrictions,  including those restricting the use
          of encryption technology;
        o tariffs and trade barriers and limitations on fund transfers;
        o onger   payment   cycles  and   problems   in   collecting    accounts
          receivable;
        o potential adverse tax consequences;
        o exchange rate fluctuations;
        o increased   risk of  piracy  and  limits on the  Company's  ability to
          enforce its intellectual property rights; and
        o other legal and political risks.

Any of these factors could harm the Company's business operations.

        THE COMPANY  DEPENDS ON  RELATIONSHIPS  WITH KEY RETAIL PARTNERS AND ITS
        ABILITY TO CREATE MORE SUCH RELATIONSHIPS.

The Company's business model is buyer-centric.  Successful implementation of the
model is  predicated  on the  Company's  ability  to create and  nurture  strong
partnerships  with  retailers.  If the  Company is unable to  maintain  existing
partnerships  or establish  new  partnerships  with  retailers,  its revenue and
profitably  will not meet  its  expectations  and it may not be able to fund its
operations.

        THE COMPANY MAY BE  UNABLE TO PROTECT ITS INTELLECTUAL  PROPERTY,  TRADE
        SECRETS AND  KNOW-HOW,  WHICH WOULD REMOVE A BARRIER TO COMPETITION  AND
        MAY DIRECTLY AFFECT THE AMOUNT OF REVENUE IT GENERATES.

The Company  depends  heavily on continued  service and software  development to
maintain  the quality and  reliability  of its services and to continue to grow.
The Company is dependent on its ability to keep trade secrets and obtain patents
on business processes as well as on its ability to develop new processes to meet
its customers' sourcing needs.

Although the Company employs various  methods,  including  trademarks,  patents,
copyrights and confidentiality agreements with employees,  consultants and third
party businesses,  to protect its intellectual property and trade secrets, there
can be no assurance that it will be able to maintain the  confidentiality of any
of its proprietary  technology,  know-how or trade secrets,  or that others will
not independently develop substantially  equivalent  technology.  The failure or
inability to protect  these rights could have a material  adverse  effect on the
Company's operations.

        THE  COMPANY'S  FAILURE  TO ATTRACT,  TRAIN OR RETAIN  HIGHLY  QUALIFIED
        PERSONNEL COULD HARM ITS BUSINESS

The  implementation  of the Company's  business  plan and its 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 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.

                                       24
<PAGE>

The loss of the services of executive officers or key employees,  especially Mr.
Frank Yuan, its Chief Executive Officer, could harm the Company's business. None
of the Company's  executive officers has a contract that guarantees  employment.
The Company does not maintain "key person" life insurance policies.

The Company's  success also depends on its ability to attract,  train and retain
qualified personnel,  specifically those with management and product development
skills.  In  particular,  the  Company  must hire  additional  skilled  software
engineers to further its research and development efforts.  Competition for such
personnel  is  intense.  In making  employment  decisions,  particularly  in the
Internet and high-technology industries, job candidates often consider the value
of stock options they may receive in connection  with their  employment.  If the
Company does not succeed in attracting new personnel or retaining and motivating
its current personnel, its business could be harmed.

        THE  COMPANY  MAY NOT BE ABLE TO  EFFECTIVELY  MANAGE ITS GROWTH,  WHICH
        COULD HAVE A MATERIAL EFFECT ON ITS BUSINESS OPERATIONS.

The Company's  ability to manage its growth  depends in part upon its ability to
develop and expand operating, management, information and financial systems, and
production  capacity,  which may  significantly  increase  its future  operating
expenses.  No assurance  can be given that it will grow in the future or that it
will be able to  effectively  manage such  growth.  Its  inability to manage its
growth  successfully  could  have a  material  adverse  effect on its  business,
financial condition and results of operations.

The Company  cannot  successfully  implement  its business  model if it fails to
manage its  growth.  The Company has  rapidly  and  significantly  expanded  its
operations domestically and internationally and anticipates further expansion to
take advantage of market  opportunities.  If the Company's growth continues,  it
will need to  continue  to improve  its  financial  and  managerial  control and
reporting systems and procedures.

        THE COMPANY MAY ENTER INTO NEW LINES OF BUSINESS WHICH INVESTORS ARE NOT
        GIVEN THE OPPORTUNITY TO EVALUATE

In the event of a business  combination,  acquisition,  or change in shareholder
control,  the Company may enter into a new line of  business,  which an investor
did not anticipate and in which that investor may not want to  participate.  The
Company may make investments in or acquire complementary products,  technologies
and businesses, or businesses completely unrelated to its current business plan.
Similarly, an asset acquisition or business combination would likely include the
issuance of a significant amount of the Company's common stock, which may result
in a majority  of the voting  power  being  transferred  to new  investors.  New
investors may replace the Company's management. New management may decide not to
continue to implement the Company's  current  business  plan,  and may decide to
enter into a business completely unrelated to the current business plan which an
investor  did  not  anticipate  and in  which  that  investor  may  not  want to
participate.  In such case,  an investor  could lose its entire  investment on a
business  decision it did not get to evaluate  at the time of  investing  in the
Company.

        POTENTIAL BUSINESS  COMBINATIONS  COULD BE  DIFFICULT  TO INTEGRATE  AND
        COULD DISRUPT BUSINESS OPERATIONS.

Any  acquisition of or business  combination  with another company could disrupt
the Company's ongoing business,  distract  management and employees and increase
expenses. If the Company acquires another company, it could face difficulties in
assimilating  that  company's  personnel and  operations.  In addition,  the key
personnel  of the  acquired  company  may  decide  not to work for the  Company.
Acquisitions also involve the need for integration into existing administration,

                                       25
<PAGE>

services,  marketing, and support efforts. Any amortization of goodwill or other
assets, or other charges resulting from the costs of these  acquisitions,  could
limit the  Company's  profitability  and  decrease  the value of its  stock.  In
addition,  the Company's liquidity and capital resources may be diminished prior
to or as a result of the  business  combination  and its  capital may be further
depleted by the  operating  losses,  if any, of the business  entity,  which the
Company may eventually acquire.

Investment Risks
----------------

        THE COMPANY'S COMMON STOCK HAS LIMITED LIQUIDITY.

At the present  time,  the  Company's  common  stock is not listed on The NASDAQ
Stock Market,  Inc. or on any national exchange.  Although dealer prices for the
Company's common stock are listed on the Nasdaq Over-the-Counter Bulletin Board,
trading has been limited since such quotations first appeared in July, 1999.
Whether or not shares of the  Company's  common stock are included in the Nasdaq
system,  the Company  cannot assure you that the public market for shares of its
common  stock will  become  more  active or liquid in the near  future.  In that
regard,  prospective  purchasers  of the common stock should  consider that past
shares have been issued without underwriting  arrangements typically found in an
initial public offering of securities.  Such arrangements  generally provide for
the issuer of the securities to sell the securities to an underwriter  which, in
turn, sells the securities to its customers and other members of the public at a
fixed  offering  price,  with the result that the  underwriter  has a continuing
interest in the market for such securities following the offering.

        FUTURE  ISSUANCE  OF STOCK BY THE COMPANY MAY HAVE A DILUTIVE  EFFECT ON
        OWNERSHIP INTERESTS  OF SHAREHOLDERS AND MAY NEGATIVELY IMPACT THE PRICE
        OF ITS STOCK.

Any additional  issuances by the Company from its authorized but unissued shares
may  have  the  effect  of  diluting   the   percentage   interest  of  existing
shareholders.  Out of the  40,000,000  authorized  common shares of the Company,
32,527,327,  or 81%, remain unissued.  The Board of Directors of the Company has
the  power  to issue  such  shares  without  shareholder  approval.  None of the
10,000,000  authorized  preferred  shares of the Company  are issued.  There are
outstanding  warrants and options  whose holders may acquire  additional  common
shares. The Company fully intends to issue additional common shares or preferred
shares in order to raise  capital  to fund its  business  operations  and growth
objectives.

        POTENTIAL BUSINESS COMBINATIONS MAY DILUTE SHAREHOLDER VALUE.

If the Company is not  successful in developing a viable market for its service,
its  management  will  spend a  significant  portion  of the time it  devotes to
evaluating other business opportunities that may be available to the Company. In
the event of a  business  combination,  the  ownership  interests  of holders of
existing  shares of the  Company's  stock will be  diluted.  Due to its  limited
financial  resources,  the only way the Company  will be able to  diversify  its
activities, should its business plan prove to be impractical,  would be to enter
into a business combination.

Any asset acquisition or business  combination would likely include the issuance
of a significant  amount of the Company's  common stock,  which would dilute the
ownership  interest of holders of existing shares,  and may result in a majority
of the voting power being transferred to new investors.  Depending on the nature
of the  transaction,  the Company's  shareholders may not have an opportunity to
vote on whether to approve it. For example, the Company's board of directors may
decide to issue a  significant  amount of stock to affect a share  exchange with
another company. Such a transaction does not require shareholder  approval,  but

                                       26
<PAGE>

the Company's  officers and directors  must exercise  their powers in good faith
and with a view to the interests of the corporation.

        THE  BOARD OF  DIRECTORS'  AUTHORITY  TO SET RIGHTS AND  PREFERENCES  OF
        PREFERRED  STOCK MAY PREVENT A  CHANGE IN CONTROL BY SHAREHOLDERS OF THE
        COMPANY'S COMMON STOCK.

Preferred  shares  may  be  issued  in  series  from  time  to  time  with  such
designation,  rights,  preferences  and limitations as the Board of Directors of
the Company determines by resolution and without shareholder  approval.  This is
an  anti-takeover  measure.  The Board of Directors has exclusive  discretion to
issue  preferred  stock with rights that may trump  those of common  stock.  The
Board of  Directors  could use an issuance of Preferred  Stock with  dilutive or
voting  preferences  to  delay,  defer  or  prevent  common   shareholders  from
initiating  a change in  control  of the  Company or reduce the rights of common
shareholders to the net assets upon  dissolution.  Preferred stock issuances may
also  discourage  takeover  attempts  that may offer  premiums to holders of the
Company's common stock.

        SHAREHOLDERS DO NOT HAVE THE AUTHORITY TO CALL A SPECIAL MEETING THEREBY
        DISCOURAGING TAKEOVER ATTEMPTS

Pursuant to the Company's by-laws, only the Board of Directors,  the Chairman of
the  Board or the  President  of the  Company  have the  power to call a special
meeting of the  shareholders  thereby  limiting the ability of  shareholders  to
effect a change in control of the Company.

        LIMITED  LIABILITY OF  EXECUTIVE  OFFICERS AND  DIRECTORS MAY DISCOURAGE
        SHAREHOLDERS FROM BRINGING A LAWSUIT AGAINST THEM

The Company's  articles of  incorporation  and by-laws  contain  provisions that
limit  the  liability  of  directors  for  monetary   damages  and  provide  for
indemnification  of officers and  directors.  These  provisions  may  discourage
shareholders from bringing a lawsuit against officers and directors for breaches
of fiduciary  duty and may also reduce the  likelihood of derivative  litigation
against  officers and directors even though such action,  if  successful,  might
otherwise  have  benefited  the  shareholders.   In  addition,  a  shareholder's
investment in the Company may be adversely  affected to the extent that costs of
settlement  and damage  awards  against  officers or  directors  are paid by the
Company  pursuant  to  the   indemnification   provisions  of  the  articles  of
incorporation and by-laws. The impact on a shareholder's  investment in terms of
the cost of defending a lawsuit may deter the  shareholder  from  bringing  suit
against one of the Company's officers or directors. The Company has been advised
that the SEC  takes  the  position  that  these  provisions  do not  affect  the
liability of any director under applicable federal and state securities laws.

Item 2.  Description of Property
--------------------------------

The Company  leases its  corporate  headquarters  located at 600 S. Lake Avenue,
Suite 208,  Pasadena,  California 91106. Its telephone number is (626) 793-5000.
The lease commenced on October 1, 2000, and expires on October 31, 2002, with an
option to renew for a 3-year period. The Company currently leases  approximately
2,002 square feet at an average monthly rent of approximately $3,604.

Item 3.  Legal Proceedings
--------------------------

The  Company  and Frank S. Yuan  ("Yuan")  filed a lawsuit  against  Yoram Dahan
("Dahan")  in the  Superior  Court of the  State of  California,  County  of Los
Angeles, Central District (Case No. BC 274550) on May 4, 2002. The claims by the
Company  against Dahan arose out of certain  activities  undertaken by him as an

                                       27
<PAGE>

employee of the Company  while  serving as the director of business  development
and President of the ASAP Show, a division of the Company.  The Company alleges,
among other things, that Dahan failed to fulfill his contractual  obligations as
an employee  and breached  his  fiduciary  duties to the Company for a number of
reasons,  including by acting to usurp ownership  rights to the ASAP Show and by
attempting to operate the trade show  independently  from the Company.  Further,
Yuan and the Company charged in the lawsuit that Dahan defamed both Yuan and the
Company.

In  response  to the  lawsuit  filed  by Yuan  and the  Company,  Dahan  filed a
Cross-Complaint  against the Company and Yuan on June 26, 2002 in the same court
(Case No. BC 274550)  alleging breach of contract,  fraud,  misappropriation  of
confidential  information,  intentional  interference with prospective  economic
advantage,  and breach of implied  covenant of good faith and fair dealing,  all
related to the ASAP Show. Dahan claims that he owns a certain  percentage of the
ASAP  show  and  that  he is owed  certain  amounts  in  commissions  and  other
compensation  for work  performed by him.  The  Cross-Complaint  seeks  monetary
damages,  including a share of any profits that the Company might  generate from
the ASAP Show, and further seeks punitive damages for allegedly  fraudulent acts
by the Company in misappropriating the ASAP Show contract rights.

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

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

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

On December 21, 2001,  the Company held its annual  meeting of  shareholders  in
Pasadena, California. At this meeting, shareholders of the Company were asked to
vote on the election of members to the board of directors.  All of the nominated
directors  were  elected  by  the  Company's  shareholders  as a  result  of the
following votes:



                                   Votes "For"       Votes "Against"
                                    Election           Election
         John F. Busey              4,849,406              0
         James L. Vandeberg         4,849,406              0
         Mary B. McNabb             4,849,406              0
         Charles Rice               4,849,406              0
         Deborah Shamaley           4,849,406              0
         Frank S. Yuan              4,849,406              0

In addition to the election of directors, the following matter was voted upon at
the Annual Meeting:

                                       28
<PAGE>


To ratify the selection of Corbin & Wertz as the Company's  independent auditors
for the fiscal  year  ending  June 30,  2002.  The votes  were cast as  follows:
4,849,159 in favor of ratification;  245 against ratification;  and 2 abstaining
(subsequently,  on  January  30,  2002,  Corbin  & Wertz  was  dismissed  as the
Company's  independent auditors and Squar,  Milner, Reehl & Williamson,  LLP was
hired as the Company's independent auditors (see Item 8 of this annual report on
Form 10-KSB).

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


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

The  Company's  common stock is traded on the  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, 2000
through June 30, 2002.

          July 1, 2000 to June 30, 2001:          High*         Low*
                                                  --------------------
                  First Quarter                   $ 7.06        $ 2.75
                           Second Quarter         $ 5.375       $ 2.125
                           Third Quarter          $ 4.268       $ 0.281
                           Fourth Quarter         $ 0.50        $ 0.156

                  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

* 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.

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. Investors 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 a seller may make. Because
of large dealer spreads,  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.
In some cases,  the stock may fall quickly in value.  Investors may be unable to
reap any profit from any sale of the stock, if they can sell it at all.

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

                                       29
<PAGE>

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 that may develop.

HOLDERS OF RECORD

On September 25, 2002, the Company's issued and outstanding common stock totaled
7,472,673  shares,  held by 242  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.

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, 2002. No
such sales  involved the use of an underwriter  and no commissions  were paid in
connection with the sale of any securities.

Throughout  fiscal 2002, the Company  granted  options through its 1999 and 2001
Stock  Option  Plan to  purchase  an  aggregate  of 80,000 and  142,500  shares,
respectively,  of restricted common stock, at exercise prices ranging from $0.20
to $0.45 per share (the fair market value of the  Company's  common stock on the
dates 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  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.

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,  2002.  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  and in the
subsection of Item 1 entitled "Risk Factors".

OVERVIEW

The Company was formed in July 1996 to develop,  establish, and market Web-based
e-commerce  solutions  for  retailers  and their  supply  chains  globally.  The
business  strategy  of the Company is still  focused on  building  collaborative
relationships  with  U.S.-based  retailers by providing the  retailers  with the
Company's  Internet Source Network ("ISN") and Global Financial Platform ("GFP")
with  the  intention  of  increasing   the  volume  of   international   e-trade
transactions that take place through those systems.

                                       30
<PAGE>

In  January   2001,   the  Company  began   focusing  on  directly   transacting
international closeout merchandise for U.S. retailers.  This type of transaction
has  become  the  Company's  main  source of  revenue.  Discount  and  off-price
retailers  such as Burlington  Coat Factory,  Factory-2-U  stores,  Ross Stores,
Value  City  Department   Stores,   Ames  Department   Stores  and  others  have
historically   purchased  close-out  or  off-season  merchandise  from  domestic
jobbers,  wholesalers  and/or  manufacturers.  These types of  retailers  do not
typically buy from original  manufacturing  sources  located in the Pacific Rim,
Middle East and Central and South  America.  The Company's  management  believes
that the  service  it offers to  acquire  the goods  from the  original  sources
without  the need of  issuing  letters of credit  will  attract  more  retailers
because they can avoid the traditional method of sourcing the goods.

From its inception to December 2000, the Company  developed and  implemented all
the necessary components to operate an international electronic trading company.
These components are as follows: 1) joint ventures in major production countries
- currently the Company has established  joint ventures in China,  Taiwan,  Hong
Kong, Korea, Thailand,  Bangladesh, and the Philippines(in addition to the joint
ventures,  the  Company  has  sourcing  agents in the  Middle  East,  Europe and
Indonesia)  - to link  vendors with  buyers;  2) ISN and VTS  development  - the
Company has developed and implemented its "ISN" and "VTS" software  platforms to
enable U.S.  retailers to source  merchandise  from vendors  located outside the
U.S.; and 3) GFP development - allows U.S.  retailers to purchase  international
merchandise  without  the  need  for  issuing  a letter  of  credit.  Management
anticipates that the Company's  international  electronic  trading business will
breakeven during the fiscal year ending June 30, 2003.

C-Me  also  hosts  the  ASAP  Show,  which  is  an  international  sourcing  and
manufacturing trade show that brings leading manufacturers from around the world
to one  venue to meet,  greet  and sell to  buyers.  The ASAP  Show is a natural
extension of C-Me's core business on-line model. In the past six years, C-Me has
created a comprehensive  base of  manufacturers  from around the world.  Through
C-Me's  network  of  global   offices,   the  Company   anticipates   that  many
international  manufacturers  will  exhibit at the ASAP Show twice a year in Las
Vegas,  Nevada.  Management  estimates  that the net  revenue for ASAP Show will
increase  each year.  The Company  anticipates  that the ASAP Show will generate
more revenues than its international  electronic trading business. ASAP plans to
accomplish this objective through sales of exhibitor space,  through government,
trade and corporate advertising sponsorships, and through advertising sales.

The  Company's  joint  venture  partners are its active sales agents for finding
vendors,  sourcing merchandise and promoting the ASAP Show. The Company pays the
joint venture  companies a commission of $500 for each exhibitor booth that they
bring to the ASAP Show.

The Company has incurred losses during the first six years of development. As of
June 30, 2002, the Company had an  accumulated  net loss of  $10,928,320,  which
includes  $3,594,461  in non-cash  compensation  related to the recording of the
fair value of warrants  and stock  options  issued by the Company to  employees,
consultants, directors and officers and strategic partners. The Company does not
anticipate that these types of expenses will continue at the previous levels.

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of the Company's  financial condition and results of
operations are based on the Company's audited financial  statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United  States.  The  preparation  of these  financial  statements  requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  on-going  basis,  the  Company  evaluates  its
estimates.  The Company bases its estimates on assumptions  that are believed to

                                       31
<PAGE>

be reasonable  under the  circumstances,  the results of which form the basis of
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Critical  estimates  include,  among
others, the estimated  allowance for doubtful accounts,  the realiability of the
company's  investments  in  affiliated  companies  and the valuation of deferred
income taxes.  Actual results may differ from these  estimates  under  different
assumptions or conditions.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fiscal year ended June 30, 2002, compared to year ended June 30, 2001
---------------------------------------------------------------------

The following discussion sets forth information for the twelve months ended June
30, 2002,  compared with the twelve months ended June 30, 2001. This information
has been derived from the audited financial  statements of the Company contained
elsewhere in this Form 10-KSB.

Revenues
--------

Net  revenues  from  transaction  sales for the year  ended  June 30,  2002 were
$182,523,  an increase of $130,366  from $52,157 in 2001.  During the year ended
June 30,  2002 the  Company  had  transaction  sales of  $2,025,256  compared to
$726,160  for the same period last year.  The gross  profit  margin for the year
ended June 30, 2002 was 9%,  compared  to 7% 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.

Subscriber  fees decreased  $14,372 or 47% to $16,293 in the year ended June 30,
2002 from  $30,665 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.

ASAP Show revenues, which include exhibitor booth sales, advertising and sponsor
fees, totaled $424,271 for the February 2002 show. There were no such trade show
revenues in fiscal 2001.

Operating Expenses
------------------

General and  administrative  expenses consist  primarily of salaries,  marketing
program,  investor  relations,  and professional  consulting  fees.  General and
administrative  expenses  decreased  $327,897 or 15% to  $1,877,547  in the year
ended June 30,  2002 from  $2,205,444  for the same  period  last year.  Payroll
expenses,   which  are  recorded  under  general  and  administrative  expenses,
decreased  $677,057  or 56% to  $530,761  in the year ended  June 30,  2002 from
$1,207,818  for the same period  last year.  The  decrease  in payroll  expenses
reflect the reducing of higher paid staff.  Professional  consulting fees, which
are recorded under general and  administrative  expenses,  decreased $382,884 or
84% to $72,890 in the year ended June 30, 2002 from $455,774 for the same period
last  year  due to the  Company  handling  its  own  IR/PR  functions  and  more
effectively utilizing outside legal and accounting services.

During the fiscal  year ended June 30,  2002,  the  Company  granted  80,000 and
142,500 stock options, under its 1999 and 2001 stock option plans, respectively,
of which 25,000 and 27,500 stock  options  granted under its 1999 and 2001 stock
option plans were  cancelled,  respectively.  In accordance  with APB No. 25 and
SFAS 123, the Company recognized non-cash  stock-based  compensation  expense of
$101,097 for the amortization of unearned  non-cash stock  compensation from the
prior  year's  grants.  There  was no  expense  recognized  related  to the 2002
issuances as they were issued to employees at the fair market value on the dates
of grant.  For the year ended June 30,  2001,  the Company  recognized  non-cash
stock-based compensation expense of $1,370,733.


                                       32
<PAGE>

Other Income (Expense)
----------------------

Net interest  income  decreased by $211,090 or 68% to $100,490 in the year ended
June 30, 2002 from  $311,580 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.

Under the equity  method of  accounting,  the loss in  overseas  joint  ventures
decreased  by  $125,379  or 24% to $400,179 in the year ended June 30, 2002 from
$525,558 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 has begun
to capitalize on its  expenditures on market branding which will reduce cost and
increase  revenue  for the fiscal year ended June 30,  2003.  In  addition,  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 and $148,879 in its  investment in ABNet,  which was
recorded in the  accompanying  statements of operations  for the year ended June
30, 2002 and 2001, respectively.

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.  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.

Amortization of negative goodwill  increased by $3 to $333,335 in the year ended
June 30,  2002 from  $333,332 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 amortizes the negative goodwill over three
years.

Net Loss
--------

The net loss for the fiscal year ended June 30, 2002  decreased by $1,422,134 or
39% to $2,182,051 from $3,604,185 for the same period last year. The decrease in
2002 is mainly due to lower  general and  administrative  expenses by  $327,897,
lower stock based  compensation  of  $1,269,636  and $125,379  less in losses in
overseas joint  ventures and  investments;  decrease in impairment  writedown of
$127,117,  which were offset by a loss on disposal  of  investment  in ABNet for
$792,729, and an increase in revenue of $540,265.

Net loss per  share  decreased  by $0.19 or 39% to $0.29  per  share in the year
ended June 30, 2002 from $0.48 for the same period last year.

                                       33
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's net working capital  decreased from $2,617,046 as of June 30, 2001
to $2,040,600  as of June 30, 2002,  primarily due to cash used in repayments of
borrowings  under line of credit for $400,000,  and investment of  approximately
$400,000 in related party note  receivable  which was collected  subsequently to
the balance sheet date.  During the current fiscal year ended June 30, 2002, the
Company  had average  monthly  general and  administrative  expenses  (excluding
non-cash  compensation  expenses)  of  approximately  $156,000  as  compared  to
$184,000  for fiscal year ended June 30,  2001.  During the later part of fiscal
year 2001,  the  Company  implemented  a cost  reduction  plan and  focused on a
transaction  revenue business model. The cost reduction plan includes  reduction
of its staff,  professional  consulting fees,  investor  relations and marketing
costs.  Management  believes  the cost  reduction  plan will  reduce the monthly
expenses to approximately $100,000 for the fiscal year ending June 30, 2003. The
Company  also  anticipates  average net revenue of 15% on all its  international
transactions.  With working  capital of  approximately  $2.0 million and average
monthly general and administrative expenses of approximately  $100,000,  coupled
with growing net revenue,  the Company  believes its operations can breakeven or
become  profitable by fiscal year 2003. There can be no assurance,  however that
the Company will achieve breakeven or profitability.

The Company  believes it has  sufficient  cash to operate its business  over the
next 12 months.  As of September 25, 2002, the Company had cash of approximately
$500,000,  short-term  payables  of  approximately  $100,000  and  no  long-term
payables.  The Company's monthly cash used in operations has been around $80,000
and the Company  expects that its monthly cash used in operations to continue to
be around that amount.  Depending on market  acceptance of the Company's current
business  model and its  ability to  generate  revenue,  the  Company  may raise
additional  funds,  either  debt or  equity,  to  augment  future  growth of the
business.

The  forecast  of the  period  of time  through  with  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 guarantee  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 / or equity
financing to fund its longer-term  growth.  The availability of future financing
will depend on market conditions.

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
following this report on Form 10-KSB.

                                       34
<PAGE>


Item  8.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------

The dismissal of BDO Seidman,  LLP and the hiring of Corbin & Wertz by the Board
of Directors of the Company was  previously  reported in a report Form 8-K dated
August 15, 2001 and filed on August 17, 2001.

The  dismissal  of Corbin & Wertz  and the  hiring  of  Squar,  Milner,  Reehl &
Williamson, LLP by the Board of Directors of the Company was previously reported
in a report  on Form  8-K,  as  amended,  dated  January  30,  2002 and filed on
February 6, 2002.

                                    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, 2002, 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, 2002, 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, 2002, 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, 2002,
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

                                       35
<PAGE>


     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

     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


*        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.

                                       36
<PAGE>

REPORTS ON FORM 8-K

No reports on Form 8-K were filed by the Company during the fourth quarter ended
June 30, 2002.

                                   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 8, 2002
                    -------------------


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 8, 2002
                    ----------------------
                    Frank S. Yuan
                    Chief Executive Officer and Director


               By:   /s/  Mary McNabb                    Date: October 8, 2002
                    ----------------------
                    Mary McNabb
                    Director


               By:   /s/  John F. Busey                  Date: October 8, 2002
                    ----------------------
                    John F. Busey
                    Director


               By:   /s/  Charles Rice                   Date: October 8, 2002
                    ----------------------
                    Charles Rice
                    Director


               By:   /s/  Deborah Shamaley               Date: October 8, 2002
                    ----------------------
                    Deborah Shamaley
                    Director


               By:   /s/  James Vandeberg                Date: October 8, 2002
                    ----------------------
                    James Vandeberg
                    Director

                                       37
<PAGE>


                Certification Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of The Sarbanes-Oxley Act of 2002


I, Frank S. Yuan, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Cyber Merchants
     Exchange, Inc.;

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

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



Date:        October 8, 2002                     /s/ Frank S. Yuan
          ----------------------               ----------------------
                                                     Frank S. Yuan
                                                     Chief Executive Officer














                                       38
<PAGE>






                         Cyber Merchants Exchange, Inc.




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




                     Report on Audited Financial Statements


                   For the Years Ended June 30, 2002 and 2001



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






Financial Statements

    Balance Sheet as of June 30, 2002                                        F-3

    Statements of Operations for the years ended June 30, 2002 and 2001      F-4

    Statements of Shareholders' Equity for the years ended
          June 30, 2002 and 2001                                             F-5

    Statements of Cash Flows for the years ended June 30, 2002 and 2001      F-6


  Notes to Financial Statements                                              F-7





                                       39
<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, 2002, and the related statements of operations,
stockholders'  equity and cash flows for the year then  ended.  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 audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. 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 audit  provides 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, 2002,  and the results of its  operations  and its cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States.




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

Newport Beach, CA
July 30, 2002





                                       F-1
<PAGE>


                           Independent Auditors Report



The Board of Directors
Cyber Merchants Exchange, Inc.



We have audited the accompanying statements of operations,  shareholders' equity
and cash flows of Cyber  Merchants  Exchange,  Inc.  (the  Company) for the year
ended June 30, 2001. 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 audit.

We conducted our audit 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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of  operations  and cash  flows of Cyber
Merchants  Exchange,  Inc. for the year ended June 30, 2001 in  conformity  with
accounting principles generally accepted in the United States of America.



                                         /S/ Corbin & Wertz


Irvine, California
September 7, 2001










                                       F-2
<PAGE>



                         Cyber Merchants Exchange, Inc.
                                  BALANCE SHEET
                                  June 30, 2002






ASSETS

Current assets:
   Cash and cash equivalents                                      $     709,791
   Accounts receivable                                                  150,370
   Inventory                                                            233,912
   Convertible note receivable                                          600,000
   Related party note and interest receivable                           407,000
   Prepaid expenses                                                     173,214
                                                                  --------------

Total current assets                                                  2,274,287

Property and equipment, net                                              31,011
Investments in overseas joint ventures, net                             612,695
Other assets                                                              7,222
                                                                  --------------

Total noncurrent assets                                                 650,928
                                                                  --------------

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

LIABILITIES AND SHAREHOLDERS' EQUITY

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

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                                              (10,928,320)
                                                                  --------------

Total shareholders' equity                                            2,691,528
                                                                  --------------

Total liabilities and shareholders' equity                        $   2,925,215
                                                                  ==============

See  independent   auditors'   reports  and  accompanying   notes  to  financial
statements.


                                       F-3
<PAGE>



                         Cyber Merchants Exchange, Inc.

                            STATEMENTS OF OPERATIONS
                                                       Years Ended June 30,
                                                --------------------------------
                                                     2002              2001
                                                --------------    --------------

Revenues:
   Transaction sales                            $   2,025,256     $     726,160
   Cost of goods sold                               1,842,733           674,003
                                                --------------    --------------

   Net revenue from transaction sales                 182,523            52,157
   Tradeshow revenue                                  424,271                 -
   Subscriber fees                                     16,293            30,665
                                                --------------    --------------

Net revenue                                           623,087            82,822
                                                --------------    --------------

Operating expenses:
   General and administrative                       1,877,547         2,205,444
   Stock-based compensation                           101,097         1,370,733
   Depreciation and amortization                       44,849            77,582
                                                --------------    --------------

Total operating expenses                            2,023,493         3,653,759
                                                --------------    --------------

Loss from operations                               (1,400,406)       (3,570,937)

Other income (expenses):
   Interest income, net                               100,490           311,580
   Equity in losses on investments in
     overseas joint ventures                         (400,179)         (525,558)
   Amortization of negative goodwill                  333,335           333,332
   Impairment write-down on investment in ABNet       (21,762)         (148,879)
    Loss on disposal of investment, ABNet            (792,729)                -
   Other                                                    -            (2,923)
                                                --------------    --------------

Total other income (expenses)                        (780,845)          (32,448)
                                                --------------    --------------

Loss before income taxes                           (2,181,251)       (3,603,385)

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

Net loss                                        $  (2,182,051)    $  (3,604,185)
                                                ==============    ==============

Basic and diluted net loss available to common
     stockholders per share                     $       (0.29)    $       (0.48)
                                                ==============    ==============

Weighted-average number of common shares
     outstanding                                    7,583,369         7,583,673
                                                ==============    ==============

See  independent   auditors'   reports  and  accompanying   notes  to  financial
statements.


                                       F-4
<PAGE>



                         Cyber Merchants Exchange, Inc.

                       STATEMENTS OF SHAREHOLDERS' EQUITY
                       YEARS ENDED JUNE 30, 2002 and 2001
<TABLE>
<CAPTION>


                                    Common Stock           Additional       Common
                             ---------------------------     Paid-In         Stock       Accumulated    Shareholders'
                                Shares         Amount        Capital       Subscribed      Deficit         Equity
                             ------------   ------------   ------------   ------------   ------------   ------------
<S>                          <C>           <C>           <C>             <C>           <C>            <C>

 Balance, July 1, 2000         7,589,669    $ 8,550,777    $ 2,152,631    $ 1,481,240    $(5,142,084)   $ 7,042,564

 Proceeds from stock
    subscribed and options
    exercised with cash
    proceeds                           -      1,481,240              -     (1,481,240)             -              -
 Adjust options exercised
    in 2000 without cash
    proceeds                      (5,996)             -        (43,852)             -              -        (43,852)
 Amortization of stock-
    based compensation                 -              -        795,348              -              -        795,348
 Compensation cost for options
    granted in 2001                    -              -        619,237              -              -        619,237
 Net loss                              -              -              -              -     (3,604,185)    (3,604,185)
                             ------------   ------------   ------------   ------------   ------------   ------------
 Balance, June 30, 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
                             ============   ============   ============   ============   ============   ============

</TABLE>

See  independent   auditors'   reports  and  accompanying   notes  to  financial
statements.


                                       F-5
<PAGE>



                         Cyber Merchants Exchange, Inc.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

                                                       Years Ended June 30,
                                                 -------------------------------
                                                      2002            2001
                                                 --------------   --------------
Cash flows from operating activities:
  Net loss                                       $  (2,182,051)   $  (3,604,185)
  Adjustments to reconcile net loss to
   net cash used in operating activities:

    Depreciation and amortization                       44,849           77,582
    Amortization of negative goodwill                 (333,335)        (333,332)
    Equity in losses on investments in
     overseas joint ventures                           400,179          525,558
    Loss on disposal of investment in ABNet            792,729                -
    Impairment write-down on investment in ABNet        21,762          148,879
    Compensation expense for options
     and warrants granted                              101,097        1,370,733
    Changes in operating assets and liabilities:
      Accounts receivable, net                         217,030         (312,707)
      Inventory                                       (233,912)               -
      Prepaid expenses                                (173,214)               -
      Accrued interest receivable                       30,043          (37,043)
      Other assets                                       4,275           (2,511)
      Accounts payable and accrued expenses           (159,094)        (298,333)
                                                 --------------   --------------
Net cash used in operating activities               (1,469,642)      (2,465,359)
                                                 --------------   --------------

Cash flows from investing activities:
  Proceeds from maturity of
   certificates of deposits                          2,800,000        1,100,000
  Investment in related party note receivable         (400,000)               -
  Investment in overseas joint ventures, net           (21,338)        (900,000)
  Investment in convertible note receivable                  -         (600,000)
  Purchases of property and equipment                   (4,613)         (84,892)
                                                 --------------   --------------
Net cash provided by (used in)
 investing activities                                2,374,049         (484,892)
                                                 --------------   --------------

Cash flows from financing activities:
  Proceeds from borrowings under line of credit        816,745          900,000
  Repayments on borrowings under line of credit     (1,216,745)        (500,000)
  Proceeds received from stock sales and
   collection of subscriptions receivable                    -        1,481,240
                                                 --------------   --------------
Net cash (used in) provided by
 financing activities                                 (400,000)       1,881,240
                                                 --------------   --------------

Net increase (decrease) in
 cash and cash equivalents                             504,407       (1,069,011)

Cash and cash equivalents,
 beginning of year                                     205,384        1,274,395
                                                 --------------   --------------

Cash and cash equivalents,
 end of year                                     $     709,791    $     205,384
                                                 ==============   ==============


Supplemental disclosure of cash flow information:

  Cash paid during the year for:

    Interest                                     $       8,401    $       4,478
                                                 ==============   ==============

    Income taxes                                 $         800    $         800
                                                 ==============   ==============

See  accompanying  notes to financial  statements for additional  information on
non-cash investing and financing activities.

See  independent   auditors'   reports  and  accompanying   notes  to  financial
statements.

                                       F-6
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.  Vendors may  subscribe to a  retailer's  ISN, by paying the Company a
subscription fee and/or  transaction fee. The Company also provides vendors with
a Virtual  Trade  Show,  a vertical  marketplace  for  vendors 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 an  international
sourcing and  manufacturing  trade show that brings leading  manufacturers  from
around the world to one venue to greet, meet and sell to buyers. In the past six
years,  C-Me has created a comprehensive  base of manufacturers  from around the
world.  Through C-Me's network of global offices,  the Company  anticipates that
hundreds of  international  manufacturers  will exhibit at the ASAP Show twice a
year in Las Vegas, Nevada.

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  realizability  of the Company's  investments  in  affiliated  companies and
convertible note receivable 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.


                                       F-7
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

Certain financial  instruments,  principally accounts  receivables,  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  receivable  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  $500,000 in certificates  of deposit,  which mature on
various  dates in July  2002,  at two  different  banks and has  maintained  its
operating account in another bank at approximately $210,000 as of June 30, 2002.
The amount  invested at each bank exceeds the FDIC  insurance  coverage limit of
$100,000, resulting in approximately $410,000 being uninsured at June 30, 2002.

Two customers account for approximately 51% and 83% of sales for fiscal 2002 and
2001, respectively. Two customers account for 80% of accounts receivable at June
30, 2002.  The loss of either of these  customers may have a material  impact on
the Company's financial statements.

CASH AND CASH EQUIVALENTS

The Company  considers all highly liquid financial  instruments with an original
maturity of three months or less to be cash and cash equivalents.

INVESTMENTS IN OVERSEAS JOINT VENTURES AND ABNET

Investments  in  overseas  joint  ventures  are  accounted  for under the equity
method.  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 exists.

INVENTORY

Inventory  consists  entirely of  finished  goods and are stated at the lower of
standard cost or market.  Cost is  determined  on a weighted  average basis that
approximates the first-in,  first-out basis.  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  products or services in the ensuing years.  The industry in which the
Company  operates is  characterized  by  technological  advancement  and change.
Should demand for the Company's  products  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.


                                       F-8
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 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.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the recoverability of long-lived assets in accordance with
Statement  of  Financial   Accounting   Standards  No.  121  ("SFAS  No.  121"),
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of." SFAS No. 121 requires  recognition  of impairment of long-lived
assets  in the  event  the net book  value of such  assets  exceeds  the  future
undiscounted  cash  flows  attributable  to  such  assets.  At  June  30,  2002,
management determined that the Company's long-lived assets have been impaired as
follows:

     o   Based  on its  analysis,  management  determined  that it has  incurred
         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 for the year ended June 30, 2002.

Management  believes that the impairment  losses recognized on long-lived assets
are adequate.  There can be no  assurance,  however,  that market  conditions or
demand for the Company's products or services will not change which could result
in additional future long-lived asset impairments.

REVENUE RECOGNITION

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,  the Company  records the  corresponding
revenue on a net basis.  However,  for financial  reporting purposes the Company
presents the details of gross  transaction  sales and related  costs of sales in
the accompanying  statements of operations.  The Company 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 such revenue is recognized at the time of
the related trade show.

                                       F-9
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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  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 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.

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting   Standards  No.  123  ("SFAS  123),   "Accounting   for  Stock-Based
Compensation." This standard, 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 if the Company
adopted the cost  recognition  requirement  under SFAS 123,  are  required to be
presented (see Note 10).

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB 25."
FIN 44 clarifies the  application  of APB 25 for (a) the  definition of employee
for purpose of applying APB 25, (b) the criteria for determining  whether a plan
qualifies as a non compensatory plan, (c) the accounting consequence for various
modifications  to the terms of a previously fixed stock option or award, and (d)
the  accounting  for an  exchange  of stock  compensation  awards in a  business
combination.  The  adoption  of FIN 44 did not  have a  material  effect  on the
Company's financial statements.

                                       F-10
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

LOSS PER SHARE

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 128
("SFAS 128"), "Earnings per Share." Under SFAS No. 128, basic earnings per share
is  computed  by  dividing  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  zero  shares in 2002 and 2001).  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 OF FINANCIAL INSTRUMENTS

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 107 ("SFAS
107"),  "Disclosures  About  Fair  Value  of  Financial  Instruments."  SFAS 107
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 line of credit
borrowings  approximate  their fair values due to the  short-term  maturities of
those financial statements. The fair value of the convertible note receivable is
not determinable as the transaction was with a non-public company and comparable
instruments  were not available to analyze.  Also, the fair value of the related
party note receivable is not  determinable as this transaction is with a related
party.

ADVERTISING

The  Company  expenses  the cost of  advertising  when  incurred  as general and
administrative  expenses.  Advertising  expenses were approximately  $64,000 and
$35,000 for the years ended June 30, 2002 and 2001, respectively.

COMPREHENSIVE INCOME

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 130
("SFAS 130"),  "Reporting  Comprehensive Income." SFAS 130 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.

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 12).


                                       F-11
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Statement of Financial  Accounting  Standards No. 133 ("SFAS 133"),  "Accounting
For Derivative  Instruments and Hedging Activities",  as amended by SFAS 137 and
138, 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, 2002.

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
approximately  $346,000 for the year ended June 30, 2001 and were  insignificant
to the Company for the year ended June 30, 2002.

RECENT ACCOUNTING PRONOUNCEMENT

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 141 ("SFAS
141"),  "Business  Combinations,"  which is effective for business  combinations
initiated  after June 30,  2001.  SFAS 141  eliminates  the  pooling of interest
method of accounting  for business  combinations  and requires that all business
combinations  occurring  after July 1, 2001 are accounted for under the purchase
method. The adoption of SFAS 141 did not have a material impact on the Company's
financial statements.

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 142 ("SFAS
142"),  "Goodwill and Other  Intangible  Assets,"  which is effective for fiscal
years  beginning  after  December 15,  2001.  Early  adoption is  permitted  for
entities  with fiscal years  beginning  after March 15, 2001,  provided that the
first interim  financial  statements have not been previously  issued.  SFAS 142
addresses how intangible  assets that are acquired  individually or with a group
of other assets should be accounted for in the financial  statements  upon their
acquisition  and after  they have been  initially  recognized  in the  financial
statements.  SFAS 142 requires  that  goodwill and  intangible  assets that have
indefinite  useful lives not be amortized but rather be tested at least annually
for impairment, and intangible assets that have finite useful lives be amortized
over their  useful  lives.  SFAS 142  provides  specific  guidance  for  testing
goodwill and  intangible  assets that will not be amortized for  impairment.  In
addition,  SFAS 142 expands the disclosure requirements about goodwill and other
intangible  assets  in the years  subsequent  to their  acquisition.  Impairment
losses for goodwill and indefinite-life  intangible assets that arise due to the
initial application of SFAS 142 are to be reported as resulting from a change in
accounting  principle.  However,  goodwill and intangible  assets acquired after
June 30, 2001 will be subject  immediately  to the  provisions  of SFAS 142. The
Company  does not  expect  SFAS 142 to have a material  effect on its  financial
statements.

                                       F-12
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 143 ("SFAS
143"),  "Accounting  for Asset  Retirement  Obligations."  SFAS 143  establishes
standards  associated with the retirement of tangible  long-lived assets and the
associated  asset  retirement  costs.  This statement is effective for financial
statements  issued for fiscal years  beginning  after June 15, 2002. The Company
does not expect SFAS 143 to have a material effect on its financial statements.

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 144 ("SFAS
144"),  "Accounting  for the Impairment or Disposal of Long-Lived  Assets." SFAS
144  addresses  financial   accounting  and  reporting  for  the  impairment  of
long-lived assets and for long-lived assets to be disposed of. The provisions of
SFAS  144 are  effective  for  financial  statements  issued  for  fiscal  years
beginning  after  December 15,  2001,  and interim  periods  within these fiscal
years, with early adoption  encouraged.  The Company does not expect SFAS 144 to
have a material impact on its financial statements.

In August 2002, the FASB issued Statement on Financial  Accounting Standards No.
146  ("SFAS  146").  SFAS 146,  "Accounting  for Costs  Associated  with Exit or
Disposal  Activities," is effective for such activities initiated after December
31, 2002. Activities of this type include  restructurings (such as relocation of
a business and fundamental reorganizations of a business itself), which may give
rise to costs such as contract cancellation provisions, employee relocation, and
one-time  termination  costs.  SFAS 146 prohibits  liability  recognition  based
solely on  management's  intent,  and requires that  liabilities  be measured at
estimated fair value.  Management has not determined the effect, in any, of SFAS
146 on the Company's future financial statements.

RECLASSIFICATIONS

Certain  reclassifications  have been made to the fiscal  2001  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 processed to CIT for collection,  CIT will charge 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,  2002  and 2001  were
insignificant.




                                       F-13
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001



NOTE 3 -PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30, 2002:



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         (260,483)
                                               -----------

                                               $    31,011
                                               ===========


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 and 2001, the Company recognized an impairment loss
of $21,762 and $148,879,  respectively,  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 with ABNet 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)  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, 2002 and 2001,
the Company  recognized an  investment  loss in the  accompanying  statements of
operations  from this joint  venture of  approximately  $100,000  and  $169,000,
respectively, based on the Company's equity ownership percentage.

                                       F-14
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 5 - INVESTMENTS IN OVERSEAS JOINT VENTURES (Continued)

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 was
used to purchase software back from the Company). 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  of  47.06%  and  accounts  for this
investment under the equity method.  For the years ended June 30, 2002 and 2001,
the Company  recognized an  investment  loss in the  accompanying  statements of
operations  from this joint  venture of  approximately  $185,000  and  $172,000,
respectively, based on the Company's equity ownership percentage.

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).  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,  2002 and  2001,  the  Company  recognized  an  investment  loss in the
accompanying  statements of operations from this joint venture of  approximately
$116,00 and  $185,000,  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 will be  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, 2002
and 2001, the Company recognized income in the statements of operations from the
amortization  of these  software sales in the amount of  approximately  $333,000
each year.  The  respective  joint  ventures are amortizing the cost of software
over the same three-year  period. As a result,  the total  amortization  expense
recognized by the joint venture companies was approximately $333,000, which is a
portion of the total losses on joint  ventures of  approximately  $873,000  (see
below).

During  fiscal  year 2002,  the company  entered  into an  agreement  with third
parties to form joint  ventures  in  Bangladesh,  Korea and Hong Kong named C-Me
Bangladesh,  C-Me Korea and C-Me Hong Kong, 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  parties.  Profits are first to be  distributed  to the third  parties
until the third parties 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  member.  As of June 30,  2002,  the  joint  ventures  are  fully
operational promoting the Company and the ASAP show, however the operations were
insignificant.


                                       F-15
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001



NOTE 5 - INVESTMENTS IN OVERSEAS JOINT VENTURES (Continued)

As of June 30,  2002,  and for the  years  ended  June 30,  2002 and  2001,  the
investment in respective  joint  ventures are  summarized as follows (which were
audited by other accountants):
<TABLE>
<CAPTION>


                                     C-Me Taiwan        E-SEA          GP.com           Total
-------------------------------------------------------------------------------------------------
<S>                               <C>             <C>             <C>            <C>


Net investment at July 1, 2000      $     (49,573)  $           -   $           -   $     (49,573)

Investment                                200,000         100,000         600,000         900,000
Amortization of negative
   goodwill                               100,000         100,000         133,332         333,332
Equity in loss of joint ventures         (168,768)       (172,221)       (184,569)       (525,558)
                                    -------------   -------------   -------------   -------------
Net investment at June 30, 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
                                    =============   =============   =============   =============
</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, 2002:
<TABLE>
<CAPTION>


                                     C-Me Taiwan        E-SEA          GP.com           Total
-------------------------------------------------------------------------------------------------

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

Current assets                      $       8,492   $      35,995   $   1,202,374   $   1,246,861
                                    -------------   -------------   -------------   -------------
Total assets                        $     175,312   $     230,154   $   1,410,173   $   1,815,639
                                    =============   =============   =============   =============


Current liabilities                 $      52,510   $          25   $      10,716   $      63,251
                                    -------------   -------------   -------------   -------------
Total liabilities                   $      52,510   $          25   $      10,716   $      63,251
                                    =============   =============   =============   =============

Total stockholders' equity          $     122,802   $     230,129   $   1,399,457   $   1,752,388
                                    =============   =============   =============   =============



Sales                               $       6,009   $      25,618   $      21,384   $      53,011
                                    -------------   -------------   -------------   -------------
Cost of sales                       $      51,424   $         370   $           -   $      51,794
                                    =============   =============   =============   =============

Net loss                            $    (250,555)  $    (391,530)  $    (231,405)  $    (873,490)
                                    =============   =============   =============   =============

</TABLE>



                                       F-16
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE  6 - RELATED PARTY NOTE RECEIVABLE

In November  2001, the Company  advanced  $400,000 to a related party for a note
receivable.  The note receivable bears interest at 5% and was due in March 2002.
Subsequent  to June 30, 2002,  the company  collected  all amounts due under the
related party note receivable.

NOTE 7 - CONVERTIBLE NOTE RECEIVABLE

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

NOTE 8 - INCOME TAXES

Income tax expense for the years ended June 30, 2002 and 2001  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:
                                                   2002            2001
                                             --------------   -------------

Computed "expected" tax benefit              $    (742,000)   $ (1,225,000)

Adjustment in income taxes resulting from:
    Valuation allowance                            903,200       1,329,000
    Other                                          (16,400)              -
    State and local income taxes, net of federal  (144,000)       (103,200)
                                             --------------   -------------

                                             $         800    $        800
                                             ==============   =============

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets at June 30, 2002 are presented below:

Deferred tax assets:
    Net operating loss carryforwards                          $  3,045,200
    Stock compensation expense                                   1,240,000
    Other                                                           18,000
                                                              -------------

Total                                                            4,303,200

    Less valuation allowance                                    (4,303,200)
                                                              -------------

    Net deferred tax assets                                   $          -
                                                              =============

The net change in the total  valuation  allowance  for the years  ended June 30,
2002 and 2001 was an increase of $903,200 and $1,329,000, respectively.

                                       F-17
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE 8 - INCOME TAXES (Continued)

As of June 30,  2002,  the  Company  had net  operating  loss  carryforwards  of
approximately  $7,822,000  and  $3,940,000  available to offset  future  taxable
Federal and State  income,  respectively.  The Federal and State carry  forwards
expire in varying amounts through 2003 and 2023, respectively.

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.


NOTE 9 - SHAREHOLDERS' EQUITY

The Company  adopted a cashless  policy that allows the stock option  holders to
exercise  their  options  without  paying any cash.  For the year ended June 30,
2001, the Company  determined that 5,996 shares were incorrectly issued and that
these shares were  cancelled,  accordingly  resulting in a $43,852  reduction in
stock compensation expense.

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).

During  fiscal  2001,  the  Company  received  proceeds  of  $1,475,240,  net of
expenses, related to a private placement that was closed on June 30, 2000.


NOTE 10 - STOCK OPTIONS AND WARRANTS

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.


                                       F-18
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)

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, 2001, the Company granted a total of 353,016 options
to   employees,    directors,   officers,   consultants,   and   outside   sales
representatives.  The  exercise  prices of options  granted  vary and range from
$4.88 to $6.08.  The Company  applies APB Opinion No. 25  "Accounting  for Stock
Issued to Employees"  and related  interpretations  in accounting  for its stock
option  plans.  As  a  result,  the  Company  recognized  total  non-cash  stock
compensation  expense of $619,237 in the  statement of  operations  for the year
ended June 30, 2001.

The Company  recorded  compensation  expense for  previously  issued  options of
$101,097  and  $795,348  in the  fiscal  year  ended  June 30,  2002  and  2001,
respectively.

In December 2001,  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 (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  2004 and are  exercisable  through
December 2011.

Throughout fiscal 2002, the Company,  pursuant to the 2001 plan, granted options
to purchase an  aggregate  of 142,500  shares of  restricted  common  stock,  at
exercise  prices ranging from $0.20 to $0.45 per share (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  2004 and are  exercisable  through
December 2011.

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

                                                          Weighted Average
                                        Stock Options      Exercise Price
                                       ----------------   ----------------

Balance, July 1, 2000                         1,692,807              $4.33

Options granted                                 353,016               5.06
Options adjustment                                5,996               0.40
Options cancelled                              (314,280)              6.96
                                       ----------------   ----------------

Balance, June 30, 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 exercisable at June 30, 2002          1,394,127              $3.62
                                       ================   ================

                                       F-19
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)

The following table summarizes  information about the stock options  outstanding
at June 30, 2002:
<TABLE>
<CAPTION>


                                      Options Outstanding                              Options Exercisable
                        ------------------------------------------------         -------------------------------
<S>                    <C>              <C>                  <C>                  <C>               <C>
                                            Weighted
                                             Average            Weighted                               Weighted
                                            Remaining            Average                                 Average
                                           Contractual          Exercise                               Exercise
  Exercise Price              Number           Life               Price                 Number            Price
-----------------       ----------------------------------------------------------------------------------------

  $0.20 to $0.45              255,000       8.69 years             $0.39                221,242           $0.41
  $3.00 to $3.50              741,500       7.27 years             $3.26                741,500           $3.26
  $4.00 to $8.38              431,385       7.74 years             $5.88                431,385           $5.88
                        ----------------------------------------------------------------------------------------

Total                       1,427,885       7.67 years             $3.54              1,394,127           $3.62
================        ========================================================================================
</TABLE>


The fair value of the stock options granted during the years ended June 30, 2002
and 2001 was $61,375 and $902,088,  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, 2002           June 30, 2001
                                          -------------           -------------

Discount rate - bond yield rate                3.75%                   4.75%

Volatility                                      222%                 107.36%

Expected life                                     3                      10

Expected dividend yield                           -                       -
                                          =============           =============


The Company  applies APB Opinion No. 25 in accounting for its options granted to
employees.  Had the Company  determined the compensation  cost based on the fair
value at the grant date for its stock  options under SFAS No. 123, the Company's
net loss would have been increased to the pro forma amounts indicated below:

                                            June 30,            June 30,
                                              2002                2001
                                          -------------      -------------

Net loss attributable to Common Stock
     - as reported                        $ (2,182,051)      $ (3,604,185)
                                          =============      =============

Net loss attributable to Common Stock
     - pro forma                          $ (2,407,175)      $ (5,088,599)
                                          =============      =============

Net loss per share - as reported          $      (0.29)      $      (0.48)
                                          =============      =============

Net loss per share - as pro forma         $      (0.32)      $      (0.67)
                                          =============      =============

                                       F-20
<PAGE>

                          CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)

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 vendors.  In return,  BCF is free to use the network
designed and  maintained by the Company and will share a certain  portion of the
fee revenue generated by this network with the Company. In addition, the Company
granted a warrant to BCF to allow BCF to purchase  up to 10% of the  outstanding
shares  (maximum of 828,118  shares as of June 30,  2002) of common stock of the
Company on a fully diluted basis, subject to certain conditions and restrictions
as defined in the warrant  agreement.  The common stock,  if issued to BCF, will
have certain registration rights. As of June 30, 2002, the exercise price ranged
from $4.00 to $9.00 per share. The warrants agreement will expire on October 15,
2002.

Information with respect to common stock purchase  warrants issued is summarized
as follows:

                                                             Weighted Average
                                            Warrants          Exercise Price
                                          --------------    -------------------

Balance, July 1, 2000                          1,697,052                  $4.59
No activity                                            -                      -
                                          --------------    -------------------

Balance, June 30, 2001 and 2002                1,697,052                  $4.59
                                          ==============    ===================

Warrants exercisable at June 30, 2002          1,697,052                  $4.59
                                          ==============    ===================


Additional  information  about  outstanding  warrants to purchase the  Company's
common stock at June 30, 2002 is as follows:

                      Warrants Outstanding and Exercisable
               -------------------------------------------------
                                                 Weighted
                                                  Average            Weighted
                                                 Remaining            Average
                                                Contractual          Exercise
        Exercise Price            Number            Life              Price
     ---------------------  -------------------------------------------------

     $4.00                        676,241        0.29 years            $4.00
     $4.01 to $4.878              977,663        2.90 years            $4.74
     $4.879 and over               43,148        0.63 years            $9.83
                            -------------------------------------------------

     Total                      1,697,052        1.27 years            $4.59
     =====================  =================================================




                                       F-21
<PAGE>

                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001


NOTE 11 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASE

The Company leases office space under a non-cancelable operating lease agreement
that will expire on October 31, 2002. The lease agreement will be converted into
a month-to-month  agreement.  Future minimum lease payments under non-cancelable
operating leases as of June 30, 2002 are as follows:

 Years ending June 30,                                      Amount
 ---------------------------                             ---------------
          2003                                               15,000
                                                         ===============


Rent  expense  for the  years  ended  June 30,  2002 and 2001 was  approximately
$57,000 and $74,000, 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.

NOTE 12 - BUSINESS SEGMENTS

Reportable  business  segments  for the years  ended June 30, 2002 (as there was
only one segment in 2001) are as follows:

Net sales from continuing operations:
         Transaction sales                                   $    182,523
         ASAP Show                                                424,271
         Other                                                     16,293
                                                             ------------
                                                             $    623,087
                                                             ============
Operating profit (loss) from continuing operations:
         Transaction sales                                   $   (869,299)
         ASAP Show                                               (531,901)
         Other                                                        794
                                                             ------------
                                                             $ (1,400,406)
                                                             ============
Depreciation and amortization - continuing operations:
         Transaction sales                                   $     44,849
         ASAP Show                                                      -
         Other                                                          -
                                                             ------------
                                                             $     44,849
                                                             ============
Identifiable assets - continuing operations:
         Transaction sales                                   $  2,925,215
         ASAP Show                                                      -
         Other                                                          -
                                                             ------------
                                                             $  2,925,215
                                                             ============


                                       F-22
<PAGE>
                         CYBER MERCHANTS EXCHANGE, INC.
                          Notes to Financial Statements
                   For the Years Ended June 30, 2002 and 2001

NOTE 12 - BUSINESS SEGMENTS (Continued)

Capital expenditures:

     Transaction sales                                       $      4,613
     ASAP Show                                                          -
     Other                                                              -
                                                             ------------
                                                             $      4,613
                                                             ============

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

Two transaction  sales customers  accounted for 55% of net segment sales for the
year ended June 30, 2002.













                                       F-23