SOURCE: China Direct Trading Corp.

August 25, 2006 10:35 ET

China Direct Reports Revenue Increase of 1520%, Revenue Increases 58% Sequentially From Q2 2006 Over Q1 2006

Q2 2006 Revenue of $3.97 Million and Net Income of $374,885 on Delivered Orders

COOPER CITY, FL -- (MARKET WIRE) -- August 25, 2006 -- China Direct Trading Corp. (OTCBB: CHDT) today announced consolidated results for the second quarter of FY2006 ended June 30, 2006, and the filing of its Form 10-Q for that fiscal quarter with the U.S. Securities and Exchange Commission.

FINANCIAL RESULTS: Reported consolidated gross revenues for the quarter ending June 30, 2006, were $3,969,957, an increase of 1520% from the $261,016 in gross revenues reported for the second quarter of FY2005 and a sequential increase of 58% over first quarter FY2006 gross revenues of $2,511,809. The increase in gross revenues is primarily due to growth in power generator sales by Complete Power Solutions, LLC, a 51%-owned China Direct subsidiary.

Total sales orders reached $6,800,000 Q2 FY2006, of which $3.97 million could be recognized under applicable GAAP as second quarter FY2006 gross revenues.

Profitability continued to accelerate as second quarter FY2006 net income rose to $374,885 over sequential first quarter FY2006 net income of $42,718, versus a loss of $(18,097) for the corresponding second quarter of FY2005.

Cash position increased to $873,211 in Q2 2006 versus $9,090 at the end of the 2005 calendar year.

"Our profitability is increasing and our ability to sell, contract and complete power generator installations is accelerating, as evidenced by the rapid increase in completed orders over the second quarter," said Howard Ullman, CEO/President of China Direct. "The higher investment and associated costs in building out our infrastructure in Q1 FY2006 are now paying off and we will continue to strive to drive cost efficiencies to seek increased profits."

INVESTOR TELECONFERENCE: China Direct will host an investor teleconference to discuss second quarter FY2006 results and update investors on current corporate and subsidiary initiatives on Monday, August 28, 2006 at 10:00 AM Eastern Time. To participate in the call, the dial-in number is (319) 632-1100, then enter access code 260372 and push the pound (#) key. A replay of the call will be available for two weeks and will be accessible at (641) 985-5006, access code 260372#. A replay of the call will also be available from the www.chdt.us web site one day following the call.

Balance Sheet and Consolidated Statement of Operations Financial Tables follow:

        CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS


                                               (Unaudited)
                                                 June 30,    December 31,
                                                  2006          2005
                                               ----------    ----------
Assets:

Current assets:
   Cash                                        $  873,211    $    9,090
   Accounts receivable - net                    3,856,521         4,000
   Advances                                         1,200             -
   Inventory                                      659,325        11,760
   Prepaid expense                                 49,134             -
                                               ----------    ----------

     Total Current Assets                       5,439,391        24,850
                                               ----------    ----------

Fixed assets:
   Communications equipment                        12,941             -
   Computer equipment                              29,898         4,965
   Computer software                                6,724             -
   Transportation equipment                       365,303             -
   Machinery and equipment                        103,296             -
   Furniture and fixtures                          43,945             -
   Leasehold improvements                          19,413             -
   Less: Accumulated Depreciation                 (93,506)       (2,132)
                                               ----------    ----------

     Total Fixed Assets                           488,014         2,833
                                               ----------    ----------

Other non-current assets:
   Deposits                                        89,610         1,775
   Goodwill                                     1,567,214             -
                                               ----------    ----------

      Total other non-current assets            1,656,824         1,775
                                               ----------    ----------

         Total assets                          $7,584,229    $   29,458
                                               ==========    ==========


Liabilities and Stockholders' Deficit:

Current Liabilities:
   Accounts payable, trade                    $   763,584   $    35,666
   Accrued expenses                               549,161       496,783
   Customer deposits                            1,970,544        24,891
   Notes payable - current maturities              80,535             -
   Related party payables                          26,011        16,011
                                               ----------    ----------
         Total Current Liabilities              3,389,835       573,351
                                               ----------    ----------

Long-Term Liabilities:
   Notes payable - less current maturities        284,296             -
   Stockholder loans payable                      747,500             -
   Investor loans payable                         710,100             -
                                               ----------    ----------
         Total Long-Term Liabilities            1,741,896             -
                                               ----------    ----------

         Total Liabilities                      5,131,731       573,351
                                               ----------    ----------

Minority Interest                                 741,788             -
                                               ----------    ----------

Stockholders' Deficit:
   Preferred Stock, par value $.001 per share
      Authorized 100,000,000 shares, Issued
       1,265,000 shares at June 30, 2006 and
       8,000 shares at December 31, 2005            1,265             8
   Common Stock, par value $.0001 per share
      Authorized 600,000,000 shares, Issued
       543,122,028 Shares at June 30, 2006
       and December 31, 2005                       54,313        54,313
   Additional paid-in capital                   2,668,408       832,665
   Accumulated deficit                         (1,013,276)   (1,430,879)
                                               ----------    ----------

     Total Stockholders' Deficit                1,710,710      (543,893)
                                               ----------    ----------

     Total Liabilities and
      Stockholders' Deficit                   $ 7,584,229   $    29,458
                                              ===========   ===========



            CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS



                              (Unaudited)               (Unaudited)
                          For the Three Months       For the Six Months
                             Ended June 30,            Ended June 30,
                        ------------------------  ------------------------
                            2006         2005         2006         2005
                        -----------  -----------  -----------  -----------

Revenues                $ 3,969,957  $   261,016  $ 6,481,766  $   465,370
Cost of Sales            (2,160,684)    (155,101)  (4,043,229)    (327,376)
                        -----------  -----------  -----------  -----------
     Gross Profit         1,809,273      105,915    2,438,537      137,994
                        -----------  -----------  -----------  -----------

Operating Expenses:
  Sales and marketing        81,773        4,353      173,559        6,126
  Compensation              738,923       50,000      896,340      100,000
  Professional fees          34,039       36,282       65,907       49,095
  Other General and
   administrative           203,884       33,388      362,968       85,909
                        -----------  -----------  -----------  -----------
     Total Operating
      Expenses            1,058,619      124,023    1,498,774      241,130
                        -----------  -----------  -----------  -----------

Net Operating Income
 (Loss)                     750,654      (18,108)     939,763     (103,136)

Other Income (Expense):
  Interest income             2,150           11        2,150           11
  Interest expense          (26,715)           -      (41,724)        (740)
                        -----------  -----------  -----------  -----------

Net Income (Loss)
 before minority
 interest                   726,089      (18,097)     900,189     (103,865)
Minority interest          (351,204)           -     (482,586)           -
                        -----------  -----------  -----------  -----------

Net Income (Loss)       $   374,885  $   (18,097) $   417,603  $  (103,865)
                        ===========  ===========  ===========  ===========

Weighted Average Shares
 Outstanding            543,122,028  517,232,972  543,122,028  516,348,305
                        ===========  ===========  ===========  ===========

Income (Loss) per
 Common Share           $         -  $         -  $         -  $         -
                        ===========  ===========  ===========  ===========
About China Direct: China Direct (www.chdt.us) is a holding company engaged through its operating subsidiaries in the following business lines: Overseas Building Supply (OBS) is engaged in manufacturing, distribution and logistics of building materials including but not limited to generators, roof tiles, interior doors, and insulation materials. CPS (www.completepower247.com) is a majority-owned subsidiary engaged in turnkey solutions for standby commercial and residential power generation. Souvenir Direct Inc. (SDI) is engaged in product development, manufacturing, distribution, logistics and product placement into mass retail of souvenir and gift items in 29 countries. None of the web site URLs listed in this press release are incorporated into or are part of this press release.

Forward-Looking Statements: This press release, including any financial information and projections, contain "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on China Direct's and its subsidiaries' managements' current expectations and assumptions, and involve risks and uncertainties. Such expectations and assumptions may prove to be faulty or incorrect and actual results may differ significantly, materially from those anticipated results set forth in such statements. No forward-looking statement is or can be guaranteed. Current revenues and revenue growth is not a reliable indicator of future financial results and should not be relied upon by investors as such an indicator. The sale of power generators can be affected by a number of factors that are beyond the control of China Direct or CPS, including seasonal sales cycles, availability of affordable inventory financing, predatory pricing by competitors and weather conditions. China Direct and CPS undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements in this press release and risks associated with any investment in China Direct, which is a "penny stock" company (and as such is deemed a "highly risky investment") should be evaluated together with the many uncertainties that affect our business, particularly those stated in the cautionary statements and risk factors in current and future China Direct SEC Filings, which statements we hereby incorporate by reference herein. Such risks include, but are not limited to, foreign, national, state and local government regulation, actions or initiatives, Changes in general economic conditions, consumer spending habits, or the sales environment which, in each case, could reduce demand for our products; Risks as a distributor of products produced by other companies; The risk our outstanding litigation could result in settlements or judgments which are material to us; Dilution from any potential issuance of common or convertible preferred stock or convertible debt in connection with financings or acquisition activities; and Risks that we may not realize or anticipate from the expected increased sales and profits and other benefits from CPC.

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