On September 24, 2006 our wholly-owned subsidiary, CDI China, Inc. (“CDI China”), entered into a stock acquisition agreement with Shanghai Lang Chemical Company, Limited, a Chinese limited liability company (“Lang”), and its two stockholders Jingdong Chen and Qian Zhu. Under the terms of the stock exchange agreement, CDI China will acquire 51% equity ownership of Lang in exchange for an initial capital infusion of US$375,000 and a follow-up capital infusion of US$326,250 to be made on or before June 30, 2007. The agreement shall be effective as of October 1, 2006 and will close on or before October 31, 2006. Messrs. Chen and Zhu will each retain a 24.5% equity interest in Lang, will remain as officers and will enter into employment agreements with CDI Shanghai Company, Limited, a wholly owned subsidiary of CDI China, Inc., on or before October 31, 2006. The purchase price was determined based on arm’s length negotiations and no finder’s fees or commissions will be paid in connection with the acquisition. The cash infusion will be derived by the Company from its working capital.

Shanghai Lang Chemical Company, Limited is a distributor of finely processed industrial grade synthetic chemical products. Shanghai Lang Chemical Company, Limited specializes in the distribution of industrial grade synthetic chemicals within China. All of the operations are located within China. Products distributed by Shanghai Lang Chemical Company, Limited are employed as a raw material in the production of finished products such as: paint, glue, plastics, textiles, leather goods as well as various medical products. Shanghai Lang Chemical Company, Limited operates a distribution network which covers the Eastern section of China, specifically the Jiangsu, Zhejiang, and Shanghai provinces. Shanghai Lang Chemical Company, Limited is located in the Shanghai region of the Yangtze River delta. Shanghai Lang Chemical Company, Limited is owned equally amongst two shareholders, Mr. Chen Jingdong and Ms. Zhu Qian. Mr. Chen Jingdong and Ms. Zhu Qian are husband and wife. Mr. Chen Jingdong serves as the CEO, while Ms. Zhu Qian acts as the CFO. Mr. Chen and Ms. Zhu will enter into employment agreements with CDI Shanghai Company, Limited to remain as officers of Shanghai Lang Chemical Company, Limited.

On or before October 31, 2006, Shanghai Lang Chemical Company, Limited shall deliver to China Direct, Inc., the financial statements of Shanghai Lang Chemical Company, Limited, including the consolidated statement of operations, consolidated statement of cash flow, and the consolidated balance sheet as well as the shareholders’ equity of Shanghai Lang Chemical Company, Limited at December 31, 2005 which reflect revenues of $31,740,000, and net assets of $767,197.

On or before October 31, 2006, Jingdong Chen and Qian Zhu will enter into employment agreements with CDI Shanghai Company, Limited, a wholly owned subsidiary of CDI China, Inc.

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