UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(Mark One)
       [X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             For the quarterly period ended:         March 31, 2005
                                            -----------------------------------

       [  ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                                                   EXCHANGE ACT

    For the transition period from                     to
                                  --------------------    ----------------------
                    Commission file number                        000-28831
                                            -----------------------------------

                        China Direct Trading Corporation
 -------------------------------------------------------------------------------
                     (Exact name of small business issuer as
                                             specified in its charter)

                     Florida                                    84-1047159
--------------------------------------------------------------------------------
             (State or other jurisdiction                     (IRS Employer
         of incorporation or organization)                 Identification No.)

               12535 Orange Drive, Suite 613, Davie, Florida 33330
 ------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (954) 474-0224
                            Issuer's telephone number


                (Former name,  former address and former fiscal year, if changed
since last report.)


                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDING DURING THE PRECEDING FIVE YEARS

         Check whether the registrant  filed all documents and reports  required
to be  filed  by  Section  12,  13 or  15(d)  of  the  Exchange  Act  after  the
distribution of securities under a plan confirmed by a court. Yes ----- No -----



<PAGE>




                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practical date: March 31, 2005  Approximately
515,453,800 shares

         Transitional Small Business Disclosure Format (check one).
Yes      ;  No   X
    ----       -----








































<PAGE>



                                                      PART I

ITEM 1.  FINANCIAL STATEMENTS

                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                (Unaudited)
                                                                                 March 31,          December 31,
                                                                                    2005                2004
                                                                             ------------------  ------------------
Assets:

Current assets:
<S>                                                                          <C>                 <C>
   Cash                                                                      $           38,365  $           77,503
   Advances                                                                                   -               3,061
   Prepaid expense                                                                            -               9,000
                                                                             ------------------  ------------------

     Total Current Assets                                                                38,365              89,564
                                                                             ------------------  ------------------

Fixed assets:
   Computers                                                                              2,688               2,688
   Less: Accumulated Depreciation                                                        (1,120)               (897)
                                                                             ------------------  ------------------

     Total Fixed Assets                                                                   1,568               1,791
                                                                             ------------------  ------------------

Other non-current assets:
   Deposits                                                                               1,713               1,713
                                                                             ------------------  ------------------

      Total other non-current assets                                                      1,713               1,713
                                                                             ------------------  ------------------

         Total assets                                                        $           41,646  $           93,068
                                                                             ==================  ==================
</TABLE>















<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<TABLE>
<CAPTION>



                                                                                (Unaudited)
                                                                                 March 31,          December 31,
                                                                                    2005                2004
                                                                             ------------------  ------------------
Liabilities and Stockholders' Deficit:

Current liabilities:
<S>                                                                          <C>                 <C>
   Accounts payable, trade                                                   $            8,469  $           20,595
   Accrued expenses                                                                     166,987             170,516
   Customer deposits                                                                     83,680              83,680
   Accrued compensation                                                                 250,000             200,000
   Related party payables                                                               315,000             315,000
                                                                             ------------------  ------------------

         Total Liabilities                                                              824,136             789,791
                                                                             ------------------  ------------------

Stockholders' Deficit:
   Preferred Stock,  par value $.001 per share  Authorized  100,000,000  shares,
      Issued 8,100 shares at March 31, 2005 and
      December 31, 2004                                                                       8                   8
   Common Stock, par value $.0001 per share
      Authorized 600,000,000 shares,
      Issued 515,453,800 Shares at March 31, 2005 and
      December 31, 2004                                                                  51,546              51,546
   Additional paid-in capital                                                            93,432              93,432
   Accumulated deficit                                                                 (927,476)           (841,708)
                                                                             ------------------  ------------------

     Total Stockholders' Deficit                                                       (782,490)           (696,722)
                                                                             ------------------  ------------------

     Total Liabilities and
       Stockholders' Deficit                                                 $           41,646  $           93,069
                                                                             ==================  ==================
</TABLE>









                             See accompanying notes.


<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>




                                                                                     For the Three Months
                                                                                       Ended March 31,
                                                                            --------------------------------------
                                                                                   2005                2004
                                                                            ------------------  ------------------

<S>                                                                         <C>                 <C>
Revenues                                                                    $          204,354  $          273,432
Cost of Sales                                                                         (172,275)           (142,140)
                                                                            ------------------  ------------------

        Gross Profit                                                                    32,079             131,292
                                                                            ------------------  ------------------

Operating Expenses:
  Sales and marketing                                                                    1,773               4,815
  Compensation                                                                          50,000                   -
  Other General and administrative                                                      65,334              47,344
                                                                            ------------------  ------------------

       Total Operating Expenses                                                        117,107              52,159
                                                                            ------------------  ------------------

Net Operating Income (Loss)                                                            (85,028)             79,133

Other Income (Expense):
  Interest expense                                                                        (740)               (820)
                                                                            ------------------  ------------------

Net Income (Loss)                                                           $          (85,768) $           78,313
                                                                            ==================  ==================

Weighted Average
Shares Outstanding                                                                 515,453,800         499,350,300
                                                                            ==================  ==================

Income (Loss) per Common Share                                              $                -  $                -
                                                                            ==================  ==================
</TABLE>











                             See accompanying notes.



<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>



                                                                              For the Three Months
                                                                                 Ended March 31,
                                                                      -------------------------------------
                                                                            2005                2004
                                                                      -----------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Continuing operations:
<S>                                                                   <C>                <C>
   Net Income (Loss)                                                  $         (85,768) $           78,313
Adjustments necessary to reconcile net loss
   to net cash used in operating activities:
      Stock issued for expenses                                                   9,000                   -
      Depreciation                                                                  224                 224
     (Increase) decrease in advances                                              3,061                   -
      Increase (decrease) in accounts payable                                   (12,126)             (3,434)
      Increase (decrease) in accrued compensation                                50,000                   -
      Increase (decrease) in accrued expenses                                    (3,529)                  -
      Increase (decrease) in deposits from customers                                  -                (895)
                                                                      -----------------  ------------------

  Net Cash Used in continuing operations                                        (39,138)             74,208
                                                                      -----------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of fixed assets                                                              -              (2,688)
                                                                      -----------------  ------------------
Net cash provided by (used) investing activities                                      -              (2,688)
                                                                      -----------------  ------------------

CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of stock                                                           -                   -
Shareholder receivables                                                               -              (6,111)
Proceeds from shareholder payables                                                    -                   -
                                                                      -----------------  ------------------
Net Cash Provided by Financing Activities                                             -              (6,111)
                                                                      -----------------  ------------------

Net (Decrease) Increase in
  Cash and Cash Equivalents                                                     (39,138)             65,409
Cash and Cash Equivalents
  at Beginning of Period                                                         77,503              24,841
                                                                      -----------------  ------------------
Cash and Cash Equivalents
  at End of Period                                                    $          38,365  $           90,250
                                                                      =================  ==================
</TABLE>








<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

<TABLE>
<CAPTION>




                                                                            For the Three Months
                                                                              Ended March 31,
                                                                   --------------------------------------
                                                                          2005                2004
                                                                   ------------------  ------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
<S>                                                                <C>                 <C>
  Interest                                                         $              740  $              820
  Franchise and income taxes                                       $                -  $                -

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
</TABLE>





























                             See accompanying notes.



<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         This  summary  of   accounting   policies  for  China  Direct   Trading
Corporation  and  Subsidiaries  is  presented  to  assist in  understanding  the
Company's  financial  statements.  The accounting  policies conform to generally
accepted  accounting  principles  and  have  been  consistently  applied  in the
preparation of the financial statements.

Interim Reporting

         The  unaudited  financial  statements  as of March 31, 2005 and for the
three month  periods  ended March 31, 2005 and 2004  reflect,  in the opinion of
management,  all adjustments  (which include only normal recurring  adjustments)
necessary to fairly state the financial  position and results of operations  for
the three  months.  Operating  results for interim  periods are not  necessarily
indicative of the results which can be expected for full years.

Organization and Basis of Presentation

         CBQ, Inc., (formerly Freedom Funding, Inc.) a Colorado corporation, was
incorporated  September 18, 1986,  under the laws of the State of Delaware,  and
changed its situs to Colorado in 1989.

         Souvenir  Direct,  Inc. was incorporated on September 9, 2002 under the
laws of the State of Florida.

         On December 1, 2003, China Direct Trading Corporation  acquired 100% of
the outstanding common stock of Souvenir Direct, Inc. in a reverse  acquisition.
At this time, a new  reporting  entity was  created.  Souvenir  Direct,  Inc. is
considered the reporting entity for financial reporting purposes.

         In May 2004,  the  Company  changed  its name to China  Direct  Trading
Corporation  and  reincorporated  from the  State of  Colorado  to the  State of
Florida.

Nature of Business

         The  Company  is engaged  in the  business  of  marketing  and  selling
novelty,   gift,  and  promotional  items  in  North  America.   The  items  are
manufactured  in the  People's  Republic of China by  third-party  manufacturing
companies.

Cash and Cash Equivalents

         For purposes of the statement of cash flows, the Company  considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.





<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Pervasiveness of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  required  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 period. Actual results could differ from those estimates.

Principles of Consolidation

         The consolidated  financial statements for the three months ended March
31, 2005 include the accounts of the parent entity and its subsidiaries Souvenir
Direct, Inc. and China Pathfinder Fund, LLC.

         The  results  of  subsidiaries  acquired  or sold  during  the year are
consolidated  from their effective dates of acquisition  through their effective
dates of disposition.

         All  significant  intercompany  balances  and  transactions  have  been
eliminated.

Net Income (Loss) Per Common Share

         Basic  earnings per common share were  computed by dividing net loss by
the weighted  average  number of shares of common stock  outstanding  during the
year.  Diluted  loss per common  share for the three months ended March 31, 2005
and 2004 are not presented as it would be anti- dilutive.

Concentration of Credit Risk

         The  Company has no  significant  off-balance-sheet  concentrations  of
credit  risk such as foreign  exchange  contracts,  options  contracts  or other
foreign hedging arrangements.

Reclassifications

         Certain   reclassifications  have  been  made  in  the  2004  financial
statements to conform with the 2005 presentation.

Major Suppliers

         The Company's major  suppliers are from the People's  Republic of China
and to a lesser extent a variety of Pacific Rim countries. The Company relies on
30 manufacturing  concerns in China for its products.  The loss of these Chinese
manufacturing sources would adversely impact on the business of the Company.


<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Major Customers

         At March 31, 2005, the Company receives  approximately 36% of its gross
revenues  from  its top  three  accounts.  The  loss of  these  customers  would
adversely impact the business of the Company.

Revenue Recognition

         Sales  revenue is  recognized  upon the  shipment of  merchandise  from
suppliers to customers.  Allowances for sales returns, rebates and discounts are
recorded  as a  component  on  net  sales  in  the  period  the  allowances  are
recognized.

Advertising

         Advertising  costs are  expensed as incurred.  Advertising  expense was
$1,773  and  $4,815  for the  three  months  ended  March  31,  2005  and  2004,
respectively.

Income Taxes

         The Company  accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No.109 requires recognition of deferred
income  tax  assets  and   liabilities   for  the  expected  future  income  tax
consequences,  based on enacted tax laws, of temporary  differences  between the
financial reporting and tax bases of assets and liabilities.

NOTE 2 - LEASES

         In September  2004, the Company  entered into a new lease agreement for
approximately 1,800 square feet of office space with Flamingo Commons,  LLC. The
lease  requires  monthly  lease  payments  of  approximately   $2,175  beginning
September 1, 2004. The lease expires in August 2005. The office space is used as
the  corporate  headquarters.  It is located at 12535 Orange  Drive,  Suite 613,
Davie, Florida 33330.

         The Company also rents a storage  facility on a  month-to-month  basis.
Monthly rentals for the storage facility are approximately $150.

         Rental expense under these leases was  approximately  $8,000 and $4,000
for the three months ended March 31, 2005 and 2004, respectively.







<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - LEASES (continued)

         The minimum  future lease payments under these leases for the next five
years are:


          Year Ended December 31,
-------------------------------------------
         2005                                             $       17,400
         2006                                                          -
         2007                                                          -
         2008                                                          -
         2009                                                          -
                                                          --------------
         Total minimum future lease payments              $       17,400
                                                          ==============

NOTE 3 - COMMITMENTS

         On December 1, 2003, the Company  entered into an employment  agreement
with Howard  Ullman,  the  Company's  President and CEO that provides for annual
compensation of $200,000.

NOTE 4 - STOCK TRANSACTIONS

Common Stock

         On September 9, 2002, the Company issued 100 shares of common stock for
$2,774 of start- up expenses.

         On December 1, 2003,  the Company  issued  97,000,000  shares of common
stock to acquire Souvenir Direct, Inc. in a reverse acquisition.  The 100 shares
that  were  previously  issued  were  retroactively   adjusted  to  reflect  the
equivalent  number of shares  that were  issued in  connection  with the reverse
acquisition.  The acquisition was recorded by a credit to common stock of $9,600
and a debit to paid-in  capital of $2,674 and a debit to  retained  earnings  of
$6,926.  Also on December 1, 2003,  an additional  414,628,300  shares of common
stock were issued to the previous  owners of CBQ,  Inc. All  references to stock
reflect the retroactive adjustment to the shares.

         In April  2004,  440,000  shares of common  stock were  returned to the
treasury and cancelled.

         In May 2004,  the Company issued  1,500,000  shares of common stock for
services valued at $27,000.

         In June 2004, the Company issued  2,000,000  shares of common stock for
services  valued at $36,000.  As of December  31,  2004,  expense of $27,000 and
prepaid expense of $9,000 was recorded.

         In June 2004,  the Company  issued  200,000  shares of common stock for
services valued at $3,600.


<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - STOCK TRANSACTIONS (continued)

         In July 2004,  the Company  issued  138,000  shares of common stock for
services valued at $5,520.

         In September  2004,  the Company  issued 240,000 shares of common stock
for services valued at $7,200.

         In November 2004, the Company issued 187,500 shares of common stock for
services valued at $9,375.

Preferred Stock

         In February 2004, the Company sold 1,000 shares of preferred  stock for
cash of $5,000. In June 2004, the Company issued 7,100 shares of preferred stock
for services  valued at $128.  The preferred  shares are  convertible  to common
shares at a  conversion  ratio of 1,000 shares of common stock for each share of
preferred stock.

Warrants

         The Company has issued stock warrants to its officers and directors for
a total of 5,975,000  shares of the Company's  common stock. The warrants expire
between November 11, 2011 and July 20, 2014. The warrants have an exercise price
of $.03 to $.05.

         The Company  issued a stock  warrant to each of two former  officers of
the  Company  in  December  2003 for a total of 35,000  shares of the  Company's
common stock.  Each of the stock warrants expires on July 20, 2014,and  entitles
each former officer to purchase 10,000 and 25,000 shares,  respectively,  of the
Company's common stock at an exercise price of $0.05.

         The Company has also issued a stock  warrant for  50,000,000  shares of
common stock to Dutchess Private Equities Fund, II, L.P.  ("Dutchess"),  as part
of an  investment  agreement  between  Dutchess and the Company.  As part of the
agreement,  Dutchess  will invest up to  $2,500,000  to purchase  the  Company's
common stock. The warrant will expire August 3, 2014.

NOTE 5 - RELATED PARTY PAYABLES

         On September  1, 2004,  China  Pathfinder  Fund,  LLC., a  wholly-owned
subsidiary of the Company  received  loans of $15,000 from  shareholders  of the
Company.  The loans  carry an  interest  rate of 5% per annum and are payable in
twelve equal monthly  installments with the first installment due and payable on
January 31, 2005.

         During 2003 and 2004, a former  officer of the Company paid $300,000 to
settle a previously  filed  lawsuit on behalf of the Company.  This $300,000 has
been included in related party payables at March 31, 2005 and December 31, 2004.


<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - INCOME TAXES

         As  of  December  31,  2004,  the  Company  had a  net  operating  loss
carryforward for income tax reporting  purposes of  approximately  $455,000 that
may be offset against future taxable income through 2024. Current tax laws limit
the amount of loss  available to be offset  against future taxable income when a
substantial  change in  ownership  occurs.  Therefore,  the amount  available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the  carryforwards  will expire  unused.  Accordingly,  the potential tax
benefits of the loss  carryforwards  are offset by a valuation  allowance of the
same amount.

NOTE 7 - LEGAL SETTLEMENTS

         In June 2001,  ITC/INFO Tech  ("Claimant")  obtained a default award of
$79,000  against the Company.  The award was based on  non-payment  for computer
goods shipped by ITC to two subsidiaries of the Company. The Company has offered
to settle the award for shares of restricted stock, but the Claimant has refused
to accept such an offer to date.  The Claimant has made no effort to enforce its
award since June 2001.  As of March 31, 2005 and December  31,  2004,  the award
amount has been included in the accrued expenses of the Company.

NOTE 8 - CONTINGENCIES

         Celeste Trust Reg.,  Esquire Trade,  et al. v. CBQ, Inc. (Case# 03 Civ.
9650 RMB; US District Court, SDNY, 12/4/2003). A lawsuit filed against CBQ, Inc.
by three  plaintiffs on or about December 4, 2003, but which the Company did not
receive  notice of until  the week of  February  18,  2004 or  thereabouts.  The
plaintiffs  purchased  debentures  issued by Socrates  Technologies  Corporation
(STC), a public  Delaware  corporation in 2000.  When the Company  purchased the
assets of two STC  subsidiaries  in March 2001, the  plaintiffs  allege that the
Company  promised to issue to the plaintiffs and others the  consideration  that
was to be  paid  to STC  for  the  acquired  assets  and  to so do in  order  to
compensate the plaintiffs for their investment in the STC debentures, which were
apparently  in default at that time.  The total  consideration  paid for the STC
subsidiaries'  assets were 7.65  million  shares of Company  Common  Stock and a
Promissory Note made by CBQ, Inc. for $700,000  principal amount. The Company is
currently  contesting  the  lawsuit.  On April 15,  2004,  the Court  denied the
plaintiffs'  motion for  default  judgment  and set the case for  discovery  and
trial.

         On January 25, 2005, the U.S.  District Court for the Southern District
of New York dismissed without prejudice the lawsuit against China Direct Trading
Corporation  in the  previously-  reported civil case styled CELESTE TRUST REG.,
ESQUIRE TRADE,  ET AL. V. CBQ, INC.  (Case# 03 Civ. 9650 RMB; US District Court,
Southern  District  for New York,  12/4/2003).  The lawsuit was  dismissed  in a
response to China Direct Trading Corporation's motion to dismiss. The Plaintiffs
can  refile the  lawsuit if they a  complaint  on or before  March 1, 2005.  The
Plaintiffs  have filed an amended  complaint with the Court on or about February
24, 2005.




<PAGE>



                CHINA DIRECT TRADING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - CONTINGENCIES (continued)

         As  reported  previously,  the  Company  has  received  two claims from
certain  former  shareholders  of  Cyberquest,   Inc.  that  they  hold  or  own
approximately  70,000  shares of a class of the Company's  redeemable  preferred
stock  that  was  issued  in  the  Company's  1998  acquisition  of  Cyberquest.
Cyberquest ceased  operations in 2000-2001 period.  The Company has investigated
these claims and has not been able to date to substantiate  any of the claims to
date  and the  claimants  have  not  pursued  their  claims  beyond  an  initial
communication asserting ownership of these shares of serial preferred stock.

NOTE 9 - SUBSIDIARY

         In February  2004,  the Company  established  a new  subsidiary,  China
Pathfinder Fund, LLC, a Florida limited liability  company.  The purpose of this
new   subsidiary  is  to  pursue  the  business  of  acting  as  a  funding  and
merger-and-acquisition agent in the United States and China.

NOTE 10 - ACQUISITION

         On March 18, 2005,  the Company  entered into an agreement  whereby the
Company will acquire 40% of the outstanding  shares of Beijing Hua Wei Furniture
Manufacture  Co.,  Ltd.,  ("HWFM"),  a company  organized  under the laws of the
People's  Republic  of China.  The Company  will issue  common  stock  valued at
$1,325,000 at closing to acquire its 40% interest in HWFM


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL  - This  discussion  should  be read in  conjunction  with  Management's
Discussion and Analysis of Financial  Condition and Results of Operations in the
Company's annual report on Form 10-KSB for the year ended December 31, 2004.

PLAN OF  OPERATIONS.  The  Company's  plan of operations is to: (a) expand SDI's
existing  gift,   souvenir  and  promotional   product  line  and  expand  SDI's
geographical  markets by increased  marketing  of SDI at U.S. and  International
gift,  souvenir  and/or  promotional  product  trade  shows  and more  extensive
face-to-face marketing of SDI to targeted U.S. corporate accounts; (b) establish
CPF's business development business by more extensive  face-to-face marketing of
potential  customers in China by CPF's new Beijing office; and (c) establish CPF
as  a  second  trading  company  operation  that  trades  in  non-SDI  products,
especially  trading  Chinese  commodities  and  manufactured  goods  in the U.S.
through  sales to  wholesalers  and  distributors  as well as sales to end- user
customers.  The Company is seeking to  accomplish  its expansion of its business
lines by internal growth through enhanced,  expanded marketing and sales efforts
and  diversification  of product lines, and by acquiring other companies through
stock-for-stock exchanges.

         The  Company  may  incur   significant   post-merger   or   acquisition
registration costs in the event management wishes to register a portion of their
shares for subsequent sale. The Company


<PAGE>



will also incur  significant  legal and accounting  costs in connection with the
acquisition including the costs of preparing post- effective  amendments,  Forms
8-K, agreements and related reports and documents.

         While the Company believes that SDI will be able to generate sufficient
cash flow to pay for SDI's and the  Company's  direct  overhead  costs and, with
respect to SDI, its internal  planned  growth in fiscal year 2005,  SDI does not
generate sufficient cash flow at this time to fund an acquisition  program,  and
funding of the proposed  enhanced and expanded  marketing  and sales efforts for
SDI and CPF. The Company will not have  sufficient  funds  (unless it is able to
raise funds in a private  placement or in  connection  with an  acquisition)  to
undertake any significant business development, or extensive marketing, in terms
of scope of campaign  and  geographical  reach,  of new  products.  Accordingly,
following the acquisition,  the Company will, in all likelihood,  be required to
either seek debt or equity  financing or obtain funding from third  parties,  in
exchange for which the Company may be required to give up a substantial  portion
of its  interest in the  acquired  product or to issue large number of shares of
its capital stock. There is no assurance that the Company will be able either to
obtain  additional  financing or interest third parties in providing funding for
the further development, marketing and manufacturing of any products acquired.

RESULTS OF  OPERATIONS - For the three months ended March 31, 2005,  the Company
had a net loss from operations of  approximately  $86,000.  For the three months
ended March 31, 2004, the Company had net income of approximately $78,000.

Total Revenues - For the three months ended March 31, 2005 and 2004, the Company
had total sales of  approximately  $204,000  and $273,000  respectively,  for an
decrease of approximately  $69,000. The decrease in revenues was mainly due to a
one-time order for $90,000 during the three months ended March 31, 2004.

Costs and  Expenses - For the three  months  ended March 31, 2005 and 2004,  the
Company had cost of sales of approximately $172,000 and $142,000,  respectively.
As a percentage of sales, cost of sales increased from approximately 52% for the
three  months  ended March 31, 2004 to  approximately  84% for the three  months
ended March 31,  2005.  The  increase in the cost of sales for the three  months
ended  March 31,  2005 as compared to the same period in 2004 is due to advanced
payments  made by the  Company  to  factories  for  manufacturing.  General  and
administrative  expenses increased  approximately  $68,000, from $47,344 for the
three  months  ended March 31, 2004 to $115,334 for the three months ended March
31,  2005.  This  increase is  attributable  primarily to an increase in officer
compensation as well as an increase in legal and professional  fees. The cost of
rent and other  general and  administrative  costs also  increased for the three
months  ended March 31, 2005 as  compared  to the three  months  ended March 31,
2004.

LIQUIDITY  AND CAPITAL  RESERVES.  Historically,  the Company has not  generated
enough cash flow from  operations  to cover its  overhead  costs and the cost of
growth.  The  inadequacy  of cash  flow  and the  inability  of the  Company  to
consistently obtain funding and ongoing funding on commercially reasonable terms
have  undermined  the former  business  operations of the Company and forced the
Company  to obtain  funding  from  management  and  through  the sale of Company
securities.


<PAGE>



         As a small  business  and a  penny  stock  company,  the  Company  will
continue to face  difficulty  in obtaining  financing  or funding on  reasonable
commercial  terms. The Company expects future  development and expansion will be
financed  through cash flow from operations and other forms of financing such as
the sale of  additional  equity and debt  securities,  capital  leases and other
credit facilities. There are no assurances that such financing will be available
on terms  acceptable or favorable to the Company.  Further,  the increase in the
number of shares of common stock in the public markets may reduce the ability or
appeal of the Company to future sources of possible financing or funding.

GOVERNMENT REGULATIONS.  The Company is subject to all pertinent Federal, State,
and Local laws  governing its business.  The Company is subject to licensing and
regulation by a number of  authorities in its State or  municipality.  These may
include health, safety, and fire regulations.

IMPACT OF INFLATION.  To date, the Company has not  experienced  any significant
effect  from  inflation.  The  Company's  major  expenses  have been the cost of
marketing its product lines to customers in North America.  That effort involves
mostly Mr.  Ullman  traveling  to make  direct  marketing  and sales  pitches to
customers  and  potential  customers  as well as  showing  the SDI  products  at
industry  trade shows  around North  America and visiting  China to maintain and
expand SDI's  distribution and  manufacturing  relationships  and channels.  The
Company  generally has been able to meet increase in costs by raising  prices of
its products.

COUNTRY RISKS. Almost all of the Company's contract manufacturing operations and
sources of  products  are located in China.  As such,  the Company is subject to
significant  risks not  typically  faced by companies  operating in or obtaining
products from North America and Western  Europe.  Political,  economic and trade
conflicts between the United States and China,  including possible conflict over
North Korea's  nuclear  weapons  program or the  independence  of Taiwan,  could
severely  hinder the ability of the Company to obtain products and fill customer
orders  from the  Company's  current  Chinese  manufacturing  sources.  Further,
Chinese commercial law is still evolving to accommodate increasing capitalism in
Chinese society,  especially in terms of commercial  relationships  and dealings
with foreign  companies,  and can be  unpredictable in application or principal.
The same unpredictability exists with respect to the central Chinese government,
which can unilaterally and without prior warning impose new legal,  economic and
commercial  laws,  policies and  procedures.  This  element of  unpredictability
heightens the risk of doing business in China.

         China is also under  international  pressure to value its currency in a
manner  that would  increase  the value of Chinese  currency in respect of other
world  currencies  and thereby  increase the cost of Chinese  goods in the world
market.  The Company does not believe that such  revaluation of Chinese currency
would  adversely  impact  its  business  because of the  low-cost  nature of the
Company's  products and the fact that U.S. dollars is the currency of use in all
of the Company's commercial transactions.

ITEM 3.  CONTROLS AND PROCEDURES

         The Company's Chief Executive  Officer and Chief Financial  Officer are
responsible for


<PAGE>



establishing and maintaining disclosure controls and procedures for the Company.

         (a) Evaluation of Disclosure Controls and Procedures

         As of the end of the period covered by this report, the Company carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's management, including the Company's President, of the effectiveness of
the design and operation of the  Company's  disclosure  controls and  procedures
pursuant to Rule 13a-15 under the  Securities  Exchange Act of 1934,  as amended
(the  "Exchange  Act").  Based  upon the  evaluation,  the  Company's  President
concluded that, as of the end of the period, the Company's  disclosure  controls
and  procedures  were effective in timely  alerting him to material  information
relating to the Company  required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.

         (b) Changes in Internal Controls

         Based on his evaluation as of March 31, 2005, there were no significant
changes in the Company's  internal  controls over financial  reporting or in any
other areas that could  significantly  affect the  Company's  internal  controls
subsequent to the date of his most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On January 25, 2005, the U.S.  District Court for the Southern District
of New York dismissed without prejudice the lawsuit against China Direct Trading
Corporation  in the  previously-  reported civil case styled CELESTE TRUST REG.,
ESQUIRE TRADE,  ET AL. V. CBQ, INC.  (Case# 03 Civ. 9650 RMB; US District Court,
Southern  District  for New York,  12/4/2003).  The lawsuit was  dismissed  in a
response to China Direct Trading Corporation's motion to dismiss. The Plaintiffs
can  refile the  lawsuit if they a  complaint  on or before  March 1, 2005.  The
Plaintiffs  filed an amended  complaint  with the Court on or about February 24,
2005.  While the  Company  currently  intends  to  defend  against  the  Amended
Complaint,  and without admitting any liability in the matter,  the Company will
also explore settlement of the litigation in order to avoid any further drain by
this federal lawsuit on the Company's resources.

         As  reported  previously,  the  Company  has  received  two claims from
certain  former  shareholders  of  Cyberquest,   Inc.  that  they  hold  or  own
approximately  70,000  shares of a class of the Company's  redeemable  preferred
stock  that  was  issued  in  the  Company's  1998  acquisition  of  Cyberquest.
Cyberquest ceased  operations in 2000-2001 period.  The Company has investigated
these claims and has not been able to date to substantiate  any of the claims to
date  and the  claimants  have  not  pursued  their  claims  beyond  an  initial
communication asserting ownership of these shares of serial preferred stock.

         The Company is a defendant to another  lawsuit  concerning a trade show
contract,  but the  Company  does not believe  that this  lawsuit is material in
respect of potential liability of the Company. The Company intends to vigorously
defend itself in this lawsuit.


<PAGE>




         No director, officer or affiliate of the Company, or owner of record of
more than five percent (5%) of the  securities of the Company,  or any associate
of any such director, officer or security holder is a party adverse to us or has
a material interest adverse to us in reference to pending litigation.

         We are not  currently  a party to any other legal  proceedings  that we
believe  will have a  material  adverse  effect on our  financial  condition  or
results of operations.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None/Not Applicable.

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

None/Not Applicable.

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

3.1      Articles of Incorporation of the Company *

2.1.1    Articles  of  Incorporation   of  China  Direct  Trading   Company,   a
         wholly-owned subsidiary of the Company **

2.2      By-laws of the Company***

3.2.1    By-Laws of China Direct Trading Corporation,  a wholly owned subsidiary
         of the Company ****

10.1     Investment Agreement, dated August 5, 2004, by the Company and Dutchess
         Private Equities Fund, II, LP++

10.2     Registration Rights Agreement, dated August 5, 2004, by the Company and
         Dutchess Private Equities Fund, II, LP +++

14       Code of Ethics, dated November 21, 2003, ++++

31       Certification  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002.+



<PAGE>



32       Certification  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002.+ ---------------

*        Incorporated  by  reference  to Annex C to the  Special  Meeting  Proxy
         Statement,   dated  April  15,  2004,  filed  by  China  Direct Trading
         Corporation with the Commission on April 20, 2004.

**       Incorporated  by  reference  to Annex G to the  Special  Meeting  Proxy
         Statement,   dated  April  15,  2004,  filed  by  China  Direct Trading
         Corporation with the Commission on April 20, 2004.

***      Incorporated   by  reference  to  Annex  D  the  Specia  Meeting  Proxy
         Statement,   dated  April  15,  2004,  filed  by  China  Direct Trading
         Corporation with the Commission on April 20, 2004.

****     Incorporated   by  reference  to  Annex  H  the  Specia  Meeting  Proxy
         Statement,  dated  April  15,  2004,  filed  by  China  Direct  Trading
         Corporation with the Commission on April 20, 2004.

+        Filed Herein

++       Incorporated by reference to Exhibit 10.1 to the Form 8- Report,  dated
         August 5, 2004, as filed by China Direct Trading  Corporation on August
         10, 2004

+++      Incorporated by reference to Exhibit 10.2 to the Form 8- Report,  dated
         August 5, 2004, as filed by China Direct Trading  Corporation on August
         10, 2004

++++     Incorporated by reference to Exhibit 14 to the Company' Form 10-KSB for
         the fiscal year ending  December  31,  2003,  as filed by China  Direct
         Trading Company with the Commission on April 20, 2004.

(b) Reports on Form 8-K filed.

i)       Items 5 - Departure of Director and  Appointment  of Directors.  Report
         filed January 10, 2005.

ii)      Item 7 Regulation FD Disclosure - Worldcity  Business Magazine Article.
         Report filed January 14, 2005.

iii)     Item 8 - Other Materially  Important Events.  Report filed February 22,
         2005.

iv)      Item 7 - Regulation  FD  Disclosure.  Report filed Februar 24, 2005.

v)       Item 2 - Share Purchase Agreement. Report filed April 29, 2005.











<PAGE>



                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 13th day of May, 2005.

China Direct Trading Corporation

May 13, 2005

/s/ Howard Ullman
Howard Ullman
CEO, President and Chairman
(Principal Executive Officer)
(Principal Financial and Accounting Officer)