LJ International Reports 36% Revenue Increase, Doubling of EPS in Second Quarter

   Company's ENZO Retail Division Reached $4.4 Million in Revenues for
         First Six Months of 2006, Moving Closer to Profitability



HONG KONG and LOS ANGELES, Aug. 10 /Xinhua-PRNewswire-FirstCall/ -- LJ International Inc. ("LJI") (NASDAQ:JADE), one of the fastest-growing jewelry companies in the world, today announced financial results for the second quarter and six months ended June 30, 2006.

  Highlights of the report include:

  -- Second quarter 2006 revenues were up 36% year-over-year
  -- Second quarter EPS was $0.04, up 100% from $0.02 in year-ago quarter
  -- Revenues of ENZO Retail Division reached $2.69 million in second
     quarter, up 53% sequentially from first quarter
  -- ENZO net loss narrowed to $328,000 in second quarter from $550,000 in
     first quarter
  -- Excluding ENZO loss, overall EPS was $0.05 for second quarter 2006,
     $0.10 for first six months
  -- Gross margin widened year-over-year to 28% from 24%, reflecting ENZO's
     progressively positive impact
  -- Company expects continued growth in third quarter of 2006 with annual
     increases of 24% and 20%, respectively, in revenues and EPS



Revenues for the second quarter ended June 30, 2006 rose to a record $25.95 million, up 36% from $19.08 million in the second quarter of 2005. Revenues in the Company's core wholesale business totaled $23.26 million in the second quarter of 2006, up approximately 25% from a year earlier. Revenues at the ENZO chain of retail stores in China, Hong Kong and Macau totaled $2.69 million in the second quarter of 2006; they were not yet contributing significant revenue in the year-earlier quarter.  On a sequential basis, ENZO revenues were up 53% from $1.76 million in the first quarter of 2006.

For the first six months of 2006, revenues totaled a record $50.10 million, up 37.2% from $36.51 million in the first six months of 2005. Core wholesale revenues were $45.66 million, while ENZO revenues totaled $4.44 million.

Net income for the second quarter of 2006 was $630,000, or $0.04 per fully diluted share, up 100% on an EPS basis from $303,000, or $0.02 per fully diluted share, in the second quarter of 2005.  Excluding the net loss of the ENZO Division (see below), net income in the latest quarter was $958,000, or $0.05 per fully diluted share.

For the first six months of 2006, net income was $952,000, or $0.05 per fully diluted share, compared to $552,000, or $0.04 per fully diluted share, in the first six months of 2005.  Excluding ENZO's losses, net income for the first six months of 2006 was $1.83 million, or $0.10 per fully diluted share.

On the balance sheet, LJI's cash and cash equivalents was at $8.83 million as of June 30, 2006 and the company continues to operate with zero long-term debt.

Chairman Notes Positive ENZO Impact

LJI Chairman and CEO Yu Chuan Yih said, "I'm pleased to report another strong quarter for LJI, with robust revenues expansion in both the wholesale and retail segments of the company.  ENZO, which now has 32 stores in operation throughout China as well as 2 in Hong Kong and 1 in Macau, is starting to contribute to the company's overall revenues and its margins, which are up significantly year-over-year.  In addition, ENZO is making rapid progress towards division-level profitability, with a second-quarter net loss just over half the size of its loss in the first quarter.  Our updated information indicates that 15 ENZO stores are now profitable on a store-by- store basis."

Gross margins in the ENZO unit, at 63%, contributed to an increase in overall gross margins to 28% in the latest quarter from 24% a year earlier. Taken separately, in the second quarter of 2006 ENZO reported negative EBITDA of $209,000, less than half the negatives EBITDA of $455,000 in the first quarter.  The division's net loss declined to $328,000 in the second quarter from $550,000 in the first quarter.

Revenues of $33 million, EPS of $0.12 Expected in Third Quarter 2006

The Company today also provided guidance for the third quarter ending September 30, 2006.  LJI expects overall revenues of approximately $33.0 million, up approximately 24% from the third quarter of 2005.  Net income is projected to be approximately $2.1 million, or $0.12 per fully diluted share, up 20% from a year earlier.

Conference Call Information

The Company will conduct a conference call today, August 10, 2006 at 11:00 a.m. Eastern Time to discuss this second quarter earnings results.  The call will be hosted by Betty Ho, Vice President of Corporate Development.  The conference call is accessible live via phone by dialing 877-407-8031, or 201- 689-8031 for international callers, and asking for the LJ International Inc. call.  Please call at least 10 minutes prior to the start time, or live over the Internet by logging on to the Company's website at http://www.ljintl.com/ .  The call can also be accessed via the Internet at http://www.investorcalendar.com/ by entering the Company's name or ticker symbol.

To be added to LJI's investor lists, please contact Haris Tajyar at  or at 818-382-9700.

About LJ International Inc.

LJ International Inc. ("LJI") (NASDAQ:JADE), based in Hong Kong and the U.S., is engaged in the designing, branding, marketing and distribution of a full range of jewelry.  It has built its global business, currently one of the fastest-growing in the jewelry industry, on a vertical integration strategy and an unwavering commitment to quality and service.  LJI distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe, with a growing retail presence in China through its ENZO stores.  Its product lines incorporate all major categories sought by major retailers, including earrings, necklaces, pendants, rings and bracelets.

For more information on LJI, please visit http://www.ljintl.com/ .

Forward looking statement: Except for the historical information, the matters discussed in this news release may contain forward-looking statements, including, but not limited to, factors relating to future revenues.  These forward-looking statements may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors including, but not limited to, uncertainties in product demand, the impact of competitive products and pricing, changing economic conditions around the world, release and revenues of new products and other risk factors detailed in the company's most recent annual report and other filings with the Securities and Exchange Commission.

                           LJ INTERNATIONAL INC
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (UNAUDITED)
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                    Three months ended     Six months ended
                                          June 30              June 30
                                        2006     2005       2006      2005
                                        US$      US$        US$       US$

  Operating revenue                   25,946   19,074     50,101     36,513
  Costs of goods sold                (18,669) (14,454)   (37,001)   (28,243)
  Gross profit                         7,277    4,620     13,100      8,270

  Selling, general and administrative
   expenses                           (6,095)  (3,936)   (10,904)    (7,555)

  Operating income                     1,182      684      2,196        715

  Other revenue and expense
  Other revenues                         234       72        346        108
  Share of results of investment
   securities                             --       --         --        215
  Interest expenses                     (683)    (402)    (1,404)      (726)

  Income before income taxes,
   minority interest and
   extraordinary gain                    733      354      1,138        312
  Income taxes                          (102)     (48)      (176)      (150)

  Income before minority interest and
   extraordinary gain                    631      306        962        162
  Minority interest                       (1)      (3)       (10)        (3)

  Income before extraordinary gain       630      303        952        159
  Extraordinary gain in negative
   goodwill                               --       --         --        393

  Net income                             630      303        952        552
  Earnings per share:
    Basic                               0.04     0.02       0.06       0.04

    Diluted                             0.04     0.02       0.05       0.04
    Weighted average number of
     shares used in calculating
     diluted earnings per
     share                       17,778,968 13,463,017 17,490,110 13,599,965



                          LJ INTERNATIONAL INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE DATA)


                                                  As of            As of
                                                 June 30,       December 31,
                                                   2006             2005
                                                (Unaudited)
  ASSETS                                            US$              US$
  Current assets:
      Cash and cash equivalents                    3,078            4,796
      Restricted cash                              5,755            5,839
      Trade receivables, net of allowance for
       doubtful accounts (US$212 as of June
       30, 2006 and December 31, 2005)            17,731           24,960
    Derivatives                                    2,470            2,034
    Investment in capital guaranteed fund          2,496            2,496
      Inventories                                 63,144           55,941
      Prepayments and other current assets         3,605            2,538
  Total current assets                            98,279           98,604
  Properties held for lease, net                   1,373            1,400
  Property, plant and equipment, net               6,527            6,221
  Due from related parties                           139              484
  Goodwill, net                                    1,521            1,521

  Total assets                                   107,839          108,230

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
      Bank overdrafts                              3,335            2,028
      Notes payable                                3,585            3,079
    Capitalized lease obligation, current
     portion                                          75               20
      Letters of credit, gold and other loans     28,037           32,643
    Derivatives                                    5,436            3,567
      Trade payables                              11,016           12,168
      Accrued expenses and other payables          5,096            7,280
    Due to related parties                            --            1,910
    Income taxes payable                             350              201
      Deferred taxation                              154              154
      Total current liabilities                   57,084           63,050
  Long-term debts                                     --               --
  Other payables, non-current                        328               43

  Total liabilities                               57,412           63,093

  Minority interest                                  139              129
  Stockholders' equity
      Common stocks, par value US$0.01 each,
       Authorized - 100 million shares,
       Issued - 17,263,203 shares as of
        June 30, 2006; 15,521,203 shares as
        of December 31, 2005                         173              155
  Additional paid-in capital                      35,729           31,419
  Accumulated other comprehensive loss              (156)            (156)
  Unearned compensation                              (19)             (19)
  Retained earnings                               14,561           13,609

  Total stockholders' equity                      50,288           45,008

  Total liabilities and stockholders' equity     107,839          108,230



  For further information:

  AT LJI:                                 AT INVESTOR RELATIONS INTL:
   Betty Ho                                Haris Tajyar
   Vice President, Corporate Development   Managing Partner
   Ph:  011-852-2170-0001                  Ph:  818-382-9702
                           

DATASOURCE: LJ International Inc.



CONTACT:  Betty Ho of LJ International, [phone], or

; Haris Tajyar of Investor Relations Intl for LJ

International, [phone] or  



Web site:  http://www.ljintl.com/ 

Copyright