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<SEC-DOCUMENT>0001161697-06-001185.txt : 20061212
<SEC-HEADER>0001161697-06-001185.hdr.sgml : 20061212
<ACCEPTANCE-DATETIME>20061212130649
ACCESSION NUMBER:		0001161697-06-001185
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20061210
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Completion of Acquisition or Disposition of Assets
ITEM INFORMATION:		Changes in Control of Registrant
ITEM INFORMATION:		Change in Shell Company Status
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20061212
DATE AS OF CHANGE:		20061212

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DIVERSIFAX INC
		CENTRAL INDEX KEY:			0000885462
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-MAILING, REPRODUCTION, COMMERCIAL ART & PHOTOGRAPHY [7330]
		IRS NUMBER:				133637458
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-20936
		FILM NUMBER:		061270891

	BUSINESS ADDRESS:	
		STREET 1:		SHENNAN ZHONG ROAD
		STREET 2:		PO BOX 031-114
		CITY:			SHENZHEN
		STATE:			F4
		ZIP:			518000
		BUSINESS PHONE:		212-561-3604

	MAIL ADDRESS:	
		STREET 1:		SHENNAN ZHONG ROAD
		STREET 2:		PO BOX 031-114
		CITY:			SHENZHEN
		STATE:			F4
		ZIP:			518000
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>dfax_8-k.txt
<DESCRIPTION>FORM 8-K 12-10-2006
<TEXT>

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


                                    FORM 8-K


                           CURRENT REPORT PURSUANT TO
           SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


                                DECEMBER 10, 2006
                                (Date of Report)


                                DIVERSIFAX, INC.
             (Exact name of registrant as specified in its charter)


        DELAWARE                    000-20936                    13-3637458
(State of incorporation)     (Commission File Number)          (IRS Employer
                                                             Identification No.)


SHENNAN ZHONG ROAD, P.O. BOX 031-114, SHENZHEN CITY, P.R. CHINA         518000
            (Address of principal executive offices)                  (Zip Code)


                                  212-561 3604
              (Registrant's telephone number, including area code)


                                       N/A
         (Former name or former address, if changed since last report.)


Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
    230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
    240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
    Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
    Act (17 CFR 240.13e-4(c))

<PAGE>

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

         A. MERGER AGREEMENT

         On December 10, 2006, the Registrant and its wholly-owned subsidiary,
DFAX Acquisition Vehicle, Inc. ("SUB"), entered into an agreement and plan of
merger with Upper Class Group Limited ("UCG"), Ming Yang, Wenxiang Yu, Zhi Yang,
Yundai Liu, Yongxia Cao, First Capital Limited, China US Bridge Capital Limited,
Shenzhen Dingyi Investment Company Limited, and Shenzhen Huayin Guaranty and
Investment Company Limited (the "Merger Agreement"). A copy of the Merger
Agreement is being filed as Exhibit 10.1 to this Current Report.

         The transaction described in the Merger Agreement is referred to in
this Current Report as the "Merger Transaction." A summary of the Merger
Transaction, as well as the material terms and conditions of the Merger
Agreement, are set forth below, but such summary is qualified in its entirety by
the terms and condition of the Merger Agreement, which are incorporated herein
by reference.

                  1. THE PARTIES TO THE MERGER AGREEMENT

         UCG is a corporation formed under the laws of the British Virgin Island
and a holding company that acquired all of the issued and outstanding stock of
Shouguang City Haoyuan Chemical Company Limited ("SCHC") on October 9, 2006.
Additional information about SCHC, including audited financial statements for
the period of May 18, 2005 (date of inception) through December 31, 2005, is
contained elsewhere in this Current Report.

         Prior to the completion of the Merger Transaction, Ming Yang, Wenxiang
Yu, Zhi Yang, Yundai Liu, Yongxia Cao, First Capital Limited, China US Bridge
Capital Limited, Shenzhen Dingyi Investment Company Limited, and Shenzhen Huayin
Guaranty and Investment Company Limited were the shareholders of UCG (the "UCG
Shareholders"). In addition, Ming Yang is the sole director of UCG.

                  2. THE MERGER TRANSACTION

         Pursuant to the Merger Agreement, UCG merged with and into SUB, with
UCG as the survivor of the merger. As a result of the Merger Transaction, UCG
became a wholly owned subsidiary of the Registrant, which, in turn, made the
Registrant the indirect owner of the Chinese operating company, SCHC.

                  3. THE MERGER CONSIDERATION

         Pursuant to the terms of the Merger Agreement, in exchange for their
shares in UCG, the UCG Shareholders will receive stock consideration consisting
of 26,500,000 newly issued shares of the Registrant's common stock, to be
divided proportionally among the UCG Shareholders in accordance with their
respective ownership interests in UCG.

                                     - 2 -
<PAGE>

                  4. THE MERGER AGREEMENT

         The Merger Agreement was entered into and executed by the parties on
December 10, 2006, and the necessary statutory filings were made on December 11,
2006. The Merger Agreement contains customary terms and conditions for a
transaction of this type, including representations, warranties and covenants,
as well as provisions describing the merger consideration, the process of
exchanging the consideration and the effect of the merger. The Merger Agreement
contains reciprocal indemnification provisions that provide for indemnification
in the event of a breach of a representation or warranty. The indemnification
provisions survive the closing of the Merger Transaction for 18 months.

                  5. MATERIAL RELATIONSHIPS

         Apart from the aforementioned relationships, there were no material
relationships between the Registrant or its officers and directors and any of
the parties to the Merger Agreement, other than in respect of the Merger
Agreement.

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

         On December 10, 2006, the Registrant entered into the Merger Agreement,
pursuant to which the Registrant, subject to the statutory filings, acquired UCG
from the UCG Shareholders and thereby indirectly acquired the Chinese operating
company SCHC. Further information about the Merger Agreement and the Merger
Transaction is provided above under Item 1.01 of this Current Report.

         In exchange for transferring UCG to the Registrant, the UCG
Shareholders received stock consideration consisting of 26,500,000 newly issued
shares of the Registrant's common stock, which were divided proportionally among
the UCG Shareholders in accordance with their respective ownership interests in
UCG. Further information about the merger consideration is provided above under
Item 1.01 of this Current Report.

         There were no material relationships between the Registrant or its
affiliates and any of the parties to the Merger Agreement, other than in respect
of the Merger Agreement.

         The Registrant was a "shell company" (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) immediately before the completion of the Merger Transaction. Accordingly,
pursuant to the requirements of Item 2.01(a)(f) of Form 8-K, set forth below is
the information that would be required if the Registrant were filing a general
form for registration of securities on Form 10-SB under the Exchange Act, for
the Registrant's common stock, which is the only class of its securities subject
to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act
upon consummation of the Merger Transaction.

         A. DESCRIPTION OF BUSINESS

            SCHC is organized under the laws of China. SCHC, located in
Chengming Industrial Park, Unit - Haoyuan Chemical Company Limited, Shouguang
City, Shandong, P.R. China 262714, is engaged in manufacturing and trading
Bromine and Crude Salt in China. Bromine (Br2) is a halogen element and it is a
red volatile liquid at standard room temperature which has reactivity between

                                     - 3 -
<PAGE>

chlorine and iodine. Elemental bromine is used to manufacture a wide variety of
bromine compounds used in industry and agriculture. Bromine is also used in the
manufacture of fumigants, brominated flame-retardants, water purification
compounds, dyes, medicines, sanitizers, inorganic bromides for photography, and
other items. SCHC currently has 103 full-time employees.

         The main competitors of SCHC include Shandong Hai Hua Holding Limited,
Shouguang Fu Kang Medicines Manufacturing Company Limited, Shouguang Wei Dong
Chemical Company Limited, and Shandong Cai Yang Zi Salt Field Company.

         The four largest suppliers of SCHC for the period January 2006 to June
2006 were Shandong Hai Ke Sheng Li Electrochemical Company Limited, Shouguang
Rui Tai Chemical Company Limited, Mao Xin Chemical Company Limited, and Heng
Lian Chemical Company Limited. The five largest suppliers of SCHC for year 2005
were Shandong Hai Ke Sheng Li Electrochemical Company Limited, Shouguang Rui Tai
Chemical Company Limited, Shouguang Xin Yi Fuel Trading Company Limited,
Dongying City Rui Xin Chemical Company Limited, and Mao Xin Chemical Company
Limited.

         The five largest customers for SCHC in year 2005 were Shouguang City
Wei Dong Chemical Company Limited, Shouguang City Rui Tai Chemical Company
Limited, Weifang City Lu Guang Chemical Company Limited, Shouguang City Fu Hai
Chemical Company Limited, and Dongying Hong Ze Chemical Company Limited.

         B. PLAN OF OPERATION

         Forward Looking Statements

         The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, including statements
regarding the Registrant's capital needs, business strategy and expectations.
Any statements contained herein that are not statements of historical facts may
be deemed to be forward-looking statements. In some cases, forward-looking
statements can be identified by terminology such as "may", "will", "should",
"expect", "plan", "intend", "anticipate", "believe", estimate", "predict",
"potential" or "continue", the negative of such terms or other comparable
terminology. Actual events or results may differ materially from the forward
looking statements contained herein. The Registrant disclaims any obligation to
publicly update these statements, or disclose any difference between its actual
results and those reflected in these statements.

         The Registrant became a holding company and has no significant business
operations or assets other than its interest in SCHC, its accounting predecessor
company. SCHC is engaged in manufacturing and trading Bromine and Crude Salt in
China.

         The Registrant's short to mid-term strategic plan is to focus on
Chinese domestic market expansion. The Registrant's long-term strategic goal is
to expand its market to overseas countries.

                                     - 4 -
<PAGE>

         The Registrant may issue additional shares of its capital stock to
raise additional cash for working capital during the next twelve months. The
Registrant has not decided on the amount of cash needed for working capital at
this point. Working capital will be used for expanding the Chinese domestic
market by establishing more sales points or owned chain stores in eastern China,
hiring more sales persons, and expanding current distribution channels.

         C. DESCRIPTION OF PROPERTY

         SCHC's headquarters are located in China at Unit - Haoyuan Chemical
Company Limited, Chengming Industrial Park, Shouguang City, Shandong, P.R.
China. The headquarters building is located on approximately 17,342 square
meters of state-owned land owned by Shouguang City Wo Pu Town Ba Mian He
Village. The lease for the land expires on March 31, 2054. The annual rent for
the land is RMB 46,230, or approximately US$ 5,778.75. The building area is
approximately 3,335 square meters and is owned by SCHC. As a result of the
Merger, the corporate office of the Registrant will be relocated to Unit -
Haoyuan Chemical Company Limited, Chengming Industrial Park, Shouguang City,
Shandong, P.R. China, which is the current physical location of SCHC.

         D. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information, as of December 11,
2006, concerning shares of common stock of the Registrant, the only class of its
securities that are issued and outstanding, held by (1) each shareholder known
by the Registrant to own beneficially more than five percent of the common
stock, (2) each director of the Registrant, (3) each executive officer of the
Registrant, and (4) all directors and executive officers of the Registrant as a
group:

                                            AMOUNT AND NATURE OF   PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1)    BENEFICIAL OWNERSHIP   COMMON STOCK
- ----------------------------------------    --------------------   -------------

Ming Yang (1) ..............................      5,024,000            18.6%

Wenxiang Yu (1) ............................      5,024,000            18.6%

Zhi Yang (1) ...............................      3,349,600            12.4%

Yundai Liu (1) .............................      1,674,800             6.2%

Yongxia Cao (1) ............................      1,674,800             6.2%

Shenzhen Huaying Guaranty and
 Investment Company Limited (1) ............      1,669,500            6.18%

First Capital Limited (1) ..................      2,915,000           10.79%

Shenzhen Dingyi Investment Company
 Limited (1) ...............................      2,517,500            9.32%

China US Bridge Capital Limited (1) ........      2,650,000             9.8%

Juxiang Yu (2) .............................        362,083            1.34%

All directors and executive officers
 as a group (1 person) .....................        362,083            1.34%

                                     - 5 -
<PAGE>

   (1)   Unless otherwise indicated each shareholder shown on the table has sole
         voting and investment power with respect to the shares beneficially
         owned by him or it. The address for each shareholder is c/o: Haoyuan
         Chemical Company Limited, Chengming Industrial Park, Shouguang City,
         Shandong, P.R. China 262714.

   (2)   The address for Juxiang Yu is Shennan Zhong Road, P.O. Box 031-114,
         Shenzhen City P.R. China 518000.

         Change in Control Arrangements

         There are currently no arrangements that would result in a change in
control of the Registrant.

         E. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

         Juxiang Yu

         Juxiang Yu, currently the sole officer and director of the Company, has
the following business experience: From July 1996 to June 2004, Juxiang Yu was
the Branch Manager for Ping An Insurance Co at its Guangzhou branch, and from
July 2004 Ms. Yu has served as General Manager of Guangzhou Xufei Advertising
Company.

         F. EXECUTIVE & DIRECTOR COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information with respect to the compensation of
each of the named executive officers for services provided in all capacities to
the Company and its subsidiaries in the fiscal years ended November 30, 2005,
2004, and 2003. No other executive officer or former executive officer received
more than $100,000 in compensation in the fiscal years reported below. For the
purposes of this table, warrants are deemed to be the equivalent of stock
options.
<TABLE>
<CAPTION>
                                          ANNUAL COMPENSATION           LONG TERM COMPENSATION
                                  -----------------------------------   ----------------------
NAME AND PRINCIPAL                                                      SECURITIES UNDERLYING
POSITION                   YEAR    SALARY ($)    BONUS($)   OTHER ($)          OPTIONS
- ------------------------   ----   ------------   --------   ---------   ----------------------
<S>                        <C>    <C>            <C>        <C>         <C>
Dr. Irwin A. Horowitz      2005   $125,000 (1)      0           0           15,613,097 (2)
Chairman of the Board,
Chief Executive Officer,   2004   $125,000 (1)      0           0            5,613,097 (2)
and President
                           2003   $125,000 (1)      0           0            5,613,097 (2)
</TABLE>

                                     - 6 -
<PAGE>

   (1)   D. Horowitz's salary for the years 2003 thru 2005 was accrued and
         waived pursuant to the Stock Purcahse Agreement, dated August 25, 2006
         with Juxiang Yu (the "Purchase Agreement").

   (2)   Options were rescinded pursuant to the Purchase Agreement.

COMPENSATION OF DIRECTORS

The directors of the Company are not currently compensated, nor were they
compensated during the last fiscal year. To date, no compensation has been
awarded to, earned by or paid to Juxiang Yu, in her respective capacities as
President and chief executive officer of the Registrant.

         G. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Please see the information set forth under Item 1.01 above, as well as
the information set forth under Item 5.01 and Item 5.06 below.

         On July 20, 2006, the Registrant issued a total of 25,000,000 shares of
its common stock to Dr. Irwin Horowitz, its then President and Chief Executive
Officer. Dr. Horowitz purchased the shares for an aggregate purchase price of
$137,500, or $0.055 per share. In lieu of Dr. Horowitz paying the purchase
price, the Registrant's pre-existing liability to him was reduced accordingly.
In addition, Dr. Horowitz, while President and Chief Executive Officer of the
Registrant, loaned the Company funds to cover its working capital needs to
finance acquisitions.

         Except as otherwise disclosed herein or incorporated herein by
reference, there have not been any transactions, or proposed transactions,
during the last two years, to which the Registrant was or is to be a party, in
which any director or executive officer of the Registrant, any nominee for
election as a director, any security holder owning beneficially more than five
percent of the common stock of the Registrant, or any member of the immediate
family of the aforementioned persons had or is to have a direct or indirect
material interest.

         H. DESCRIPTION OF SECURITIES

         Each share of common stock is entitled to one vote on all matters upon
which such shares can vote. All shares of common stock are equal to each other
with respect to the election of directors and cumulative voting is not
permitted. There are no preemptive rights. In the event of liquidation or
dissolution, holders of common stock are entitled to receive, pro rata, the
assets remaining, after creditors, and holders of any class of stock having
liquidation rights senior to holders of shares of common stock, have been paid
in full. All shares of common stock are entitled to such dividends as the Board
of Directors may declare from time to time. There are no provisions in the
articles of incorporation or bylaws that would delay, defer or prevent a change
of control. The Registrant does not have any other classes of issued and
outstanding capital stock.

                                     - 7 -
<PAGE>

         I. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

         Until August 2006, the Registrant's common stock was trading on the
Pink Sheets, and consequently, there ware no market values for the common stock
until it was listed on the OTCBB. The Registrant's common stock is traded on the
OTCBB under the symbol "DSFX.OB." As of December 8, 2006, the closing price for
the Registrant's common stock was $1.10 per share. There is currently minimal
trading in the Registrant's common stock. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.

         As of the close of business on December 8, 2006, there were
approximately 235 holders of record of the Registrant's common stock.

         The Registrant has no plans to declare cash dividends on its common
stock in the future and has not declared any thus far during fiscal year 2006 or
during the last two completed fiscal years. There are no restrictions that limit
the ability of the Registrant to declare cash dividends on its common stock and
the Registrant does not believe that there are any that are likely to do so in
the future.

         J. LEGAL PROCEEDINGS

         Neither the Registrant nor its property is a party to any pending legal
proceeding.

         K. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         None.

         L. RECENT SALES OF UNREGISTERED SECURITIES

         None.

         M. INDEMNIFICATION OF DIRECTORS AND OFFICERS

         The Registrant will indemnify its directors and officers to the fullest
extent permitted by the General Corporation Law of the State of Delaware.

ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.

         Immediately prior to the completion of the Merger Transaction, Juxiang
Yu controlled the Registrant by virtue of her holdings in the Registrant's
common stock. With the completion of the Merger Transaction, the UCG
Shareholders control the Registrant.

         For information about the Merger Transaction, please see the
information set forth above under Item 1.01 and Item 2.01 of this Current
Report, which information is incorporated hereunder by this reference.

                                     - 8 -
<PAGE>

ITEM 5.06 CHANGE IN SHELL COMPANY STATUS.

         The Registrant was a "shell company" (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended) immediately before
the Merger Transaction. As a result of the Merger Transaction, the Registrant
has acquired subsidiaries that possess operating businesses. Consequently, the
Registrant believes that the Merger Transaction has caused it to cease to be a
shell company. For information about the Merger Transaction, please see the
information set forth above under Item 1.01 and Item 2.01 of this Current
Report, which information is incorporated hereunder by this reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

         (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.

         The following financial statements are hereby included as part of this
Current Report.

             SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED

                  Shouguang City Haoyuan Chemical Company Limited Financial
                  Statements as of September 30, 2006

                  Shouguang City Haoyuan Chemical Company Limited Financial
                  Statements as of December 31, 2005

         (b) PRO FORMA FINANCIAL INFORMATION.

         The following financial statements are hereby included as part of this
Current Report.

                  Pro Forma Balance Sheet as of September 30, 2006

                  Pro Forma Statement of Operations for the nine months ended
                  September 30, 2006

                  Pro Forma Statement of Operations for the period of May 18,
                  2005 (date of inception) through December 31, 2005

         (c) EXHIBITS.

             10.1 Agreement and Plan of Merger, dated as of December 10, 2006,
                  among the Registrant, DFAX Acquisition Vehicle, Inc. ("SUB"),
                  Upper Class Group Limited ("UCG"), Ming Yang, Wenxiang Yu, Zhi
                  Yang, Yundai Liu, Yongxia Cao, First Capital Limited, China US
                  Bridge Capital Limited, Shenzhen Dingyi Investment Company
                  Limited, and Shenzhen Huayin Guaranty and Investment Company
                  Limited.

                                     - 9 -
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date:  December 11, 2006                DIVERSIFAX, INC.


                                       /s/ Juxiang Yu
                                       --------------
                                       Juxiang Yu
                                       President &
                                       Chief Executive Officer


                                     - 10 -
<PAGE>




                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED

                              FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006




<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED


                                 C O N T E N T S
                                 ---------------


                                                                            PAGE
                                                                            ----

BALANCE SHEETS ..........................................................      1

STATEMENTS OF OPERATIONS ...............................................       2

STATEMENTS OF COMPREHENSIVE INCOME .....................................       3

STATEMENT OF STOCKHOLDERS' EQUITY ......................................       4

STATEMENTS OF CASH FLOWS ...............................................       5

NOTES TO FINANCIAL STATEMENTS ..........................................   6 - 8

<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                 BALANCE SHEETS
                    SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

                                                  September 30,     December 31,
                                                      2006              2005
                                                  ------------      ------------
                                                   (Unaudited)        (Audited)
      ASSETS

CURRENT ASSETS
  Cash ....................................        $3,265,072        $2,409,781
  Accounts receivable .....................                 -           325,193
  Inventories .............................           148,610            89,383
  Prepaid land lease ......................               496               496
                                                   ----------        ----------
                                                    3,414,178         2,824,853
                                                   ----------        ----------

DUE FROM RELATED PARTY ....................         1,166,340           503,787

PROPERTY, PLANT AND EQUIPMENT, Net ........         2,129,095         2,220,319

PREPAID LAND LEASE, Net of current portion             23,938            23,808
                                                   ----------        ----------
                                                    3,319,373         2,747,914
                                                   ----------        ----------

TOTAL ASSETS ..............................        $6,733,551        $5,572,767
                                                   ==========        ==========

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses ...        $   50,704        $  330,472
  Due to director .........................             9,111            70,924
  Due to related party ....................            47,294            46,322
  Taxes payable ...........................           921,433         1,325,863
                                                   ----------        ----------

TOTAL LIABILITIES .........................         1,028,542         1,773,581
                                                   ----------        ----------

COMMITMENT

      STOCKHOLDERS' EQUITY

PAID-IN CAPITAL ...........................         1,332,430           446,400

RETAINED EARNINGS - UNAPPROPRIATED ........         3,239,875         2,815,396

RETAINED EARNINGS - APPROPRIATED
  Statutory Common Reserve Fund ...........           669,477           331,223
  Statutory Public Welfare Fund ...........           334,738           165,611

CUMULATIVE TRANSLATION ADJUSTMENT .........           128,489            40,556
                                                   ----------        ----------

TOTAL STOCKHOLDERS' EQUITY ................         5,705,009         3,799,186
                                                   ----------        ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $6,733,551        $5,572,767
                                                   ==========        ==========

                 See accompanying notes to financial statements.

                                      -1-
<PAGE>
<TABLE>
                          SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                      STATEMENTS OF OPERATIONS
                      FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005,
                          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
             FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2005
                                            (UNAUDITED)
<CAPTION>
                                                                                      May 18, 2005
                                                                                        (Date of
                                   Three Months     Three Months      Nine Months      Inception)
                                       Ended            Ended           Ended            Through
                                   September 30,    September 30,    September 30,    September 30,
                                       2006             2005             2006             2005
                                   -------------    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>              <C>
NET SALES ....................      $ 4,689,282      $ 5,609,785      $12,760,106      $ 7,582,224
                                    -----------      -----------      -----------      -----------

OPERATING EXPENSES
  Cost of net sales ..........        2,732,692        3,360,475        7,518,749        5,115,904
  General and administrative
   expenses ..................           59,547           60,924          206,589          253,787
                                    -----------      -----------      -----------      -----------
                                      2,792,239        3,421,399        7,725,338        5,369,691
                                    -----------      -----------      -----------      -----------

INCOME FROM OPERATIONS .......        1,897,043        2,188,386        5,034,768        2,212,533


OTHER INCOME
  Interest income ............              248               16              791              207
                                    -----------      -----------      -----------      -----------

INCOME BEFORE INCOME TAXES ...        1,897,291        2,188,402        5,035,559        2,212,740

INCOME TAXES .................          596,039          716,542        1,653,018          734,860
                                    -----------      -----------      -----------      -----------

NET INCOME ...................      $ 1,301,252      $ 1,471,860      $ 3,382,541      $ 1,477,880
                                    ===========      ===========      ===========      ===========

                          See accompanying notes to financial statements.

                                                -2-
</TABLE>
<PAGE>
<TABLE>
                          SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                 STATEMENTS OF COMPREHENSIVE INCOME
                      FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005,
                          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
             FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2005
                                            (UNAUDITED)
<CAPTION>
                                                                                      May 18, 2005
                                                                                        (Date of
                                   Three Months     Three Months      Nine Months      Inception)
                                       Ended            Ended           Ended            Through
                                   September 30,    September 30,    September 30,    September 30,
                                       2006             2005             2006             2005
                                   -------------    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>              <C>
NET INCOME ...................      $ 1,301,252      $ 1,471,860      $ 3,382,541      $ 1,477,880

OTHER COMPREHENSIVE INCOME
  Foreign currency translation
   adjustment ................           57,233           16,671           87,933           16,671
                                    -----------      -----------      -----------      -----------

COMPREHENSIVE INCOME .........      $ 1,358,485      $ 1,488,531      $ 3,470,474      $ 1,494,551
                                    ===========      ===========      ===========      ===========

                          See accompanying notes to financial statements.

                                                -3-
</TABLE>
<PAGE>
<TABLE>
                                SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                       STATEMENT OF STOCKHOLDERS' EQUITY
                                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
<CAPTION>
                                                              Retained Earnings -
                                                                 Appropriated
                                                            ------------------------
                                                             Statutory    Statutory
                                              Retained        Common       Public     Cumulative
                                 Paid-in      Earnings -      Reserve      Welfare    Translation
                                 Capital    Unappropriated      Fund        Fund      Adjustment      Total
                               -----------  --------------  -----------  -----------  -----------  -----------
<S>                            <C>            <C>           <C>          <C>          <C>          <C>
BALANCE AT DECEMBER 31, 2005
 (AUDITED) ................... $   446,400    $ 2,815,396   $   331,223  $   165,611  $    40,556  $ 3,799,186

Capital contribution .........     886,030              -             -            -            -      886,030

Dividend distribution ........           -     (2,450,681)            -            -            -   (2,450,681)

Net income for the nine months
 ended September 30, 2006 ....           -      3,382,541             -            -            -    3,382,541

Transfer to reserve funds ....           -       (507,381)      338,254      169,127            -            -

Cumulative translation
 adjustment ..................           -              -             -            -       87,933       87,933
                               -----------    -----------   -----------  -----------  -----------  -----------

BALANCE AT SEPTEMBER 30, 2006
 (UNAUDITED) ................. $ 1,332,430    $ 3,239,875   $   669,477  $   334,738  $   128,489  $ 5,705,009
                               ===========    ===========   ===========  ===========  ===========  ===========

                                See accompanying notes to financial state ments.

                                                      -4-
</TABLE>
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                            STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
   FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2005
                                   (UNAUDITED)

                                                         2006           2005
                                                      -----------   -----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income .......................................  $ 3,382,541   $ 1,477,880
  Adjustments to reconcile net income
   to net cash provided by operating activities
    Depreciation and amortization ..................      158,372        57,033
    (Increase) decrease in assets
      Accounts receivable ..........................      327,763      (238,824)
      Inventories ..................................      (56,618)   (1,282,412)
      Prepaid land lease ...........................            -       (55,895)
    Increase (decrease) in liabilities
      Accounts payable and accrued expenses ........     (277,016)      657,199
      Deferred revenue .............................            -       189,496
      Taxes payable ................................     (432,711)      925,409
                                                      -----------   -----------

  Net cash provided by operating activities ........    3,102,331     1,729,886
                                                      -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property, plant and equipment ........      (21,981)   (2,226,253)
                                                      -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Increase (decrease) in due to/from director ......      (62,490)    1,758,554
  Increase (decrease) in due to/from related party .     (643,647)      125,029
  Capital contribution .............................      886,030       440,496
  Dividend distribution ............................   (2,462,106)            -
                                                      -----------   -----------

  Net cash provided by (used in) financing
   activities ......................................   (2,282,213)    2,324,079
                                                      -----------   -----------

EFFECTS OF EXCHANGE RATE CHANGE ON CASH ............       57,154        21,508
                                                      -----------   -----------

NET INCREASE IN CASH ...............................      855,291     1,849,220

CASH - BEGINNING OF PERIOD .........................    2,409,781             -
                                                      -----------   -----------

CASH - END OF PERIOD ...............................  $ 3,265,072   $ 1,849,220
                                                      ===========   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for:

    Income taxes ...................................  $ 1,975,519   $    22,187
                                                      ===========   ===========

                 See accompanying notes to financial statements.

                                      -5-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements have been prepared by
Shouguang City Haoyuan Chemical Company Limited (the "Company"). These
statements include all adjustments (consisting only of its normal recurring
adjustments) which management believes necessary for a fair presentation of the
statements and have been prepared on a consistent basis using the accounting
policies described in the Summary of Accounting Policies included in the 2005
Annual Report. Certain financial information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission, although the Company firmly believes that the accompanying
disclosures are adequate to make the information presented not misleading. The
Notes to Financial Statements included in the 2005 Annual Report should be read
in conjunction with the accompanying interim financial statements. The interim
operating results for the three and nine months ended September 30, 2006 may not
be indicative of operating results expected for the full year.

Nature of the Business
- ----------------------
Shouguang City Haoyuan Chemical Company Limited (the "Company"), was
incorporated in Shouguang City, Shangdong Province, the People's Republic of
China (the "PRC") on May 18, 2005 for the purpose of manufacturing and trading
bromine and crude salt. The Company is a wholly-owned subsidiary of Upper Class
Group, Limited, a British Virgin Island Company.

Reporting Currency
- ------------------
The Company's functional currency is Renminibi ("RMB"), however, the reporting
currency is the United States dollar ("USD").

Revenue Recognition
- -------------------
In accordance with Securities and Exchange Commission ("SEC") Staff Accounting
Bulletin ("SAB") No. 104, "Revenue Recognition," the Company recognizes revenue
when persuasive evidence of a customer or distributor arrangement exists or
acceptance occurs, receipt of goods by customer occurs, the price is fixed or
determinable, and the sales revenues are considered collectible. Subject to
these criteria, the Company generally recognizes revenue at the time of shipment
or delivery to the customer, and when the customer takes ownership and assumes
risk of loss based on shipping terms.

Estimates
- ---------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates based on
management's knowledge and experience. The more significant areas requiring the
use of management estimates and assumptions relate to mineral reserves that are
the basis for future cash flow estimates and units-of-production depreciation
and amortization calculations. Accordingly, actual results could differ from
those estimates.

Foreign Currency Translation
- ----------------------------
Assets and liabilities of the Company have been translated using the exchange
rate at the balance sheet date. The average exchange rate for the period has
been used to translate revenues and expenses. Translation adjustments are
reported separately and accumulated in a separate component of equity
(cumulative translation adjustment).

                                      -6-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Mineral Rights
- --------------
The Company follows FASB Staff Position amending SFAS No. 141 and 142 which
provides that certain mineral rights are considered tangible assets and that
mineral rights should be accounted for based on their substance. Mineral rights
are included in property, plant and equipment.

Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided to write off the cost of property, plant and equipment
over their estimated useful lives using the straight-line method at the
following rates per annum:

         Buildings .....................................       20 years
         Plant and machinery ...........................       8 years
         Mineral rights ................................       50 years
         Office furniture and equipment ................       8 years

The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognized in the income statement.

Mineral rights, granted on two pieces of land located in the PRC, are recorded
at cost. Mineral rights are amortized ratably over the 50 year term of the
leases. This method is equivalent to the units of production method since the
proven and probable reserves of 780,000 tons exceed the expected production over
50 years (8,000 - 12,000 tons of annual practical capacity).

Construction in progress represents manufacturing plants under construction.
Construction in progress is stated at cost which includes the cost of
construction and purchase cost of plant and machinery. Construction in progress
for manufacturing plants is transferred to property, plant and equipment on the
commissioning date. Manufacturing plants are considered to be commissioned when
they are capable of producing saleable quality output in commercial quantities
on an ongoing basis.

Shipping and Handling Fees and Costs
- ------------------------------------
The Company follows Emerging Issues Task Force ("EITF") No. 00-10, Accounting
for Shipping and Handling Fees and Costs. The Company does not charge its
customers for shipping and handling. The Company classifies shipping and
handling costs as part of the cost of net sales. For the three months ended
September 30, 2006 and 2005, shipping and handling costs were $87,210 and
$258,275, and for the nine months ended September 30, 2006, shipping and
handling costs were $165,593 and $299,825.

Prepaid Land Lease
- ------------------
Prepaid land lease is stated at cost and amortized over the period of the lease
on the straight-line basis.

                                      -7-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (UNAUDITED)

NOTE 2 - DUE FROM RELATED COMPANY

Amount represents receivable due from a company whose shareholder and director
is also a shareholder and director of the Company. The amount due is unsecured
with no stated repayment terms.

NOTE 3 - DUE TO DIRECTOR

The amount due is unsecured, interest-free and with no stated repayment terms.

NOTE 4 - DUE TO RELATED PARTY

Amount represents payable due to a company whose shareholder and director is
also a shareholder and director of the Company.

NOTE 5 - RETAINED EARNINGS - APPROPRIATED

In accordance with the relevant PRC regulations and the Company's Articles of
Association, the Company is required to allocate its profit after tax to the
following reserves:

Statutory Common Reserve Funds
- ------------------------------
The Company is required each year to transfer 10% of the profit after tax as
reported under the PRC statutory financial statements to the statutory common
reserve funds until the balance reaches 50% of the registered share capital.
This reserve can be used to make up any loss incurred or to increase share
capital. Except for the reduction of losses incurred, any other application
should not result in this reserve balance falling below 25% of the registered
capital.

Statutory Public Welfare Funds
- ------------------------------
The Company is required each year to transfer 5% of the profit after tax as
reported under the PRC statutory financial statements to the statutory public
welfare funds. This reserve is restricted to capital expenditure for employees'
collective welfare facilities that are owned by the Company. The statutory
public welfare funds are not available for distribution to the shareholders
(except on liquidation). Once capital expenditure for staff welfare facilities
has been made, an equivalent amount must be transferred from the statutory
public welfare funds to the discretionary common reserve funds.

NOTE 6 - COMMITMENT

The Company has entered into a contract for construction of a crude salt
project, with estimated cost of approximately $160,000.

NOTE 7 - INCOME TAXES

As discussed in Note 1, the Company utilizes the asset and liability method of
accounting for income taxes in accordance with SFAS No. 109. The statutory PRC
tax rate is equivalent to the Company's effective tax rate.
No provision for deferred taxes has been made as there were no material
temporary differences at September 30, 2006 and 2005.

                                      -8-
<PAGE>




                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 2005




<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED


                                 C O N T E N T S
                                 ---------------

                                                                            PAGE
                                                                            ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .....................  1

BALANCE SHEET ...............................................................  2

STATEMENT OF OPERATIONS .....................................................  3

STATEMENT OF COMPREHENSIVE INCOME ...........................................  4

STATEMENT OF STOCKHOLDERS' EQUITY ...........................................  5

STATEMENT OF CASH FLOWS .....................................................  6

NOTES TO FINANCIAL STATEMENTS ........................................... 7 - 13

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Shouguang City Haoyuan Chemical Company Limited
Shouguang City, Shandong Province


We have audited the accompanying balance sheet of Shouguang City Haoyuan
Chemical Company Limited as of December 31, 2005, and the related statements of
operations, comprehensive income, stockholders' equity, and cash flows for the
period May 18, 2005 (date of inception) through December 31, 2005. 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 the standards of the Public Company
Accounting Oversight Board (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 Shouguang City Haoyuan Chemical
Company Limited as of December 31, 2005, and the results of its operations and
its cash flows for the period May 18, 2005 (date of inception) through December
31, 2005, in conformity with accounting principles generally accepted in the
United States.

/s/ Morison Cogen LLP

September 26, 2006

                                      -1-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                  BALANCE SHEET
                                DECEMBER 31, 2005

      ASSETS

CURRENT ASSETS
  Cash .....................................................         $ 2,409,781
  Accounts receivable ......................................             325,193
  Inventories ..............................................              89,383
  Prepaid land lease .......................................                 496
  Due from related party ...................................             503,787
                                                                     -----------
                                                                       3,328,640

PROPERTY, PLANT AND EQUIPMENT, Net .........................           2,220,319

PREPAID LAND LEASE, Net of current portion .................              23,808
                                                                     -----------

TOTAL ASSETS ...............................................         $ 5,572,767
                                                                     ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses ....................         $   330,472
  Due to director ..........................................              70,924
  Due to related party .....................................              46,322
  Taxes payable ............................................           1,325,863
                                                                     -----------

TOTAL LIABILITIES ..........................................           1,773,581
                                                                     -----------

COMMITMENT

      STOCKHOLDERS' EQUITY

ADDITIONAL PAID-IN CAPITAL .................................             446,400

RETAINED EARNINGS - UNAPPROPRIATED .........................           2,815,396

RETAINED EARNINGS - APPROPRIATED
  Statutory Common Reserve Fund ............................             331,223
  Statutory Public Welfare Fund ............................             165,611

CUMULATIVE TRANSLATION ADJUSTMENT ..........................              40,556
                                                                     -----------

TOTAL STOCKHOLDERS' EQUITY .................................           3,799,186
                                                                     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................         $ 5,572,767
                                                                     ===========

   The accompanying notes are an integral part of these financial statements.

                                      -2-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                             STATEMENT OF OPERATIONS
                 FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION)
                            THROUGH DECEMBER 31, 2005


NET SALES ..................................................         $14,344,296
                                                                     -----------

OPERATING EXPENSES
  Cost of net sales ........................................           9,095,301
  General and administrative expenses ......................             304,451
                                                                     -----------
                                                                       9,399,752
                                                                     -----------

INCOME FROM OPERATIONS .....................................           4,944,544

OTHER INCOME
  Interest income ..........................................                 446
                                                                     -----------

INCOME BEFORE INCOME TAXES .................................           4,944,990

INCOME TAXES ...............................................           1,632,760
                                                                     -----------

NET INCOME .................................................         $ 3,312,230
                                                                     ===========

   The accompanying notes are an integral part of these financial statements.

                                      -3-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                        STATEMENT OF COMPREHENSIVE INCOME
                 FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION)
                            THROUGH DECEMBER 31, 2005


NET INCOME .................................................         $ 3,312,230

OTHER COMPREHENSIVE INCOME
  Foreign currency translation adjustment ..................              40,556
                                                                     -----------

COMPREHENSIVE INCOME .......................................         $ 3,352,786
                                                                     ===========

   The accompanying notes are an integral part of these financial statements.

                                      -4-
<PAGE>
<TABLE>
                                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                                        STATEMENT OF STOCKHOLDERS' EQUITY
                                 FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION)
                                            THROUGH DECEMBER 31, 2005
<CAPTION>
                                                               Retained Earnings -
                                                                  Appropriated
                                                             ------------------------
                                                              Statutory    Statutory
                              Additional     Retained          Common       Public     Cumulative
                                Paid-in      Earnings -        Reserve      Welfare    Translation
                                Capital    Unappropriated       Fund         Fund      Adjustment      Total
                              -----------  --------------    -----------  -----------  -----------  -----------
<S>                           <C>            <C>             <C>          <C>          <C>          <C>
BALANCE AT MAY 18, 2005
 (DATE OF INCEPTION) .......  $         -    $         -     $         -  $         -  $         -  $         -

Initial capitalization .....      446,400              -               -            -            -      446,400

Transfer to reserve funds ..            -       (496,834)        331,223      165,611            -            -

Cumulative translation
 adjustment ................            -              -               -            -       40,556       40,556

Net income for the period
 ended December 31, 2005 ...            -      3,312,230               -            -            -    3,312,230
                              -----------    -----------     -----------  -----------  -----------  -----------

BALANCE AT DECEMBER 31, 2005  $   446,400    $ 2,815,396     $   331,223  $   165,611  $    40,556  $ 3,799,186
                              ===========    ===========     ===========  ===========  ===========  ===========

                   The accompanying notes are an integral part of these financial statements.

                                                       -5-
</TABLE>
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                             STATEMENT OF CASH FLOWS
                 FOR THE PERIOD MAY 18, 2005 (DATE OF INCEPTION)
                            THROUGH DECEMBER 31, 2005

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income .................................................      $ 3,312,230
  Adjustments to reconcile net income
   to net cash provided by operating activities
    Depreciation and amortization ............................          108,605
    Increase in assets
      Accounts receivable ....................................         (321,259)
      Inventories ............................................          (88,302)
      Prepaid land lease .....................................          (24,500)
    Increase in liabilities
      Accounts payable and accrued expenses ..................          326,474
      Tax payable ............................................        1,309,824
                                                                    -----------

  Net cash provided by operating activities ..................        4,623,072
                                                                    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property, plant and equipment ..................       (2,301,576)
                                                                    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Increase in due from director ..............................           70,066
  Capital contribution .......................................          441,000
  Advances from related party ................................         (451,931)
                                                                    -----------

  Net cash provided by financing activities ..................           59,135
                                                                    -----------

EFFECTS OF EXCHANGE RATE CHANGE ON CASH ......................           29,150
                                                                    -----------

NET INCREASE  IN CASH ........................................        2,409,781

CASH - BEGINNING OF PERIOD ...................................                -
                                                                    -----------

CASH - END OF PERIOD .........................................      $ 2,409,781
                                                                    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for:

    Income taxes .............................................      $   735,701
                                                                    ===========

   The accompanying notes are an integral part of these financial statements.

                                      -6-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business
- ----------------------
Shouguang City Haoyuan Chemical Company Limited (the "Company"), was
incorporated in Shouguang City, Shangdong Province, the People's Republic of
China (the "PRC") on May 18, 2005 for the purpose of manufacturing and trading
bromine and crude salt.

Reporting Currency
- ------------------
The Company's functional currency is Renminibi ("RMB"), however, the reporting
currency is the United States dollar ("USD").

Estimates
- ---------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates based on
management's knowledge and experience. The more significant areas requiring the
use of management estimates and assumptions relate to mineral reserves that are
the basis for future cash flow estimates and units-of-production depreciation
and amortization calculations. Accordingly, actual results could differ from
those estimates.

Foreign Currency Translation
- ----------------------------
Assets and liabilities of the Company have been translated using the exchange
rate at the balance sheet date. The average exchange rate for the period has
been used to translate revenues and expenses. Translation adjustments are
reported separately and accumulated in a separate component of equity
(cumulative translation adjustment).

Comprehensive Income
- --------------------
The Company follows the Statement of Financial Accounting Standard ("SFAS") No.
130, "Reporting Comprehensive Income." Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
income.

Fair Value of Financial Instruments
- -----------------------------------
The fair value of financial instruments classified as current assets or
liabilities, including cash, receivables, accounts payable and accrued expenses
and due to director, approximates carrying value due to the short-term maturity
of the instruments.

Cash Equivalents
- ----------------
The Company considers all short-term securities purchased with a maturity of
three months or less to be cash equivalents.

                                      -7-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Concentration of Credit Risk
- ----------------------------
Certain financial instruments potentially subject the Company to concentrations
of credit risk. These financial instruments consist primarily of cash and
accounts receivable. The Company places its temporary cash investments with high
credit quality financial institutions to limit its credit exposure.
Concentrations of credit risk with respect to accounts receivable are limited
since the Company performs ongoing credit evaluations of its customers'
financial condition and due to the generally short payment terms.

Accounts Receivable
- -------------------
The Company considers accounts receivable to be fully collectible; accordingly,
the Company has not provided for an allowance for doubtful accounts. As amounts
become uncollectible, they will be charged to an allowance or operations in the
period when a determination of uncollectibility is made.

Revenue Recognition
- -------------------
In accordance with Securities and Exchange Commission ("SEC") Staff Accounting
Bulletin ("SAB") No. 104, "Revenue Recognition," the Company recognizes revenue
when persuasive evidence of a customer or distributor arrangement exists or
acceptance occurs, receipt of goods by customer occurs, the price is fixed or
determinable, and the sales revenues are considered collectible. Subject to
these criteria, the Company generally recognizes revenue at the time of shipment
or delivery to the customer, and when the customer takes ownership and assumes
risk of loss based on shipping terms.

Asset Retirement Obligation
- ---------------------------
The Company follows SFAS No. 143, "Accounting for Asset Retirement Obligations,"
which established a uniform methodology for accounting for estimated reclamation
and abandonment costs. SFAS No. 143 requires the fair value of a liability for
an asset retirement obligation to be recognized in the period in which the legal
obligation associated with the retirement of the long-lived asset is incurred.
When the liability is initially recorded, the offset is capitalized by
increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its present value each period, and the capitalized cost
is depreciated over the useful life of the related asset. To settle the
liability, the obligation is paid, and to the extent there is a difference
between the liability and the amount of cash paid, a gain or loss upon
settlement is recorded. Currently, there are no reclamation or abandonment
obligations associated with the land being utilized for exploitation.

Mineral Rights
- --------------
The Company follows FASB Staff Position amending SFAS No. 141 and 142 which
provides that certain mineral rights are considered tangible assets and that
mineral rights should be accounted for based on their substance. Mineral rights
are included in property, plant and equipment.

                                      -8-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided to write off the cost of property, plant and equipment
over their estimated useful lives using the straight-line method at the
following rates per annum:

         Buildings .....................................       20 years
         Plant and machinery ...........................       8 years
         Mineral rights ................................       50 years
         Office furniture and equipment ................       8 years

The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognized in the income statement.

Mineral rights, granted on two pieces of land located in the PRC, are recorded
at cost. Mineral rights are amortized ratably over the 50 year term of the
leases. This method is equivalent to the units of production method since the
proven and probable reserves of 780,000 tons exceed the expected production over
50 years (8,000 - 12,000 tons of annual practical capacity).

Construction in progress represents manufacturing plants under construction.
Construction in progress is stated at cost which includes the cost of
construction and purchase cost of plant and machinery. Construction in progress
for manufacturing plants is transferred to property, plant and equipment on the
commissioning date. Manufacturing plants are considered to be commissioned when
they are capable of producing saleable quality output in commercial quantities
on an ongoing basis.

Prepaid Land Lease
- ------------------
Prepaid land lease is stated at cost and amortized over the period of the lease
on the straight-line basis.

Inventories
- -----------
Inventories are stated at the lower of cost and net realizable value. Cost which
comprises direct materials and, where applicable, direct labor costs and those
overhead costs that have been incurred in bringing the inventories and work in
progress to their present locations and condition, is calculated using the
first-in, first-out method. Net realizable value is based on estimated selling
prices less estimated selling expenses.

                                      -9-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Income Taxes
- ------------
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial accounting
and reporting for income taxes. Under the liability method, deferred income tax
assets and liabilities are computed annually for temporary differences between
the financial statements and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.

Employee Benefits
- -----------------
The Company participates in employee social security plans, including pension,
medical, housing and other welfare benefits, organized by the government
authorities in accordance with relevant regulations. Except for the above social
security benefits, the Company has no additional commitment to other employee
welfare benefits.

According to the relevant regulations, premium and welfare benefit contributions
are remitted to the social welfare authorities and are calculated based on
percentages of the total salary of employees, subject to a certain ceiling.
Contributions to the plans are charged to the income statement as incurred.

Start-up Costs
- --------------
Start-up costs are expensed when incurred.

Shipping and Handling Fees and Costs
- ------------------------------------
The Company follows Emerging Issues Task Force ("EITF") No. 00-10, "Accounting
for Shipping and Handling Fees and Costs." The Company does not charge its
customers for shipping and handling. The Company classifies shipping and
handling costs as part of the cost of net sales. For the period ended December
31, 2005, shipping and handling costs were $362,465.

Recoverability of Long Lived Assets
- -----------------------------------
The Company follows SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be
recoverable. The Company is not aware of any events or circumstances which
indicate the existence of an impairment which would be material to the Company's
annual financial statements.

Advertising Costs
- -----------------
Advertising costs are expensed as incurred.

                                      -10-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 2 - INVENTORIES

Inventories consist entirely of raw materials used in the production of bromine.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

         Buildings ...................................       $   71,982
         Plant and machinery .........................        1,622,595
         Mineral rights ..............................          484,784
         Office furniture and equpment ...............           18,795
                                                             ----------
                                                              2,198,156
         Less: Accumulated depreciation ..............          108,605
                                                             ----------
                                                              2,089,551
         Construction in progress ....................          130,768
                                                             ----------

                                                             $2,220,319
                                                             ==========

Depreciation and amortization expense for the period ended December 31, 2005 was
$108,605.

NOTE 4 - PREPAID LAND LEASE

The prepaid land lease represents land use rights granted for the usage of a
piece of land located in the PRC for a term of 50 years. The prepaid lease is
amortized on a straight-line basis over the term of the lease.

NOTE 5 - DUE FROM RELATED COMPANY

Amount represents receivable due from a company whose shareholder and director
is also a shareholder and director of the Company. The amount due is unsecured
with no stated repayment terms.

NOTE 6 - DUE TO DIRECTOR

The amount due is unsecured, interest-free and with no stated repayment terms.

NOTE 7 - DUE TO RELATED PARTY

Amount represents payable due to a company whose shareholder and director is
also a shareholder and director of the Company.

NOTE 8 - RETAINED EARNINGS - APPROPRIATED

In accordance with the relevant PRC regulations and the Company's Articles of
Association, the Company is required to allocate its profit after tax to the
following reserves:

                                      -11-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 8 - RETAINED EARNINGS - APPROPRIATED (Continued)

Statutory Common Reserve Funds
- ------------------------------
The Company is required each year to transfer 10% of the profit after tax as
reported under the PRC statutory financial statements to the statutory common
reserve funds until the balance reaches 50% of the registered share capital.
This reserve can be used to make up any loss incurred or to increase share
capital. Except for the reduction of losses incurred, any other application
should not result in this reserve balance falling below 25% of the registered
capital.

Statutory Public Welfare Funds
- ------------------------------
The Company is required each year to transfer 5% of the profit after tax as
reported under the PRC statutory financial statements to the statutory public
welfare funds. This reserve is restricted to capital expenditure for employees'
collective welfare facilities that are owned by the Company. The statutory
public welfare funds are not available for distribution to the shareholders
(except on liquidation). Once capital expenditure for staff welfare facilities
has been made, an equivalent amount must be transferred from the statutory
public welfare funds to the discretionary common reserve funds.

NOTE 9 - COMMITMENT

The Company has entered into a contract for construction of a crude salt
project, with estimated cost of approximately $179,000.

NOTE 10 - OPERATING LEASE COMMITMENTS

The Company is obligated under a noncancellable operating lease for rental of
motor vehicles expiring December 31, 2006 for annual minimum lease payments of
approximately $15,000. The lease runs for an initial term of two years, with an
option to renew the lease when all terms are renegotiated.

The rent expense for the period ended December 31, 2005 was approximately
$15,000.

NOTE 11 - INCOME TAXES

As discussed in Note 1, the Company utilizes the asset and liability method of
accounting for income taxes in accordance with SFAS No. 109. The statutory PRC
tax rate is equivalent to the Company's effective tax rate. No provision for
deferred taxes has been made as there were no material temporary differences at
December 31, 2005.

NOTE 12 - MAJOR SUPPLIER

During 2005, the Company purchased 89% of it products from four suppliers. At
December 31, 2005, amounts due to those suppliers included in accounts payable
were $39,600. This concentration makes the Company vulnerable to a near-term
severe impact, should the relationships be terminated.

                                      -12-
<PAGE>

                 SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 13 - CUSTOMER CONCENTRATION

The Company sells a substantial portion of its product to a limited number of
customers. During the period ended December 31, 2005, sales to the Company's
four largest customers, based on net sales made to such customers, aggregated
$12,660,000, or approximately 89% of total net sales, and sales to the Company's
largest customer represented approximately 37% of total net sales. At December
31, 2005, amounts due from these customers were $325,193. This concentration
makes the Company vulnerable to a near-term severe impact, should the
relationships be terminated.

NOTE 14 - SUBSEQUENT EVENTS

On February 13, 2006, the Board of Directors authorized a dividend payment of
approximately $2,443,000.

In July 2006, the Company increased its registered capital by approximately
$868,000.

                                      -13-
<PAGE>

        DIVERSIFAX, INC. (DSFX) UNAUDITED PRO FORMA FINANCIAL STATEMENTS
        ----------------------------------------------------------------

The following unaudited pro forma financial statements for DSFX have been
prepared to illustrate the acquisition of Upper Class Group Limited and
Subsidiary in a merger transaction. Under accounting principles generally
accepted in the United States, the share exchange is considered to be a capital
transaction in substance, rather than a business combination. That is, the share
exchange is equivalent to the issuance of stock by Upper Class Group Limited and
Subsidiary for the net monetary assets of DSFX, accompanied by a
recapitalization, and is accounted for as a change in capital structure.
Accordingly, the accounting for the share exchange will be identical to that
resulting from a reverse acquisition, except no goodwill will be recorded. Under
reverse takeover accounting, the post reverse acquisition comparative historical
financial statements of the legal aquirer, DSFX, are those of the legal
acquiree, Upper Class Group Limited and Subsidairy, which are considered to be
the accounting acquirer.

The unaudited pro forma financial information combines the historical financial
information of DSFX and Upper Class Group Limited as of and for the period ended
December 31, 2005 and for the nine months ended September 30, 2006. The
unaudited pro forma balance sheet as of September 30, 2006 assumes the merger
was completed on that date. The unaudited pro forma statements of operations
give effect to the merger as if the merger had been completed on January 1,
2005.

Under the terms of the merger agreement, as of the effective dates describe
therein, upon completion of the proposed merger, all shareholders of Upper Class
Group Limited will receive a total amount of 26,500,000 shares of voting common
stock of DSFX in exchange for all shares of Upper Class Group Limited common
stock held by all shareholders.

These unaudited pro forma financial statements are for information purposes
only. They do not purport to indicate the results that would have actually been
obtained had the acquisition been completed on the assumed dates or for the
periods presented, or which may be realized in the future. The accounting
adjustments reflected in these unaudited pro forma consolidated financial
statements included herein are preliminary and are subject to change. The
accompanying notes are an integral part of these pro forma consolidated
financial statements.

                                      -1-
<PAGE>

<TABLE>
                   Unaudited Proforma Condensed Combined Statement Of Financial Condition
                                              SEPTEMBER 30,2006
<CAPTION>

ASSETS
                                           DIVERSIFAX, INC.   UPPER CLASS GROUP      PRO-FORMA
                                              (8/31/06)         LTD AND SUB          ADJUSTMENT    Pro Forma
                                           ----------------   -----------------     -----------    ---------
<S>                                          <C>              <C>                   <C>            <C>
CURRENT ASSETS

Cash ......................................            0           3,296,672                       3,296,672
Note receivable,current ...................            0                   0                               0
Accounts receivable .......................            0                   0                               0
Inventories ...............................            0             148,610                         148,610
Prepaid land lease ........................            0                 496                             496
TOTAL CURRENT ASSETS ......................            0           3,445,778                       3,445,778
                                             -----------      --------------        -----------    ---------
Due from related party ....................            0           1,166,340                       1,166,340
Property, plant and equipment,net .........            0           2,129,095                       2,129,095
Prepaid land lease, net of current portion             0              23,938                          23,938
Note receivable ...........................            0                   0                               0
TOTAL ASSETS ..............................            0           6,765,151                       6,765,151
                                             ===========      ==============        ===========    =========

LIABILITIES AND STOCKHOLDERS'EQUITY

CURRENT LIABILITIES
Current maturities of long-term debt and
 notes payable ............................            0                   0                               0
Accounts payable and accrued expenses .....            0              50,704                          50,704
other current liabilities .................            0                   0                               0
Accrued payroll, stockholder ..............            0                   0                               0
Loan payable, officer/stockholder .........            0                   0                               0
Due to director ...........................            0               9,111                           9,111
Due to related party ......................            0              47,294                          47,294
Taxes payable .............................            0             921,433                         921,433
TOTAL CURRENT LIABILITIES .................            0           1,028,542                       1,028,542
                                             -----------      --------------        -----------    ---------
Long-term debt and notes payables, less
 current maturities .......................            0                   0                               0
TOTAL LIABILITIES .........................            0           1,028,542                       1,028,542
                                             ===========      ==============        ===========    =========

STOCKHOLDERS'EQUITY
Paid-in capital ...........................            0           1,332,430   1        272,931    1,605,361
Retained earnings-unappropriated ..........            0           3,239,875                       3,239,875
Retained earnings-appropriated
  Statutory common reserve fund ...........            0             669,477                         669,477
  Statutory public welfare fund ...........            0             334,738                         334,738
Cumulative translation adjustment .........            0             128,489                         128,489
Common stock, $0.001par value, 70,000,000
 shares authorized; 27,017,262 shares
 issued; 27,013,997 shares outstanding ....          517              31,600   1         (5,100)      27,017
Additional paid-in capital ................   14,617,735                   0   1    (14,617,735)           0
Accumulated deficit .......................  (14,349,904)                  0   1     14,349,904            0
                                             -----------      --------------        -----------    ---------
                                                 268,348           5,736,609                       6,004,957
                                             -----------      --------------        -----------    ---------
Less:Treasury stock; 3,265 shares at cost .     (268,348)                  0                        (268,348)
TOTAL STOCKHOLDERS'EQUITY .................            0           5,736,609                  0    5,736,609
                                             ===========      ==============        ===========    =========

TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY .            0           6,765,151                       6,765,151
                                             ===========      ==============        ===========    =========
</TABLE>
Pro-Forma Adjustments:
1.) To record the issuance of 26,500,000 shares of DSFX common stock to acquire
Upper Class Group Limited.

                                                     -2-
<PAGE>
<TABLE>
                                            PROFORMA
                                    STATEMENTS OF OPERATIONS

<CAPTION>

                                                                  DSFX
                                        --------------------------------------------------------
                                            Three Months Ended            Nine Months Ended
                                                 August 31,                  August 31,
                                        --------------------------    --------------------------
                                            2006           2005           2006           2005
                                        -----------    -----------    -----------    -----------
<S>                                     <C>            <C>            <C>            <C>
NET SALES ...........................             0              0              0              0
                                        -----------    -----------    -----------    -----------

OPERATING EXPENSES
  Cost of net sales .................             0              0              0              0
  General and administrative expenses             0              0              0              0
                                                  0              0              0              0
                                        -----------    -----------    -----------    -----------
INCOME FROM OPERATIONS ..............             0              0              0              0
                                        -----------    -----------    -----------    -----------

OTHER(INCOME)EXPENSES
  Other income ......................             0        (19,144)           (31)       (90,676)
  (Gain) on sale of investments .....             0              0        (64,002)             0
  Interest income ...................             0              0              0         (5,428)
  Interest expense ..................        10,000         10,130         30,054         30,152
                                             10,000         (9,014)       (33,979)       (65,952)
                                        -----------    -----------    -----------    -----------

NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS,NET OF TAX ...............       (97,754)       130,267       (225,420)       230,145
INCOME TAXES ........................             0              0              0              0
NET INCOME (LOSS) ...................      (107,754)       139,281       (191,441)       296,097
                                        ===========    ===========    ===========    ===========


                                               -3-
</TABLE>
<PAGE>
<TABLE>
                                            PROFORMA
                                    STATEMENTS OF OPERATIONS
                                          (continued)
<CAPTION>

                                                     Upper Class Group Ltd and Sub
                                        --------------------------------------------------------
                                            Three Months Ended            Nine Months Ended
                                               September 30,                 September 30,
                                        --------------------------    --------------------------
                                            2006           2005           2006          2005
                                        -----------    -----------    -----------    -----------
<S>                                     <C>            <C>            <C>            <C>
NET SALES ...........................     4,689,282      5,609,785     12,760,106      7,582,224
                                        -----------    -----------    -----------    -----------

OPERATING EXPENSES
  Cost of net sales .................             0              0              0              0
  General and administrative expenses        59,547         60,924        206,589        253,787
                                          2,792,239      3,421,399      7,725,338      5,369,691
                                        -----------    -----------    -----------    -----------
INCOME FROM OPERATIONS ..............     1,897,043      2,188,386      5,034,768      2,212,533
                                        -----------    -----------    -----------    -----------

OTHER(INCOME)EXPENSES
  Other income ......................             0              0              0              0
  (Gain) on sale of investments .....             0              0              0              0
  Interest income ...................          (248)           (16)          (791)          (207)
  Interest expense ..................             0              0              0              0
                                               (248)           (16)          (791)          (207)
                                        -----------    -----------    -----------    -----------

NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS,NET OF TAX ...............             0              0              0              0
INCOME TAXES ........................       596,039        716,542      1,653,018        734,860
NET INCOME (LOSS) ...................     1,301,252      1,471,860      3,382,541      1,477,880
                                        ===========    ===========    ===========    ===========


                                               -4-
</TABLE>
<PAGE>
<TABLE>
                                                PROFORMA
                                        STATEMENTS OF OPERATIONS
                                              (continued)
<CAPTION>

                                                                        PRO FORMA
                                                --------------------------------------------------------
                                                    Three Months Ended             Nine Months Ended
                                                       September 30,                 September 30,
                                                --------------------------    --------------------------
                                                    2006           2005           2006           2005
                                                -----------    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>            <C>
NET SALES ...................................     4,689,282      5,609,785     12,760,106      7,582,224
                                                -----------    -----------    -----------    -----------

OPERATING EXPENSES
  Cost of net sales .........................     2,732,692      3,360,475      7,518,749      5,115,904
  General and administrative expenses .......        59,547         60,924        206,589        253,787
                                                  2,792,239      3,421,399      7,725,338      5,369,691
                                                -----------    -----------    -----------    -----------
INCOME FROM OPERATIONS ......................     1,897,043      2,188,386      5,034,768      2,212,533
                                                -----------    -----------    -----------    -----------

OTHER(INCOME)EXPENSES
  Other income ..............................             0        (19,144)           (31)       (90,676)
  (Gain) on sale of investments .............             0              0        (64,002)             0
  Interest income ...........................          (248)           (16)          (791)        (5,635)
  Interest expense ..........................        10,000         10,130         30,054         30,152
                                                      9,752         (9,030)       (34,770)       (66,159)
                                                -----------    -----------    -----------    -----------

NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS,NET OF TAX .......................       (97,754)       130,267       (225,420)       230,145
INCOME TAXES ................................       596,039        716,542      1,653,018        734,860
NET INCOME (LOSS) ...........................     1,193,498      1,611,141      3,191,100      1,773,977
                                                ===========    ===========    ===========    ===========

EPS .........................................          0.04           0.06           0.12           0.07
                                                ===========    ===========    ===========    ===========

Weighted Average Number of Shares Outstanding    29,837,450     26,852,350     26,592,500     25,342,528
                                                ===========    ===========    ===========    ===========


                                                   -5-
</TABLE>
<PAGE>
<TABLE>
                                            PROFORMA
                                    STATEMENTS OF OPERATIONS
                                   YEAR ENDED DECEMBER 31,2005

<CAPTION>

                                                                   Upper Class
                                                    DSFX          Group Limited
                                                  (11/30/05)         and Sub         Pro Forma
                                                 -----------       -----------      -----------
<S>                                              <C>               <C>              <C>
NET SALES ...................................      1,023,476        14,344,296       15,367,772
                                                 -----------       -----------      -----------

OPERATING EXPENSES
  Cost of net sales .........................        331,301         9,095,301        9,426,602
  Selling general and administrative expenses        511,139           304,451          815,590
  Depreciation expense ......................          9,191                 0            9,191
                                                     851,631         9,399,752       10,251,383
                                                 -----------       -----------      -----------
INCOME FROM OPERATIONS ......................        171,845         4,944,544        5,116,389
                                                 -----------       -----------      -----------

OTHERINCOME(EXPENSES):
  Other income ..............................        259,776                 0          259,776
  Impairment & share of unconsolidated ......       (430,000)                0         (430,000)
  Interest income ...........................          6,984               446            7,430
  Interest expense ..........................        (42,005)                0          (42,005)
                                                    (205,245)              446         (204,799)
                                                 -----------       -----------      -----------
NET INCOME (LOSS) BEFORE INCOME TAXES .......        (33,400)        4,944,990        4,911,590
INCOME TAXES ................................              0         1,632,760        1,632,760
NET INCOME (LOSS) ...........................        (33,400)        3,312,230        3,278,830
                                                 ===========       ===========      ===========

EPS .........................................                                              0.12
                                                                                    ===========

Weighted Average Number of Shares Outstanding                                        27,323,583
                                                                                    ===========


                                               -6-
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>ex_10-1.txt
<DESCRIPTION>AGREEMENT AND PLAN OF MERGER
<TEXT>

                                                                    EXHIBIT 10.1

                          AGREEMENT AND PLAN OF MERGER

         This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") has been made as
of December 10, 2006, by and among Diversifax, Inc., a Delaware corporation
("DSFX"), DFAX Acquisition Vehicle, Inc., a Delaware corporation and a
wholly-owned Subsidiary of DSFX ("SUB"), Upper Class Group Limited, a British
Virgin Islands corporation ("UCG"), and the shareholders of UCG, each of whom is
identified on Schedule A to this Agreement (the "UCG SHAREHOLDERS").

         WHEREAS, the respective Boards of Directors of DSFX, Sub and UCG have
approved the merger, pursuant and subject to the terms and conditions of this
Agreement, of Sub with and into UCG (the "MERGER"), whereby all of the issued
and outstanding shares of the Common Stock of UCG (the "UCG COMMON STOCK") will
be converted into the right to receive a specified number of shares of the
Common Stock of DSFX (the "DSFX COMMON STOCK"); and the parties each desire to
make certain representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;

         NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, the parties agree to
effect the Merger on the terms and conditions herein provided and further agree
as follows:

                             ARTICLE 1. DEFINITIONS

         1.1 DEFINITIONS.

         In addition to the other definitions contained in this Agreement, the
following terms will, when used in this Agreement, have the following respective
meanings:

         "AFFILIATE" means a Person that, directly or indirectly, controls, is
controlled by, or is under common control with, the referenced party.

         "CLAIM" means any contest, claim, demand, assessment, action, suit,
cause of action, complaint, litigation, proceeding, hearing, arbitration,
investigation or notice of any of the foregoing involving any Person.

         "CLOSING" means the consummation of the Merger.

         "CODE" means the Internal Revenue Code of 1986, as amended, together
with all rules and regulations promulgated thereunder.

         "CONSTITUENT CORPORATIONS" means UCG and Sub, as the constituent
corporations of the Merger.

         "GAAP" means United States generally accepted accounting practices.

         "GCL" means the Delaware General Corporation Law.

         "PERSON" means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other entity, and
any Governmental Entity.

                                     - 1 -
<PAGE>

         "RECORD HOLDER" means a holder of record of UCG Common Stock as shown
on the regularly maintained stock transfer records of UCG.

         "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly through an Affiliate, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the Board of Directors or other governing body thereof.

         "SURVIVING CORPORATION" means UCG, as the surviving corporation of the
Merger.

         "U.S." means the United States of America.

         1.2 INTERPRETATION.

         In this Agreement, unless the express context otherwise requires:

         (a) the words "HEREIN," "HEREOF" and "HEREUNDER and words of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement;

         (b) references to "ARTICLE" or "SECTION" are to the respective Articles
and Sections of this Agreement, and references to "EXHIBIT" or "SCHEDULE" are to
the respective Exhibits and Schedules annexed hereto;

         (c) references to a "PARTY" means a party to this Agreement and include
references to such party's successors and permitted assigns;

         (d) references to a "THIRD PARTY" means a Person that is neither a
Party to this Agreement nor an Affiliate thereof;

         (e) the terms "DOLLARS" and "$" means U.S. dollars;

         (f) terms defined in the singular have a comparable meaning when used
in the plural, and vice versa;

         (g) the masculine pronoun includes the feminine and the neuter, and
vice versa, as appropriate in the context; and

         (h) wherever the word "INCLUDE," "INCLUDES" or "INCLUDING is used in
this Agreement, it will be deemed to be followed by the words "without
limitation."

                              ARTICLE 2. THE MERGER

         2.1 Effective Time of the Merger

         Subject to the provisions of this Agreement, the Merger will be
consummated by the filing with the Secretary of State of the State of Delaware
and the appropriate corporation office in the British Virgin Islands ("BVI") of
articles of merger, in such form as required by, and signed and attested in
accordance with, the relevant provisions of the GCL and the corporate law of the
BVI, as the case may be (the time of such filing or such later time and date as
is specified in such filing being the "EFFECTIVE TIME").

                                     - 2 -
<PAGE>

         2.2 CLOSING.

         The Closing will take place at 10:00 a.m., local time, on the earliest
date practicable after all of the conditions set forth in Articles 7 and 8 are
satisfied or waived by the appropriate party (the "CLOSING DATE").

         2.3 EFFECTS OF THE MERGER.

         By virtue of the Merger and without the necessity of any action by or
on behalf of the Constituent Corporations, or either of them:

         (a) at the Effective Time, (i) the separate existence of Sub will
cease, and Sub will be merged with and into UCG, and (ii) the certificate of
incorporation and bylaws of UCG as in effect immediately prior to the Effective
Time will be the certificate of incorporation and bylaws of the Surviving
Corporation until thereafter amended; and

         (b) at and after the Effective Time, the Surviving Corporation will
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of the Constituent Corporations will be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest will be thereafter as effectually
be the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, will not revert or be in
any way impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations will be preserved unimpaired, and all
debts, liabilities and duties of the respective Constituent Corporations will
thereafter attach to the Surviving Corporation, and may be enforced against it
to the same extent as if such debts and liabilities had been incurred or
contracted by it.

                  ARTICLE 3. EFFECT OF MERGER ON CAPITAL STOCK

         3.1 EFFECT ON CAPITAL STOCK.

         As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder of shares of UCG Common Stock or of shares of
the capital stock of Sub:

         (a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub will be converted into the right to receive one fully paid
and non-assessable share of the capital stock of the Surviving Corporation.

         (b) CANCELLATION OF TREASURY STOCK. Shares of UCG Common Stock, if any,
that are held by UCG as treasury stock will be cancelled and retired and will
cease to exist, and no Merger Consideration will be delivered in exchange
therefor. Shares of DSFX Common Stock, if any, owned by UCG as of the Effective
Time will remain unaffected by the Merger.

         (c) EXCHANGED SHARES; STOCK MERGER CONSIDERATION.

                                     - 3 -
<PAGE>

                  (i) "EXCHANGED SHARES" means all shares of UCG Common Stock
         issued and outstanding immediately prior to the Effective Time other
         than shares of UCG Common Stock, if any, held by UCG as treasury stock.

                  (ii) The consideration payable in the Merger will consist of
         an aggregate of twenty six million five hundred thousand (26,500,000)
         shares of DSFX Common Stock, which shall be distributed among the UCG
         Shareholders in accordance with Schedule A hereto (the "STOCK MERGER
         CONSIDERATION").

         (d) EXCHANGE OF EXCHANGED SHARES FOR STOCK MERGER CONSIDERATION. As of
the Effective Time, by virtue of the Merger, each issued and outstanding
Exchanged Share will be converted into the right to receive the Stock Merger
Consideration, payable, to the Record Holders of Exchanged Shares at the
Effective Time. As of the Effective Time, all shares of UCG Common Stock will no
longer be outstanding and will automatically be cancelled and retired and will
cease to exist, and each holder of a certificate representing any such shares
will cease to have any rights with respect thereto, except the right to receive
the Stock Merger Consideration therefor, without interest, upon the surrender of
such certificate in accordance with Section 3.2.

         3.2 EXCHANGE OF STOCK MERGER CONSIDERATION FOR EXCHANGED SHARES.

         (a) EXCHANGE. On the Closing Date, the holders of all of the UCG Common
Stock shall deliver to DSFX certificates or other documents evidencing all of
the issued and outstanding UCG Common Stock, duly endorsed in blank or with
executed power attached thereto in transferable form. In exchange for all of the
UCG Common Stock tendered pursuant hereto, DSFX shall issue to UCG Shareholders
the Stock Merger Consideration.

         (b) NO FURTHER OWNERSHIP RIGHTS IN UCG COMMON STOCK. All shares of DSFX
Common Stock issued upon the surrender for exchange of shares of UCG Common
Stock in accordance with the terms hereof will be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of UCG Common Stock,
and there will be no further registration of transfers of the shares of UCG
Common Stock (other than shares held directly or indirectly by DSFX) after the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or its transfer agent for any reason, such Certificates
will be cancelled and exchanged as provided by this Article 3.

                ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UCG

         UCG represents and warrants to DSFX and to Sub as follows, as of the
date hereof and as of the Closing Date:

         4.1 ORGANIZATION.

         UCG is a corporation duly organized, validly existing and in good
standing under the laws of British Virgin Island and has the corporate power and
is duly authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
entity in the country or states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. Included in the attached Schedules (as hereinafter defined) are

                                     - 4 -
<PAGE>

complete and correct copies of the articles of incorporation, bylaws and
amendments thereto as in effect on the date hereof. The execution and delivery
of this Agreement does not and the consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not, violate any
provision of UCG's certificate of incorporation or bylaws. UCG has full power,
authority and legal right and has taken all action required by law, its articles
of incorporation, bylaws or otherwise to authorize the execution and delivery of
this Agreement.

         4.2 CAPITALIZATION.

         The authorized capitalization of UCG consists of 50,000 shares of
common stock, no par value and no preferred shares. As of the date hereof, there
are 50,000 shares of common stock issued and outstanding. All issued and
outstanding common shares have been legally issued, fully paid, are
nonassessable and not issued in violation of the preemptive rights of any other
person. UCG has no other securities, warrants or options authorized or issued.

         4.3 SUBSIDIARIES.

         UCG owns 100% of Shouguang City Haoyuan Chemical Company Limited, a
corporation organized under the laws of China.

         4.4 TAX MATTERS; BOOKS & RECORDS

         (a) The books and records, financial and others, of UCG are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices; and

         (b) UCG has no liabilities with respect to the payment of any country,
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties).

         (c) UCG shall remain responsible for all debts incurred prior to the
closing.

         4.5 INFORMATION.

         The information concerning UCG as set forth in this Agreement and in
the attached Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.

         4.6 TITLE AND RELATED MATTERS.

         UCG has good and marketable title to and is the sole and exclusive
owner of all of its properties, inventory, interests in properties and assets,
real and personal (collectively, the "Assets") free and clear of all liens,
pledges, charges or encumbrances. Except as set forth in the Schedules attached
hereto, UCG owns free and clear of any liens, claims, encumbrances, royalty
interests or other restrictions or limitations of any nature whatsoever and all
procedures, techniques, marketing plans, business plans, methods of management
or other information utilized in connection with UCG's business. Except as set
forth in the attached Schedules, no third party has any right to, and UCG has
not received any notice of infringement of or conflict with asserted rights of

                                     - 5 -
<PAGE>

others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a materially adverse affect on the business,
operations, financial conditions or income of UCG or any material portion of its
properties, assets or rights.

         4.7 LITIGATION AND PROCEEDINGS

         There are no actions, suits or proceedings pending or threatened by or
against or affecting UCG, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or before any
arbitrator of any kind that would have a material adverse effect on the
business, operations, financial condition, income or business prospects of UCG.
UCG does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality.

         4.8 CONTRACTS.

         On the Closing Date, except as set forth on Schedule 4.8:

         (a) there are no material contracts, agreements, franchises, license
agreements, or other commitments to which UCG is a party or by which it or any
of its properties are bound;

         (b) UCG is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award which materially and
adversely affects, or in the future may (as far as UCG can now foresee)
materially and adversely affect, the business, operations, properties, assets or
conditions of UCG; and

         (c) UCG is not a party to any material oral or written: (i) contract
for the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension, benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation
for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; or (vii) contract, agreement, or other
commitment involving payments by it for more than $10,000 in the aggregate.

         4.9 NO CONFLICT WITH OTHER INSTRUMENTS.

         The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust or other material contract, agreement or
instrument to which UCG is a party or to which any of its properties or
operations are subject.

                                     - 6 -
<PAGE>

         4.10 MATERIAL CONTRACT DEFAULTS.

         To the best of UCG's knowledge and belief, it is not in default in any
material respect under the terms of any outstanding contract, agreement, lease
or other commitment which is material to the business, operations, properties,
assets or condition of UCG, and there is no event of default in any material
respect under any such contract, agreement, lease or other commitment in respect
of which UCG has not taken adequate steps to prevent such a default from
occurring.

         4.11 GOVERNMENTAL AUTHORIZATIONS.

         To the best of UCG's knowledge, UCG has all licenses, franchises,
permits and other governmental authorizations that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, no authorization, approval, consent or order of,
or registration, declaration or filing with, any court or other governmental
body is required in connection with the execution and delivery by UCG of the
transactions contemplated hereby.

         4.12 COMPLIANCE WITH LAWS AND REGULATIONS.

         To the best of UCG's knowledge and belief, UCG has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of UCG or would not result in UCG's incurring any material liability.

         4.13 INSURANCE.

         All of the insurable properties of UCG are insured for UCG's benefit
under valid and enforceable policy or policies containing substantially
equivalent coverage and will be outstanding and in full force at the Closing
Date.

         4.14 APPROVAL OF AGREEMENT.

         The directors of UCG have authorized the execution and delivery of the
Agreement and have approved the transactions contemplated hereby.

         4.15 MATERIAL TRANSACTIONS OR AFFILIATIONS.

         As of the Closing Date, there will exist no material contract,
agreement or arrangement between UCG and any person who was at the time of such
contract, agreement or arrangement an officer, director or person owning of
record, or known by UCG to own beneficially, ten percent (10%) or more of the
issued and outstanding Common Shares of UCG and which is to be performed in
whole or in part after the date hereof. UCG has no commitment, whether written
or oral, to lend any funds to, borrow any money from or enter into any other
material transactions with, any such affiliated person.

                ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF DSFX

         DSFX represents and warrants to UCG, as of the date hereof and as of
the Closing Date, as follows:

                                     - 7 -
<PAGE>

         5.1 ORGANIZATION.

         DSFX is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware and has the corporate power and is duly
authorized, qualified, franchised and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
corporation in the jurisdiction in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. The execution and delivery of this Agreement does not and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not violate any provision of DSFX's articles of
incorporation or bylaws. DSFX has full power, authority and legal right and has
taken all action required by law, its articles of incorporation, its bylaws or
otherwise to authorize the execution and delivery of this Agreement.

         5.2 CAPITALIZATION.

         The authorized capitalization of DSFX consists of 70,000,000 shares of
common stock, $0.001 par value per share. As of the date hereof, DSFX has
approximately 517,262 shares of common stock outstanding. All issued and
outstanding shares are legally issued, fully paid and nonassessable and are not
issued in violation of the preemptive or other rights of any person.

         5.3 SUBSIDIARIES.

         DSFX has no subsidiaries other than Sub.

         5.4 TAX MATTERS: BOOKS AND RECORDS.

         (a) The books and records, financial and others, of DSFX are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices; and

         (b) DSFX has no liabilities with respect to the payment of any country,
federal, state, county, or local taxes (including any deficiencies, interest or
penalties).

         (c) DSFX shall remain responsible for all debts incurred by DSFX prior
to the date of closing.

         5.5 LITIGATION AND PROCEEDINGS.

         There are no actions, suits, proceedings or investigations pending or
threatened by or against or affecting DSFX or its properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind that would have a
material adverse affect on the business, operations, financial condition or
income of DSFX DSFX is not in default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.

                                     - 8 -
<PAGE>

         5.6 MATERIAL CONTRACT DEFAULTS.

         DSFX is not in default in any material respect under the terms of any
outstanding contract, agreement, lease or other commitment which is material to
the business, operations, properties, assets or condition of DSFX, and there is
no event of default in any material respect under any such contract, agreement,
lease or other commitment in respect of which DSFX has not taken adequate steps
to prevent such a default from occurring.

         5.7 INFORMATION.

         The information concerning DSFX as set forth in this Agreement and in
the attached Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made in light of the circumstances
under which they were made, not misleading.

         5.8 TITLE AND RELATED MATTERS.

         DSFX has good and marketable title to and is the sole and exclusive
owner of all of its properties, inventory, interest in properties and assets,
real and personal (collectively, the "Assets") free and clear of all liens,
pledges, charges or encumbrances. DSFX owns free and clear of any liens, claims,
encumbrances, royalty interests or other restrictions or limitations of any
nature whatsoever and all procedures, techniques, marketing plans, business
plans, methods of management or other information utilized in connection with
DSFX's business. No third party has any right to, and DSFX has not received any
notice of infringement of or conflict with asserted rights of other with respect
to any product, technology, data, trade secrets, know-how, proprietary
techniques, trademarks, service marks, trade names or copyrights which, singly
on in the aggregate, if the subject of an unfavorable decision ruling or
finding, would have a materially adverse affect on the business, operations,
financial conditions or income of DSFX or any material portion of its
properties, assets or rights.

         5.9 CONTRACTS.

         On the Closing Date:

         (a) There are no material contracts, agreements franchises, license
agreements, or other commitments to which DSFX is a party or by which it or any
of its properties are bound;

         (b) DSFX is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award materially and adversely
affects, or in the future may (as far as DSFX can now foresee) materially and
adversely affect, the business, operations, properties, assets or conditions of
DSFX; and

         (c) DSFX is not a party to any material oral or written: (i) contract
for the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation

                                     - 9 -
<PAGE>

for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties, of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) contract, agreement or other commitment
involving payments by it for more than $10,000 in the aggregate.

         5.10 COMPLIANCE WITH LAWS AND REGULATIONS.

         To the best of DSFX's knowledge and belief, DSFX has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of DSFX or would not result in DSFX incurring material liability.

         5.11 INSURANCE.

         DSFX maintains no insurance policies.

         5.12 APPROVAL OF AGREEMENT.

         The directors of DSFX have authorized the execution and delivery of the
Agreement by and have approved the transactions contemplated hereby.

         5.13 MATERIAL TRANSACTIONS OR AFFILIATIONS.

         There are no material contracts or agreements of arrangement between
DSFX and any person, who was at the time of such contract, agreement or
arrangement an officer, director or person owning of record, or known to
beneficially own ten percent (10%) or more of the issued and outstanding Common
Shares of DSFX and which is to be performed in whole or in part after the date
hereof. Except as disclosed in Schedule 5.13, DSFX has no commitment, whether
written or oral, to lend any funds to, borrow any money from or enter into
material transactions with any such affiliated person.

         5.14 NO CONFLICT WITH OTHER INSTRUMENTS.

         The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust or other material contract, agreement or
instrument to which DSFX is a party or to which any of its properties or
operations are subject.

         5.15 GOVERNMENTAL AUTHORIZATIONS.

         DSFX has all licenses, franchises, permits or other governmental
authorizations legally required to enable it to conduct its business in all
material respects as conducted on the date hereof. Except for compliance with
federal and state securities and corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, or registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by DSFX of this Agreement and the consummation of the
transactions contemplated hereby.

                                     - 10 -
<PAGE>

                          ARTICLE 6. SPECIAL COVENANTS

         6.1 ACCESS TO PROPERTIES AND RECORDS.

         Prior to closing, DSFX and UCG will each afford to the officers and
authorized representatives of the other full access to the properties, books and
records of each other, in order that each may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of the other
and each will furnish the other with such additional financial and operating
data and other information as to the business and properties of each other, as
the other shall from time to time reasonably request.

         6.2 AVAILABILITY OF RULE 144.

         DSFX and UCG Shareholders holding "restricted securities, " as that
term is defined in Rule 144 promulgated pursuant to the Securities Act will
remain as "restricted securities". DSFX is under no obligation to register such
shares under the Securities Act, or otherwise. The stockholders of DSFX and UCG
holding restricted securities of DSFX and UCG as of the date of this Agreement
and their respective heirs, administrators, personal representatives, successors
and assigns, are intended third party beneficiaries of the provisions set forth
herein. The covenants set forth in this Section 6.2 shall survive the Closing
and the consummation of the transactions herein contemplated.

         6.3 THE STOCK MERGER CONSIDERATION.

         The consummation of this Agreement, including the issuance of the DSFX
Common Shares to the UCG Shareholders as contemplated hereby, constitutes the
offer and sale of securities under the Securities Act, and applicable state
statutes. Such transaction shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such statutes that
depend, inter alia, upon the circumstances under which the UCG Shareholders
acquire such securities.

         6.4 THIRD PARTY CONSENTS.

         DSFX and UCG agree to cooperate with each other in order to obtain any
required third party consents to this Agreement and the transactions herein
contemplated.

         6.5 ACTIONS PRIOR AND SUBSEQUENT TO CLOSING.

         (a) From and after the date of this Agreement until the Closing Date,
except as permitted or contemplated by this Agreement, DSFX and UCG will each
use its best efforts to:

                  (i) maintain and keep its properties in states of good repair
         and condition as at present, except for depreciation due to ordinary
         wear and tear and damage due to casualty;

                  (ii) maintain in full force and effect insurance comparable in
         amount and in scope of coverage to that now maintained by it; and

                                     - 11 -
<PAGE>

                  (iii) perform in all material respects all of its obligations
         under material contracts, leases and instruments relating to or
         affecting its assets, properties and business.

         (b) From and after the date of this Agreement until the Closing Date,
DSFX will not, without the prior consent of UCG:

                  (i) except as otherwise specifically set forth herein, make
         any change in its articles of incorporation or bylaws;

                  (ii) declare or pay any dividend on its outstanding Common
         Shares, except as may otherwise be required by law, or effect any stock
         split or otherwise change its capitalization, except as provided
         herein;

                  (iii) enter into or amend any employment, severance or
         agreements or arrangements with any directors or officers;

                  (iv) grant, confer or award any options, warrants, conversion
         rights or other rights not existing on the date hereof to acquire any
         Common Shares; or

                  (v) purchase or redeem any Common Shares.

         6.6 INDEMNIFICATION.

         (a) DSFX hereby agrees to indemnify UCG, each of the officers, agents
and directors and current shareholders of UCG as of the Closing Date against any
loss, liability, claim, damage or expense (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject to or rising out of or based
on any inaccuracy appearing in or misrepresentation made in this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement; and

(B) UCG hereby agrees to indemnify DSFX, each of the officers, agents, directors
and current shareholders of DSFX as of the Closing Date against any loss,
liability, claim, damage or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened or any claim whatsoever), to
which it or they may become subject arising out of or based on any inaccuracy
appearing in or misrepresentation made in this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.

         6.7 UCG SHAREHOLDER REPRESENTATIONS. Each of the UCG Shareholders
represents and warrants as follows:

         (a) as of the date of this Agreement each of the UCG Shareholders was,
and at the Closing Date it is, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such UCG Shareholder has not been formed solely
for the purpose of acquiring the DSFX Common Stock. Each UCG Shareholder is not
a registered broker-dealer under Section 15 of the Exchange Act.

                                     - 12 -
<PAGE>

         (b) each of the UCG Shareholders are knowledgeable and experienced in
finance and business matters and thus they are able to evaluate the risks and
merits of acquiring the shares of Common Stock of DSFX;

         (c) each of the UCG Shareholders are able to bear the economic risk of
purchasing the DSFX common stock;

         (d) DSFX has provided the UCG Shareholders with access to the type of
information normally provided in a prospectus;

         (e) DSFX did not use any form of public solicitation or general
advertising in connection with the issuance of the shares;

         (f) as to the following UCG Shareholders (Ming Yang, Wenxiang Yu, Zhi
Yang, Yundai Liu, Yongxia Cao, First Capital Limited, China US Bridge Capital
Limited, Shenzhen Dingyi Investment Company Limited, and Shenzhen Huayin
Guaranty and Investment Company Limited (collectively the "Offshore UCG
Shareholders") the offer of such securities was not made to a person in the
United States and either (A) at the time the buy order was originated, each of
the Offshore UCG Shareholders was outside the United States (in China), or DSFX
and any person acting on its behalf reasonably believed that each Offshore UCG
Shareholders was outside the United States, or (B) the transaction was not
executed on or through the facilities of the Over the Counter Bulletin Board and
neither DSFX nor any person acting on its behalf knows that the transaction has
been prearranged with a person in the United States;

         (g) the transactions contemplated hereby are bona fide and not for the
purpose of "washing off' the resale restrictions imposed because the securities
are "restricted securities" (as that term is defined in Rule 144(a)(3) under the
1933 Act);

         (h) each of the UCG Shareholders understands and acknowledges that none
of the DSFX Common Stock has been registered under the Securities Act. Each UCG
Shareholder is acquiring the DSFX Common Stock as principal for its own account
and not with a view to or for distributing or reselling such securities or any
part thereof, without prejudice, however, to such UCG Shareholder's right,
subject to the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such UCG Shareholder to hold the securities for any period of time. Such UCG
Shareholder is acquiring the DSFX Common Stock hereunder in the ordinary course
of its business. Such UCG Shareholders does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
DSFX Common Stock.

               ARTICLE 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS
                                 OF DSFX AND SUB

         The obligations of DSFX and Sub under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:

                                     - 13 -
<PAGE>

         7.1 ACCURACY OF REPRESENTATIONS.

         The representations and warranties made by UCG in this Agreement were
true when made and shall be true at the Closing Date with the same force and
effect as if such representations and warranties were made at the Closing Date
(except for changes therein permitted by this Agreement), and UCG shall have
performed or compiled with all covenants and conditions required by this
Agreement to be performed or complied with by UCG prior to or at the Closing UCG
shall be furnished with a certificate, signed by a duly authorized officer of
UCG and dated the Closing Date, to the foregoing effect.

         7.2 DIRECTOR APPROVAL.

         The Board of Directors of DSFX shall have approved this Agreement and
the transactions contemplated herein.

         7.3 OFFICER'S CERTIFICATE.

         DSFX shall have been furnished with a certificate dated the Closing
Date and signed by a duly authorized officer of UCG to the effect that: (a) the
representations and warranties of UCG set forth in the Agreement and in all
exhibits, schedules and other documents furnished in connection herewith are in
all material respects true and correct as if made on the Effective Date; (b) UCG
has performed all covenants, satisfied all conditions, and complied with all
other terms and provisions of this Agreement to be performed, satisfied or
complied with by it as of the Effective Date; (c) since such date and other than
as previously disclosed to DSFX, UCG has not entered into any material
transaction other than transactions which are usual and in the ordinary course
if its business; and (d) no litigation, proceeding, investigation or inquiry is
pending or, to the best knowledge of UCG, threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated by
this Agreement or, to the extent not disclosed in the UCG Schedules, by or
against UCG which might result in any material adverse change in any of the
assets, properties, business or operations of UCG.

         7.4 NO MATERIAL ADVERSE CHANGE.

         Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of UCG.

         7.5 OTHER ITEMS.

         DSFX shall have received such further documents, certificates or
instruments relating to the transactions contemplated hereby as DSFX may
reasonably request.

               ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS
                         OF UCG AND THE UCG SHAREHOLDERS

         The obligations of UCG and the UCG Shareholders under this Agreement
are subject to the satisfaction, at or before the Closing date (unless otherwise
indicated herein), of the following conditions:

                                     - 14 -
<PAGE>

         8.1 ACCURACY OF REPRESENTATIONS.

         The representations and warranties made by DSFX in this Agreement were
true when made and shall be true as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and DSFX
shall have performed and complied with all covenants and conditions required by
this Agreement to be performed or complied with by DSFX prior to or at the
Closing. UCG shall have been furnished with a certificate, signed by a duly
authorized executive officer of DSFX and dated the Closing Date, to the
foregoing effect.

         8.2 DIRECTOR APPROVAL.

         The Board of Directors of UCG shall have approved this Agreement and
the transactions contemplated herein.

         8.3 NO MATERIAL ADVERSE CHANGE.

         Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of DSFX

                             ARTICLE 9. TERMINATION

         9.1 TERMINATION RIGHTS.

         (a) This Agreement may be terminated by the board of directors or
majority interest of Shareholders of either DSFX or UCG, respectively, at any
time prior to the Closing Date if:

                  (i) there shall be any action or proceeding before any court
         or any governmental body which shall seek to restrain, prohibit or
         invalidate the transactions contemplated by this Agreement and which,
         in the judgment of such board of directors, made in good faith and
         based on the advice of its legal counsel, makes it inadvisable to
         proceed with the exchange contemplated by this Agreement; or

                  (ii) any of the transactions contemplated hereby are
         disapproved by any regulatory authority whose approval is required to
         consummate such transactions.

         In the event of termination pursuant to this paragraph (a), no
obligation, right, or liability shall arise hereunder and each party shall bear
all of the expenses incurred by it in connection with the negotiation, drafting
and execution of this Agreement and the transactions herein contemplated.

         (b) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of DSFX if UCG shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of UCG contained herein

                                     - 15 -
<PAGE>

shall be inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days written notice thereof is given to UCG. If this
Agreement is terminated pursuant to this paragraph (b), this Agreement shall be
of no further force or effect and no obligation, right or liability shall arise
hereunder.

         (c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of UCG if DSFX shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of DSFX contained
herein shall be inaccurate in any material respect, which noncompliance or
inaccuracy is not cured after 20 days written notice thereof is given to DSFX If
this Agreement is terminated pursuant to this paragraph (d), this Agreement
shall be of no further force or effect and no obligation, right or liability
shall arise hereunder.

         (d) In the event of termination pursuant to paragraph (b) and (c)
hereof, the breaching party shall bear all of the expenses incurred by the other
party in connection with the negotiation, drafting and execution of this
Agreement and the transactions herein contemplated.

                            ARTICLE 10. MISCELLANEOUS

         10.1 BROKERS AND FINDERS.

         Each party hereto hereby represents and warrants that it is under no
obligation, express or implied, to pay certain finders in connection with the
bringing of the parties together in the negotiation, execution, or consummation
of this Agreement. The parties each agree to indemnify the other against any
claim by any third person for any commission, brokerage or finder's fee or other
payment with respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.

         10.2 LAW, FORUM AND JURISDICTION.

         This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York, United States of America, except for
applicable provisions of the Delaware General Corporation Law, which shall
control to the extent applicable.

         10.3 NOTICES.

         Any notices or other communications required or permitted hereunder
shall be sufficiently given if personally delivered to it or sent by registered
mail or certified mail, postage prepaid, or by prepaid telegram addressed as
follows:

         If to DSFX: 10880 Wilshire Blvd Suite 2250, Los Angeles, CA 90024

         If to UCG: Haoyuan Chemical Company Limited, Chengming Industrial Park,
Shouguang City, Shandong, P.R. China 262714

         or such other addresses as shall be furnished in writing by any party
in the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed or
telegraphed.

                                     - 16 -
<PAGE>

         10.4 ATTORNEYS' FEES.

         In the event that any party institutes any action or suit to enforce
this Agreement or to secure relief from any default hereunder or breach hereof,
the breaching party or parties shall reimburse the non-breaching party or
parties for all costs, including reasonable attorneys' fees, incurred in
connection therewith and in enforcing or collecting any judgment rendered
therein.

         10.5 CONFIDENTIALITY.

         Each party hereto agrees with the other party that, unless and until
the transactions contemplated by this Agreement have been consummated, they and
their representatives will hold in strict confidence all data and information
obtained with respect to another party or any subsidiary thereof from any
representative, officer, director or employee, or from any books or records or
from personal inspection, of such other party, and shall not use such data or
information or disclose the same to others, except: (i) to the extent such data
is a matter of public knowledge or is required by law to be published; and (ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement.

         10.6 SCHEDULES; KNOWLEDGE.

         Each party is presumed to have full knowledge of all information set
forth in the other party's schedules delivered pursuant to this Agreement.

         10.7 THIRD PARTY BENEFICIARIES.

         This contract is solely among the parties hereto and except as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.

         10.8 ENTIRE AGREEMENT.

         This Agreement represents the entire agreement between the parties
relating to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understanding, agreements,
representations or warranties, written or oral, except as set forth herein. This
Agreement may not be amended or modified, except by a written agreement signed
by all parties hereto.

         10.9 SURVIVAL; TERMINATION.

         The representations, warranties and covenants of the respective parties
shall survive the Closing Date and the consummation of the transactions herein
contemplated for 18 months.

         10.10 COUNTERPARTS.

         This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall be but a
single instrument.

                                     - 17 -
<PAGE>

         10.11 AMENDMENT OR WAIVER.

         Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity, and may
be enforced concurrently herewith, and no waiver by any party of the performance
of any obligation by the other shall be construed as a waiver of the same or any
other default then, theretofore, or thereafter occurring or existing. At any
time prior to the Closing Date, this Agreement may be amended by a by all
parties hereto, with respect to any of the terms contained herein, and any term
or condition of this Agreement may be waived or the time for performance hereof
may be extended by the party or parties for whose benefit the provision is
intended.

         10.12 EXPENSES.

         Each party herein shall bear all of their respective cost s and
expenses incurred in connection with the negotiation of this Agreement and in
the consummation of the transactions provided for herein and the preparation
thereof.

         10.13 HEADINGS; CONTEXT.

         The headings of the sections and paragraphs contained in this Agreement
are for convenience of reference only and do not form a part hereof and in no
way modify, interpret or construe the meaning of this Agreement.

         10.14 BENEFIT.

         This Agreement shall be binding upon and shall inure only to the
benefit of the parties hereto, and their permitted assigns hereunder. This
Agreement shall not be assigned by any party without the prior written consent
of the other party.

         10.15 PUBLIC ANNOUNCEMENTS.

         Except as may be required by law, neither party shall make any public
announcement or filing with respect to the transactions provided for herein
without the prior consent of the other party hereto.

         10.16 SEVERABILITY.

         In the event that any particular provision or provisions of this
Agreement or the other agreements contained herein shall for any reason
hereafter be determined to be unenforceable, or in violation of any law,
governmental order or regulation, such unenforceability or violation shall not
affect the remaining provisions of such agreements, which shall continue in full
force and effect and be binding upon the respective parties hereto.

         10.17 FAILURE OF CONDITIONS; TERMINATION.

         In the event of any of the conditions specified in this Agreement shall
not be fulfilled on or before the Closing Date, either of the parties have the
right either to proceed or, upon prompt written notice to the other, to
terminate and rescind this Agreement. In such event, the party that has failed
to fulfill the conditions specified in this Agreement will liable for the other
parties legal fees. The election to proceed shall not affect the right of such
electing party reasonably to require the other party to continue to use its
efforts to fulfill the unmet conditions.

                                     - 18 -
<PAGE>

         10.18 NO STRICT CONSTRUCTION.

         The language of this Agreement shall be construed as a whole, according
to its fair meaning and intendment, and not strictly for or against either party
hereto, regardless of who drafted or was principally responsible for drafting
the Agreement or terms or conditions hereof.

         10.19 EXECUTION KNOWING AND VOLUNTARY.

         In executing this Agreement, the parties severally acknowledge and
represent that each: (a) has fully and carefully read and considered this
Agreement; (b) has been or has had the opportunity to be fully apprized by its
attorneys of the legal effect and meaning of this document and all terms and
conditions hereof; (c) is executing this Agreement voluntarily, free from any
influence, coercion or duress of any kind.

         10.20 AMENDMENT.

         At any time after the Closing Date, this Agreement may be amended by
both parties, with respect to any of the terms contained herein, and any term or
condition of this Agreement may be waived or the time for performance hereof may
be extended by the party or parties for whose benefit the provision is intended.

                                     - 19 -
<PAGE>




                            [Signature page follows]




                                     - 20 -
<PAGE>

         IN WITNESS WHEREOF, DSFX, Sub and UCG, each pursuant to the approval
and authority duly given, as well as the UCG Shareholders, have caused this
Agreement and Plan of Merger to be executed as of the date first above written.

                                       DIVERSIFAX, INC.


                                       By: /s/ Juxiang Yu
                                           -------------------------------------
                                           Juxiang Yu
                                           President and Chief Executive Officer


                                       DFAX ACQUISITION VEHICLE, INC.


                                       By: /s/ Juxiang Yu
                                           -------------------------------------
                                           Juxiang Yu
                                           Its Chairman of the Board and Chief
                                           Executive Officer


                                       UPPER CLASS GROUP LIMITED


                                       By: /s/ Ming Yang
                                           -------------------------------------
                                           Ming Yang
                                           Its Sole Director

                                UCG SHAREHOLDERS



/s/ Ming Yang                          FIRST CAPITAL LIMITED
- ----------------
Ming Yang
                                       By:   /s/ Xirong Xu
                                             -----------------------------------
/s/ Wenxiang Yu                        Name/ Xirong Xu
- ----------------                       Title President
Wenxiang Yu


/s/ Zhi Yang                                 SHENZHEN DINGYI INVESTMENT
- ----------------                             COMPANY LIMITED
Zhi Yang

                                       By:   /s/ Hongyan Sun
                                             -----------------------------------
                                       Name/ Hongyan Sun
                                       Title President


                                     - 21 -
<PAGE>

/s/ Yundai Liu
- ----------------
Yundai Liu

                                             CHINA US BRIDGE CAPITAL LIMITED
/s/ Yongxia Cao
- ----------------
Yongxia Cao                            By:   /s/ Guogiong Yu
                                             -----------------------------------
                                       Name/ Guogiong Yu
                                       Title President


                                             SHENZHEN HUAYIN GUARANTY AND
                                             INVESTMENT COMPANY LIMITED

                                       By:   /s/ Zhiyong Xu
                                             -----------------------------------
                                       Name/ Zhiyong Xu
                                       Title Chairman


                                     - 22 -
<PAGE>

                                   SCHEDULE A

                                UCG SHAREHOLDERS


                                                                SHARES OF
                           UCG COMMON STOCK                     DIVERSIFAX, INC.
NAME OF UCG SHAREHOLDER      OWNERSHIP %       SHARES OF UCG    COMMON STOCK
- -----------------------    ----------------    -------------    ----------------

Ming Yang .............        18.96%              9,480            5,024,400

Wenxiang Yu ...........        18.96%              9,480            5,024,400

Zhi Yang ..............        12.64%              6,320            3,349,600

Yundai Liu ............         6.32%              3,160            1,674,800

Yongxia Cao ...........         6.32%              3,160            1,674,800

Shenzhen Huaying ......          6.3%              3,150            1,669,500
Guaranty and
Investment Company
Limited

First Capital Limited .           11%              5,500            2,915,000

Shenzhen Dingyi
Investment Company
Limited ...............          9.5%              4,750            2,517,500

China US Bridge Capital
Limited ...............           10%              5,000            2,650,000


                                     - 23 -
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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