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<SEC-DOCUMENT>0000885462-06-000005.txt : 20060105
<SEC-HEADER>0000885462-06-000005.hdr.sgml : 20060105
<ACCEPTANCE-DATETIME>20060105145806
ACCESSION NUMBER:		0000885462-06-000005
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20050531
FILED AS OF DATE:		20060105
DATE AS OF CHANGE:		20060105

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:			1130

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-20936
		FILM NUMBER:		06512167

	BUSINESS ADDRESS:	
		STREET 1:		4274 INDEPENDENCE CT
		CITY:			SARASOTA
		STATE:			FL
		ZIP:			34241-2109
		BUSINESS PHONE:		9413512720

	MAIL ADDRESS:	
		STREET 1:		4274 INDEPENDENCE CT
		CITY:			SARASOTA
		STATE:			FL
		ZIP:			34241-2109
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>form10qsb.txt
<DESCRIPTION>DFAX 10Q MAY 2005
<TEXT>
================================================================================

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

                                 _____________

                                  FORM 10-QSB
                                 _____________

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934.

                  FOR THE QUARTERLY PERIOD ENDED MAY 31, 2005

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934.

                   FOR THE TRANSITION PERIOD FROM, 20, TO, 20.

                             COMMISSION FILE NUMBER

                                 _____________


                                 DIVERSIFAX INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

                                 _____________


              DELAWARE
   (STATE OR OTHER JURISDICTION OF                        13-3637458
   INCORPORATION OR ORGANIZATION)        (I.R.S. EMPLOYER IDENTIFICATION NUMBER)

              4274 INDEPENDENCE COURT, SARASOTA, FLORIDA 34234-2109
                     (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (941) 351-2720
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 _____________

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [_]  [X] NO

     There were 26,626,200 shares of the Registrant's $.001 par value common
stock outstanding as of May 31, 2005.

     Transitional Small Business Format (check one)   Yes [_]  NO [X]

                                     -1-
<PAGE>

                                 DIVERSIFAX INC.
                                   FORM 10-QSB
                       FOR THE QUARTER ENDED MAY 31, 2005


PART I - FINANCIAL INFORMATION

     Item 1 -

               Financial Statements

                    Consolidated Balance Sheet for May 31, 2005 (unaudited)

                    Consolidated Statements of Operations (unaudited) for
                         the three and six months ended May 31, 2005 and 2004

                    Consolidated Statements of Cash Flows (unaudited) for
                         the six months ended May 31, 2005 and 2004

                    Notes to Consolidated Condensed Financial Statements


     Item 2 -

               Management's Discussion  and  Analysis  of  Financial  Condition
                    and Results of Operations


     Item 3 -

               Controls and Procedures



PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings

     Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

     Item 3 - Defaults Upon Senior Securities

     Item 4 - Submission of Matters To A Vote of Security Holders

     Item 5 - Other Information

     Item 6 - Exhibits

                                     -2-
<PAGE>

<TABLE>
<CAPTION>

DIVERSIFAX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET


                                                                  May 31,
                                                                   2005
                                                                (Unaudited)
                                                               -------------
<S>                                                            <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                      $    161,989
Other current assets                                                    580
                                                               -------------
     TOTAL CURRENT ASSETS                                           162,569

Equipment and vehicles, net                                          27,275

Note receivable, less allowance                                      96,788

Investment, Evolve One, Inc.                                        435,000

                                                               -------------

                                                               $    721,632
                                                               =============


LIABILITIES AND STOCKHOLDERS'  DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt and notes payable         $     10,538
Accounts payable                                                     23,334
Accrued expenses and other current liabilities                        4,239
Accrued payroll, stockholder                                        985,191
Loan payable, officer/stockholder                                 1,806,284
Deferred revenue                                                    441,250
                                                               -------------
     TOTAL CURRENT LIABILITIES                                    3,270,836
                                                               -------------

Long-term debt and notes payables, less current maturities           19,370
                                                               -------------


STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 40,000,000 shares authorized;
    26,626,200 shares issued; 26,299,702 shares outstanding          26,626
Additional paid-in capital                                       11,641,395
Accumulated deficit                                             (13,968,247)
                                                                ------------
                                                                 (2,300,226)
                                                               -------------
Less:  Treasury stock; 326,498 shares at cost                      (268,348)
                                                               -------------
     TOTAL STOCKHOLDERS' DEFICIT                                 (2,568,574)
                                                               -------------

                                                               $    721,632
                                                               =============
</TABLE>

                                     -3-
<PAGE>

<TABLE>
<CAPTION>

DIVERSIFAX INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)


                                            Three Months Ended            Six Months Ended
                                                  May 31,                     May 31,
                                        --------------------------  --------------------------
                                            2005          2004          2005          2004
                                        ------------  ------------  ------------  ------------
<S>                                     <C>           <C>           <C>           <C>
SALES
  Coin and leasing revenue              $   166,879   $   228,412   $   312,199   $   409,558
  Service fees                              181,250                     181,250
                                        ------------  ------------  ------------  ------------
                                            348,129       228,412       493,449       409,558
                                        ------------  ------------  ------------  ------------

COSTS AND EXPENSES
  Cost of sales                              97,487       107,745       183,278       209,189
  Depreciation expense                        2,295         2,112         4,595         6,356
  Selling, general and administrative       116,245       113,583       205,698       208,039
                                        ------------  ------------  ------------  ------------
                                            216,027       223,440       393,571       423,584
                                        ------------  ------------  ------------  ------------

NET OPERATING INCOME (LOSS)                 132,102         4,972        99,878       (14,026)
                                        ------------  ------------  ------------  ------------

OTHER (INCOME) EXPENSE
  Other income                              (52,408)      (18,750)      (71,533)      (37,500)
  Interest income                            (3,847)       (2,774)       (5,427)       (5,824)
  Interest expense                            9,950        10,055        20,022        20,112
                                        ------------  ------------  ------------  ------------
                                            (46,305)      (11,469)      (56,938)      (23,212)
                                        ------------  ------------  ------------  ------------

NET INCOME                              $   178,407   $    16,441   $   156,816   $     9,186
                                        ============  ============  ============  ============

NET EARNINGS PER SHARE
  Basic                                 $       .01   $        .00   $       .01  $       .00
                                        ============  ============  ============  ============
  Diluted                               $       .00   $        .00   $       .00  $       .00
                                        ============  ============  ============  ============

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING
  Basic                                  26,626,200    26,626,200    26,626,200    26,626,200
                                        ============  ============  ============  ============
  Diluted                                42,334,297    42,334,297    42,334,297    42,334,297
                                        ============  ============  ============  ============

</TABLE>

                                     -4-
<PAGE>
<TABLE>
<CAPTION>

DIVERSIFAX INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


                                                            Six Months Ended
                                                                 May 31,
                                                          ----------------------
                                                             2005        2004
                                                          ----------  ----------
<S>                                                       <C>         <C>
OPERATING ACTIVITIES:
Net income                                                $ 156,816   $   9,186
                                                          ----------  ----------
Adjustments to reconcile net income to net cash used
  by operating activities:
    Depreciation                                              4,595       5,856
    Gain on sale of equipment                               (31,850)
    Amortization of deferred revenue                       (218,750)    (37,500)
    (Increase) decrease in other current assets                 (80)      2,783
    (Decrease) increase in:
    Accrued expenses                                        (21,626)    (32,041)
    Accrued payroll, related party                           66,366      66,159
                                                          ----------  ----------
Total Adjustments                                          (201,345)      5,257
                                                          ----------  ----------
Net cash (used) provided by operating activities            (44,529)     14,443
                                                          ----------  ----------

INVESTING ACTIVITIES:
Capital expenditures                                                    (30,780)
Collections on note receivable                                  778       4,213
                                                          ----------  ----------
Net cash provided (used) by investing activities                778     (26,567)
                                                          ----------  ----------

FINANCING ACTIVITIES:
Net repayments under loan payable to officer/stockholder    (77,279)   (202,436)
Proceeds from note payable                                               30,780
Repayments on long-term debt                                 (4,455)     (5,000)
                                                          ----------  ----------
Net cash used by financing activities                       (81,734)   (176,656)
                                                          ----------  ----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                  (125,485)   (188,780)

CASH AND CASH EQUIVALENTS, BEGINNING OF
  PERIOD                                                    287,474     461,140
                                                          ----------  ----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                  $ 161,989   $ 272,360
                                                          ==========  ==========

SUPPLEMENTAL DISCLOSURES CASH FLOW INFORMATION:
  Interest paid                                           $      86   $     112
                                                          ==========  ==========
<FN>
The Company sold all fully depreciated equipment of a subsidiary to a related
party in exchange for a note in the amount of $31,850.

The Company received $435,000 in stock for services to an affiliated company.
</TABLE>

                                     -5-
<PAGE>

NOTE A.     NATURE OF BUSINESS AND INTERIM FINANCIAL STATEMENTS

Nature of Business:
- -------------------

DiversiFax,  Inc.  (the "Company") has been engaged, since November 1993, in the
business  of  owning,  leasing,  and  operating coin and debit card pay-per-copy
photocopy  machines,  fax  machines,  microfilm  reader-printers,  and accessory
equipment.

Due  to the increased use of internet services, demand for the services provided
by  the  Company  has  declined  sharply.

The Company was incorporated under the laws of the State of Delaware on February
28,  1989.  The  Company's principal executive offices and operations center are
located  at  4274  Independence  Court,  Sarasota, Florida 34234-2109, telephone
number  (941)  351-2720.

New  Significant  Accounting  Policy
- ------------------------------------

Statement  of  Financial  Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that all applicable
investments  be classified as trading securities, available-for-sale securities,
or  held-to-maturity  securities.  The  Company  has an investment classified as
available-for-sale,  which  is  required  to  be  reported  at  fair value, with
unrealized  gains  and  losses excluded from earnings and reported as a separate
component  of  stockholders'  equity  (net of the effect of income taxes).  Fair
value is also defined to be the last closing price for the listed security.  Due
to  the  size  of the Company's investment and its limited trading volume, there
can be no assurance that the Company will realize the value which is required to
be  used  by SFAS No. 115.  The amortized cost of the equity securities as shown
in  the  accompany  balance sheet approximates the estimated market value at May
31,  2005.  Accordingly,  no  comprehensive  income  is  reported.

Interim  Financial  Statements:
- -------------------------------

The interim consolidated financial statements presented herein are unaudited and
have  been  prepared  in  accordance  with  the  instructions to Form 10-QSB and
Article  10  of  Regulation  S-B  These statements should be read in conjunction
with  the audited consolidated financial statements and note thereto included in
our  annual  report on Form 10-KSB for the year ended November 30, 2004.  In the
opinion  of  management,  the  interim  statements  include  all  adjustments
(consisting  only of normal recurring adjustments) necessary to summarize fairly
our  financial  position, results of operations, and cash flows.  The results of
operations  and  cash  flows  for  the  six months ended May 31, 2005 may not be
indicative  of the results that may be expected for the year ending November 30,
2005.

NOTE  B.     GOING  CONCERN

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and liabilities.  In
the  ordinary  course of business, operating losses have been incurred resulting
in  an accumulated deficit of $13,968,247 at May 31, 2005 and $14,133,912 at May
31,  2004.  Currently, the Company's Chief Executive Officer funds any operating
deficits  and  management  believes  that  actions  presently  being  taken  to
restructure  operations provide the opportunity for the Company to continue as a
going  concern;  however,  no  assurance  can  be given.  These conditions raise
substantial  doubt  about  the Company's ability to continue as a going concern.
The  consolidated  financial  statements  of  the  Company  do  not  include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should  the  Company  be  unable  to  continue  as  a  going  concern.

                                     -6-
<PAGE>

NOTE  C.     COMMITMENTS  AND  CONTINGENCIES

On  March  15, 2005, the Company entered into a Management Agreement with Evolve
One,  Inc. ("Evolve One").  Irwin Horowitz, principal shareholder, member of the
Board  of  Directors,  and  Chief  Executive  Officer  of the Company, is also a
principal  shareholder  and  Chief Executive Officer of Evolve One.  The Company
makes  its  facilities at 39 Stringham Avenue, Valley Stream, New York available
to Evolve One; the services on a part-time basis of 7 persons presently employed
by  the  Company  for approximately 100 hours per week; equipment, hardware, and
software  of  the  Company; and related utilities and overhead functions at that
facility.  The  term  of  the  agreement is for six months and may be terminated
prior  to  the conclusion of its term on 10 days' prior written notice by either
party,  or  the  agreement  may  be  renewed  for  a  successive six-month term.

In  consideration  for  the  management  services  and  facilities  provided  by
DiversiFax  during  the  initial six-month term, Evolve One issued to DiversiFax
2,900,000 shares of its common stock. In addition, in the event the market price
of  the  common  stock  of Evolve One on the six-month anniversary date is below
$0.15  per  share,  Evolve One will issue to DiversiFax additional shares of its
common  stock  so  that  the  common  shares  provided  to  DiversiFax plus such
additional  shares  of  common  stock  will  be  equal  in value to $435,000. In
addition, DiversiFax will receive 10% of the total amount of the monies received
as  a  result  of  their  efforts  with  regard  to auctions being completed for
accounts  they  have  introduced  to AuctionStore.com, Evolve One's wholly-owned
subsidiary.  Payment  of  the  percentage  fee  will be made in cash or stock as
determined  by  DiversiFax  .

The  Company  recorded the $435,000 Evolve One contract to perform services as a
long-term  investment  based  on  management's  ability  and  intent to hold the
investment  indefinitely.  The Company recognized $181,250 of service fee income
and  deferred  $253,750  of income based on the six-month term of the agreement.
As  of  May  31, 2005, the market value of the investment approximates the cost.
Accordingly,  no  comprehensive  income  is  reported.

NOTE D.    SUBSEQUENT EVENT

On  June  20,  2005,  DiversiFax  purchased an aggregate of $100,000 units in an
Evolve  One  offering and received 6,000,000 shares of common stock and warrants
to  purchase  6,000,000  shares.

                                     -7-
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The  following  discussions  should be read in conjunction with our Consolidated
Financial  Statements  and  the  notes  thereto presented in "Item 1 - Financial
Statements"  and  our  audited financial statements and the related Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results  of Operations
included in our report on Form 10-KSB for the year ended November 30, 2004.  The
information set forth in this "Management's Discussion and Analysis of Financial
Condition  and  Results  of Operations" includes forward-looking statements that
involve  risks and uncertainties.  Many factors, including those discussed below
under  "Factors That May Affect Future Results" and "Outlook" could cause actual
results  to  differ  materially  from  those  contained  in  the forward-looking
statements  below.

OVERVIEW

Effective November 1, 1993, DiversiFax, Inc. (the "Company") acquired all of the
outstanding  common  stock  of  IMSG  Systems,  Inc. ("IMSG") and its affiliated
companies,  National Copy Corp. ("National"), Capital Copy Corp. ("Capital") and
Advanced  Business  Systems,  Inc.  ("Advanced")  (IMSG,  National,  Capital and
Advanced  collectively  "IMSG  and  Affiliates") in exchange for the issuance of
662,000  shares  of  Series A, convertible preferred stock.  The preferred stock
was  automatically  converted  into  an  aggregate of 6,620,000 shares of common
stock  of  the  Company  in  November,  1995.

IMSG  and  Affiliates  owns,  supplies, and maintains self-service coin and card
reader  operated  photocopy  machines  in  colleges,  universities,  libraries,
courthouses,  government  agencies,  pharmacies, and other retail establishments
throughout  the  eastern  United  States.

The Company is primarily responsible for the collection of the payments and most
locations  share  in  the  revenue  from  the  photocopy  machines.

GOING CONCERN AND MANAGEMENT'S PLANS

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and liabilities.  In
the  ordinary  course of business, operating losses have been incurred resulting
in  an accumulated deficit of $13,968,247 at May 31, 2005 and $14,133,912 at May
31,  2004.  Currently, the Company's Chief Executive Officer funds any operating
deficits  and  management  believes  that  actions  presently  being  taken  to
restructure  operations provide the opportunity for the Company to continue as a
going  concern;  however,  no  assurance  can  be given.  These conditions raise
substantial  doubt  about  the Company's ability to continue as a going concern.
The  consolidated  financial  statements  of  the  Company  do  not  include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should  the  Company  be  unable  to  continue  as  a  going  concern.

CRITICAL ACCOUNTING POLICIES

The  following  discussion  and  analysis is based on our consolidated financial
statements,  which  have  been prepared in accordance with accounting principles
generally  accepted  in  the  United  States of America.  The preparation of our
financial  statements requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses, and assets and liabilities
during  the  periods  reported.  Estimates  are used when accounting for certain
items  such  as revenues, allowances for doubtful accounts, depreciation, taxes,
valuation  of  investments,  and  long-lived  assets.  We  base our estimates on
historical  experience,  where applicable, and other assumptions that we believe
are  reasonable  under  the  circumstances.  Actual  results may differ from our
estimates  under  different  assumptions  or  conditions.  We  believe  that the
following  critical  accounting  policies reflect our more significant judgments
and  estimates  used  in  preparation  of our consolidated financial statements.

The  consolidated  financial  statements include the accounts of the Company and
its  wholly  owned  subsidiaries.  All  significant  intercompany  accounts  and
transactions  have  been  eliminated.

                                     -8-
<PAGE>

Revenue  from the Company's self-service coin and card reader operated photocopy
machines  is  principally  recognized  at the time payment is received.  Revenue
from  the  Company's  scanner  units  is recognized when the product is shipped.

Deferred  revenue  is  recorded  for  amounts  received but not earned as of the
balance  sheet dates.  Income from these transactions is recognized as earned or
on  a  straight-line  basis  over  the  term  of  the  contract.

The  long-term  investment  in  Evolve  One  is  recorded  at  fair value, which
approximates cost and is classified as "available-for-sale."  Unrealized holding
gains  and  losses  (net) are reported as other comprehensive income.  As of May
31,  2005,  the  market  value  of  the  investment approximates the cost and no
comprehensive  income is reported.  Revenue from the contract is recognized on a
straight-line  basis  over  the  term  of  the  contract.

RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MAY 31, 2005 COMPARED TO MAY 31,
2004

Sales:  Sales  for  the  second  quarter  of  2005  increased $119,717 or 52% to
$348,129  from  $228,412  for the second quarter of 2004.  This increase relates
primarily  to  the recognition of deferred service fee income in connection with
the six-month contract with Evolve One, Inc. offset by a decrease in income from
closing  the  Jacksonville  operations.

Cost  of Sales:  Cost of sales for the second quarter of 2005 decreased $10,258,
or  10%  to $97,487 from $107,745 for the second quarter of 2004.  Cost of sales
represented 28% of sales for the second quarter of 2005 compared to 47% of sales
for  the  second  quarter  of  2004.  The  decrease  is  a result of closing the
Jacksonville  operations,  reducing  New York related expenditures to align with
the  decrease  in  sales  from  this  area,  offset by increases in direct costs
associated  with  the  Evolve  One,  Inc.  agreement.

Selling,  general  and  administrative  expenses:  Selling,  general  and
administrative  expenses  increased  to  $116,245 or 33% of sales for the second
quarter  of  2005  from $113,583 or 50% of sales for the second quarter of 2004.
This  increase is due to increased salary and other expenses associated with the
Evolve  One,  Inc.  agreement.

The  above  factors resulted in net income of $178,407 for the second quarter of
2005  compared  to  net  income  of  $16,441  for  the  second  quarter of 2004.

The  Company's copier activities are subject to seasonal fluctuations.  Revenues
from copiers tend to be lower during the summer months of June through September
and  in  the last weeks of December and the first weeks of January due to school
and  employee  vacation  patterns.

RESULTS OF OPERATIONS FOR SIX MONTHS ENDED MAY 31, 2005 COMPARED TO MAY 31, 2004

Sales:  Sales  for  the first half of 2005 increased $83,891, or 20% to $493,449
from  $409,558  for  the first half of 2004.  This increase primarily relates to
service  fee income related to the agreement with Evolve One offset by decreases
in  income from closing the Jacksonville office and termination of a significant
New  York  contract.

Cost  of  Sales:  Cost of sales for the first half of 2005 decreased $25,911, or
12%  to  $183,278  from  $209,189  for  the  first  half of 2004.  Cost of sales
represented 37% of sales for the first half of 2005 compared to 51% of sales for
the first half of 2004.  The decrease is generally due to a decrease in expenses
from closing the Jacksonville office and recovery of bad debt previously written
off.

Selling,  general  and  administrative  expenses:  Selling,  general  and
administrative expenses decreased to $205,698 or 42% of sales for the first half
of 2005 from $208,039 or 51% of sales for the first half of 2004.  This decrease
is  primarily  attributable  to  the recovery of bad debt offset by increases to
office  salaries  and  expenses  associated with the Evolve One, Inc. agreement.

The  above  factors  resulted  in a net income of $156,816 for the first half of
2005  compared  to  net  income  of  $9,186  for  the  first  half  of  2004.

                                     -9-
<PAGE>

The  Company's copier activities are subject to seasonal fluctuations.  Revenues
from copiers tend to be lower during the summer months of June through September
and  the last weeks of December and the first weeks of January due to school and
employee  vacation  patterns.

LIQUIDITY  AND  CAPITAL  RESOURCES

At  May  31,  2005,  the Company had cash of $161,989 as compared to $287,474 at
November  30,  2004.

The  Company's  primary  need  for  funds is to finance working capital, capital
expenditures,  and the further development and the acquisition of new businesses
and  the  further  growth  of  acquisitions to broaden and diversify its revenue
source  making  it  less  seasonal.

Net  cash  used  in  operating  activities of $44,529 for the first half of 2005
resulted  from  the  net  income  of $156,816 offset by non-cash items including
depreciation  of  $4,595  and  amortization of deferred revenue of $218,750.  In
addition,  net  cash used in operating activities included a decrease in accrued
expenses  and  an  increase  in  accrued  payroll,  stockholder.

Net  cash used in financing activities amounted to $81,734 for the first half of
2005.  At  May  31, 2005, the amount of the loan payable, officer/stockholder by
the  Company  to  Dr.  Irwin  Horowitz  was  $1,786,284.

The  above  resulted in a net decrease in cash of $125,845 for the first half of
2005.

Management  continues to believe the expected cash flow from operations, and the
willingness  and  ability  of  the Company's Chief Executive Officer to fund any
operating deficit will allow the Company to continue operations over the next 12
months.  However, no assurance can be given that these factors will materialize.

                                      -10-
<PAGE>

ITEM 3 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.
- -------------------------------------------------

(a)  Under  the  supervision  and  with  the  participation  of  our Management,
including our principal executive officer and principal financial officer, which
is  the  same  person,  we  conducted  an evaluation of the effectiveness of the
design  and  operation  of our disclosure controls and procedures, as defined in
Rules  13a-15(e)  and 15d-15(e) under the Securities Exchange Act of 1934, as of
April  30,  2005.  Based on this evaluation, our principal executive officer and
principal  accounting  officer  concluded  that  our  disclosure  controls  and
procedures  were  not effective, so as to timely identify, correct, and disclose
information  required  to  be included in our Securities and Exchange Commission
("SEC")  reports  due  to  the  Company's limited internal resources and lack of
ability  to  have  multiple  levels  of  transaction review.  Through the use of
external  consultants,  management  believes  that  the financial statements and
other  information  presented  herewith  are  materially  correct.

(b)  There  were no significant changes in internal controls or in other factors
that  could  significantly affect internal controls during the quarter.  We have
not identified any significant deficiency or material weaknesses in our internal
controls,  and  therefore  there  were  no  corrective  actions  taken.

                                      -11-
<PAGE>


PART I - EXHIBITS (ITEM 601 OF REGULATION S-B)


PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS -

The Company is not a party to any material legal proceedings, except as follows:

     (1) Jacksonville Public Library re breach of contract; and
     (2) Ikon Business Solutions re commission.

The Company believes that the outcome of the above actions will not have a
material adverse effect on the Company's financial condition.


ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS -

The Company has never paid cash dividends on its Common Stock. Holders of Common
Stock  are  entitled  to receive such dividends as may be declared and paid from
time  to time by the Board of Directors out of funds legally available therefor.
The  Company  intends  to retain any earnings for the operation and expansion of
its  business  and  does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend
upon future earnings, results of operations, capital requirements, the Company's
financial  condition  and  such  other  factors  as  the  Board of Directors may
consider.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - No Annual Meeting
of Stockholders was held during the preceding year.

January 5, 2006




ITEM 6 - EXHIBITS

Exhibits are filed as part of, or incorporated by reference, into this report.

     31.1 Certification of the Chief Executive Officer, dated January 5,
          2006(This certification required as required as Exhibit 31 under
          601(a) of Regulation S-K is filed as Exhibit 99.1 pursuant to SEC
          interim filing guidance.) (2)

     32.1 Certification of the Chief Executive Officer, dated January 5,
          2006(This certification required as required as Exhibit 31 under
          601(a) of Regulation S-K is filed as Exhibit 99.2 pursuant to SEC
          interim filing guidance.) (2)

                                      -12-
<PAGE>


                                   SIGNATURES


     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                                DIVERSIFAX, INC.


                                                /s/ Irwin A. Horowitz
                                                -------------------------------
Date:  January 5, 2006                          Dr. Irwin A. Horowitz
                                                Chairman of the Board, Chief
                                                Executive Officer and President
                                                (principal executive officer)



     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature                              Title                             Date



__________________________________
/s/ Irwin A. Horowitz                  Director                January 5, 2006
Irwin A. Horowitz



_________________________________
/s/ Lonnie L. Sciambi                  Director                January 5, 2006
Lonnie L. Sciambi

                                      -13-
<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exhibit31_1.txt
<DESCRIPTION>CERT OF CEO
<TEXT>
- --------------------------------------------------------------------------------
                                                                    EXHIBIT 31.1

                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. Irwin A. Horowitz, certify that:

1.   I have reviewed this Form 10-QSB of DiversiFax, Inc.;

2.   Based on my knowledge, this report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a.   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b.   Evaluated the effectiveness of the registrant's disclosure
          controls and procedures and presented in this report our conclusions
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and

     c.   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The  registrant's  other  certifying  officer(s)  and  I  have  disclosed,
     based  on  our  most  recent  evaluation of internal control over financial
     reporting,  to  the  registrant's  auditors  and the audit committee of the
     registrant's  board  of  directors  (or  persons  performing the equivalent
     functions):

     a.   All significant deficiencies and material weaknesses in the
          design or operation of internal control over financial reporting which
          are reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b.   Any fraud, whether or not material, that involves management or
          other employees who have a significant role in the registrant's
          internal control over financial reporting.

Date: January 5, 2006


By:  ______________________________________
     Dr. Irwin A. Horowitz, Chief Executive
        Officer and Chief Financial Officer

<PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>3
<FILENAME>exhibit32_1.txt
<DESCRIPTION>CERT OF CFO
<TEXT>
- --------------------------------------------------------------------------------
                                                                   EXHIBIT 32.1


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Form 10-QSB of DiversiFax, Inc. (the "Company") for
the quarter ended May 31, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), the undersigned certifies,
pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002, to the best of their knowledge and belief, that:

          1)   the Report fully complies with the requirements of Sections
               13(a) or 15(d) of the Securities and Exchange Act of 1934, as
               amended; and

          2)   the information contained in the Report fairly presents, in
               all material respects, the financial condition and results of
               operations of the Company.




Date: January 5, 2006


By:   _______________________________________
      Dr. Irwin A. Horowitz, Chief Executive
          Officer and Chief Financial Officer



This certification shall not be deemed "filed" for purposes of Section 18 of the
Securities and Exchange Act of 1934, or the Exchange Act, or otherwise subject
to the liability of Section 18 of the Exchange Act. Such certification shall not
be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Exchange Act, except to the extent that the Company
specifically incorporates by reference.


<PAGE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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