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 AUGUST 31, 2006


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

              SHENNAN ZHONG ROAD, P O BOX 031-114,SHENZEN, CHINA 51800

                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                  _____________

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).     YES (X) NO ( )

There were 517,262 shares of the Registrant's $.001 par value common stock
outstanding as of October 11, 2006. On September 19, 2006, the Board of
Directors authorized an 100-for-1 REVERSE STOCK SPLIT of the company's $.001 par
value common STOCK. As a result of the SPLIT, no additional shares were issued,
and additional paid-in capital was reduced by $0. All references in the
accompanying financial statements to the number of common shares and per-share
amounts for 2006 and 2005 have been restated to reflect the STOCK SPLIT.

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

                                 DIVERSIFAX INC.
                                   FORM 10-QSB
                       FOR THE QUARTER ENDED AUGUST 31, 2006


PART I - FINANCIAL INFORMATION

     Item 1 - Financial Statements

             Consolidated Balance Sheet for August 31,2006 (unaudited)         3

             Consolidated  Statements of Operations (unaudited) for the
              three and nine months ended August 31, 2006 and 2005             4

              Consolidated Statements of Cash Flows (unaudited) for the nine
              months ended August 31, 2006 and 2005                            5

              Notes to Consolidated Condensed Financial Statements             6

     Item 2 - Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       10

     Item 3 - Controls and Procedures                                         16

PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings                                               17

     Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds     17

     Item 3 - Defaults Upon Senior Securities                                 17

     Item 4 - Submission of Matters To A Vote of Security Holders             17

     Item 5 - Other Information                                               17

     Item 6 - Exhibits                                                        17

     Signatures                                                               18

     Certification                                                         EX 31

     Certification                                                         EX 32













<PAGE>

 DIVERSIFAX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
                                                                      AUGUST 31,
                                                                       2006
                                                                   -------------
                                     ASSETS
CURRENT ASSETS
Cash                                                                $     0
Note receivable, current                                                  0
                                                                   ------------
     TOTAL CURRENT ASSETS                                                 0

Equipment and vehicles, net                                               0

Note receivable                                                           0
                                                                   ------------
                                                                     $    0
                                                                   ============
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

Current maturities of long-term debt and notes payable             $     0
Accounts payable 0
Accrued expenses and other current liabilities                           0
Accrued payroll, stockholder                                             0
Loan payable, officer/stockholder                                        0
                                                                   ------------
     TOTAL CURRENT LIABILITIES                                           0
                                                                   ------------

Loan payable, officer/stockholder                                        0
Long-term debt and notes payables, less current maturities               0
                                                                   ------------
     TOTAL LIABILITIES                                                   0
                                                                   ------------

STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value, 1,000,000 shares authorized;
    0 shares issued; 0 shares outstanding                               0
Common stock, $.001 par value, 70,000,000 shares authorized;
    517,262 shares issued; 513,997 shares outstanding                       517
Additional paid-in capital                                           14,617,735
Accumulated deficit                                                (14,349,904)
                                                                   ------------
                                                                        268,348
                                                                   ------------
Less:  Treasury stock; 3,265 shares at cost                           (268,348)
                                                                   ------------
     TOTAL STOCKHOLDERS' DEFICIT                                        0
                                                                   ------------

                                                                   $    0
                                                                   ============

The  accompanying  notes are an integral part of these financial  statements and
should be reviewed with the annual report.
<PAGE>


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


                           Three Months Ended             Nine Months Ended
                                August 31,                       August 31,
                    -------------------------          ----------------------
                            2006      2005               2006          2005
                        ------------------            ---------     ---------

OTHER (INCOME) EXPENSE
     Other income     $          $  (19,144)     $       (31)       $(90,676)
     (Gain) on sale of investments                   (64,002)               0
     Interest income                                                  (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   (See Note B)
                 $     (97,754)   $ 130,267    $    (225,420)     $   230,145
                     -----------   ---------        ---------      ----------


NET INCOME (LOSS)    $(107,754)   $  139,281   $   (191,441)      $   296,097
                      =========     =======       ==========          =======



NET EARNING (LOSS) PER SHARE FROM:

OTHER (INCOME) EXPENSE
-Basic              $  (.02)      $  .03        $      .07         $     .25
                      --------     -----      -------------     ------------

DISCONTINUED OPERATIONS
- Basic             $  (.19)      $ 0.49       $     (.44)         $     .86
  --               ---------     -------        -----------         --------
NET INCOME (LOSS)
 - Basic           $  (.21)       $ 0.52       $     (.37)         $    1.11
                     ------     -----------    -----------         $ -------

WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING
     Basic          513,997        266,262          513,997          266,262
                    =======        =======          =======          =======






The accompanying notes are an integral part of these financial statements and
should be reviewed with the annual report.








<PAGE>



                                    4

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

                                                             Nine Months Ended
                                                                  August 31,
                                                          ---------------------
                                                             2006        2005
                                                          ---------   ---------

OPERATING ACTIVITIES:
Net (loss) income                                        $ (191,441)  $ 230,145

Adjustments to reconcile net income to net cash
  provided (used)by operating activities:
    Depreciation on discontinued assets                       6,893       6,889
    Gain on sale of equipment                                          (31,850)
    Amortization of deferred revenue                             -    (455,000)
    Loss on note receivable                                              39,160
    Cash (used) provided from operating
       activities - discontinued operations                 156,960    (64,734)
                                                          ---------   ---------
Total Adjustments                                           163,853   (376,067)
                                                          ---------   ---------
Net cash provided(used) by operating activities             (27,588)  (145,922)
                                                          ---------   ---------

FINANCING ACTIVITIES:
Net repayments of loan payable to
  officer/stockholder                                        17,355    (86,077)
Repayments on long-term debt                                 (5,508)    (7,640)
                                                          ---------   ---------
Net cash provided (used) by financing activities             11,847    (93,717)
                                                          ---------   ---------

NET (DECREASE) IN CASH                                     (15,741)   (239,639)

CASH, BEGINNING OF PERIOD                                    15,741     287,474
                                                          ---------   ---------


CASH, END OF PERIOD                                       $       0    $ 47,838
                                                          =========   =========

SUPPLEMENTAL DISCLOSURES CASH FLOW INFORMATION:
  Interest paid                                           $      54    $    152
                                                          =========    ========

The Company received $435,000 in stock for services to an affiliated company in
the nine months ended datelstransMonth8Day31Year2005August 31, 2005.

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 in the nine months ended
August 31, 2005.

On July 20, 2006 the Company issued 25,000,000(pre reverse split)shares of
 common stock, at $.017 per share, in exchange for $425,000 of pre-existing
debt owed to an officer/stockholder.

The Company sold all of its assets in exchange for the assumption and
forgiveness of all its debt as of August 10, 2006
per the terms of the Asset Transfer and Debt Resolution Agreement.



The accompanying notes are an integral part of these financial statements and
should be reviewed with the annual report.
















                                 5


DIVERSIFAX INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A - Nature of Business and Interim Financial Statements

Nature of Business:

DiversiFax, Inc. (the "Company") has been engaged, since November 1993 through
August 10, 2006 (date of asset sale) (see Note B),
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 board of directors therefore decided on
August 18,2006 to discontinue operations, and has eliminated all of the debt of
the Company. This was achieved by exchanging the operations of the Company, as
well as all of its assets and liabilities for forgiveness of the debt owed to
Dr. I A Horowitz pursuant to the terms of the Asset Transfer and Debt Resolution
Agreement. (see Note B)

Dr. Horowitz also has sold 36,208,340 (pre reverse split) of his shares in the
Company to Ms. Juxiang Yu.

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 Shennan Zhong Road, P O Box 031-114, Shenzen, China 518000, telephone
number (212) 561-3604.

Interim Financial Statements:

See Note B.

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

The interim consolidated financial statements as of
August 31, 2006 and for the three and nine month period then ended 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, 2005. In the
 opinion of management, the interim statements include all adjustments necessary
 to summarize fairly our financial position, results of operations, and cash
 flows.
The results of operations and cash flows for the nine months ended
August 31, 2006 may not be indicative of the results that may be expected for
the year ending November 30, 2006.

New Significant Accounting Policy:

The equity method of accounting is used when the Company has a 20% to 50%
interest in other entities or less then 20% interest with the ability to
exercise significant influence over the entity's operating and financial
activities. Under the equity method, original investments are recorded at cost
and adjusted by the Company's share of undistributed earnings or losses of these
entities. Non-marketable investments in which the Company has less than 20%
interest and in which it does not have the ability to exercise significant
influence over the investee are initially recorded at cost. Both methods require
periodic review of the investment for impairment

Earnings per share:

Basic EPS is calculated based upon the weighted average number of shares
outstanding during the period, while diluted EPS also gives effect to all
potential dilutive common shares outstanding during each period such as common
stock options and warrants. As all options and warrants  were rescinded pursuant
to the Purchase Agreement referred to in Note A, other than 950 (post-split)
options that are anti-dilutive, there is no dilution.

On September 19, 2006, the Board of Directors authorized an 100-for-1 REVERSE
STOCK SPLIT of the company's $.001 par value common STOCK. As a result of the
SPLIT, no additional shares were issued. Common stock value was reduced by
approximately $51,400 to reflect the reduced number of shares, off set by an
 equal corresponding increase in additional paid-in capital. All references
in the accompanying financial statements to the number of common shares and
 per-share amounts for 2006 and 2005 have been restated to reflect
the STOCK SPLIT.



Use of Estimates:

The preparation of financial statements in conformity with accounting principles
generally accepted in the country-regionplaceUnited States of America requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
 from those estimates.


Reclassifications:

Certain minor reclassifications have been made in the consolidated financial
statements in order to reflect proper classifications.

Impact of Recently Issued Accounting Pronouncements:

In December 2004, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting Standards No. 123R (revised 2004), Share-Based Payment.
This
Statement  replaces FASB  Statement No. 123 and  supersedes  APB Opinion No. 25.
Statement  No.  123(R) will  require the fair value of all stock  option  awards
issued to  employees  to be  recorded  as an expense  over the  related  vesting
period. The Statement also requires the recognition of compensation  expense for
the fair value of any unvested  stock option awards  outstanding  at the date of
adoption.  The provisions of SFAS No. 123R are effective as of the first interim
reporting  period  beginning  after December 15, 2005. The Company has currently
adopted  SFAS No.  123R with no  material  impact on its  financial  position or
results  of  operations  since a  majority  of the  awards  under  the  existing
incentive  stock option plan will be fully vested prior to the effective date of
the revised rules

In May 2005, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 154, "Accounting Changes and Error Corrections."
The Statement applies to all voluntary changes in accounting principle and to
changes required by an accounting pronouncement that do not include explicit
transition provisions. SFAS No. 154 requires that changes in accounting
principle be retroactively applied, instead of including the cumulative effect
in the income statement. The correction of an error will continue to require
financial statement restatement. A change in accounting estimate will continue
to be accounted for in the period of change and in subsequent periods, if
necessary. SFAS No. 154 is effective for fiscal years beginning after December
31, 2005. We do not expect the adoption of this Statement to have a material
impact on our financial condition or results of operations.

In June 2005, the EITF reached a consensus on Issue 05-6, "Determining the
Amortization Period for Leasehold Improvements," which requires that leasehold
improvements acquired in a business combination or purchased subsequent to the
inception of a lease be amortized over the lesser of the useful life of the
assets or a term that includes renewals that are reasonably assured at the date
of the business combination or purchase. EITF 05-6 is effective for periods
beginning after June 29, 2005. Earlier application is permitted in periods for
which financial statements have not been issued. The adoption of this Issue did
not have an impact on the Company's financial statements

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments-an amendment of FASB Statements No. 133 and 140", to
simplify and make more consistent the accounting for certain financial
instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", to permit fair value remeasurement for any
hybrid financial instrument with an embedded derivative that otherwise would
require bifurcation, provided that the whole instrument is accounted for on a
fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the
Impairment or Disposal of Long-Lived Assets", to allow a qualifying
special-purpose entity to hold a derivative financial instrument that pertains
to a beneficial interest other than another derivative financial instrument.
SFAS No. 155 applies to all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006,
with earlier application allowed. This standard is not expected to have a
significant effect on the Company's future reported financial position or
results of operations.


In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. This adoption of this statement is not
expected to have a significant effect on the Company's future reported financial
position or results of operations





Note B - Discontinued Operations

Through the acceptance of the Asset Transfer and Debt Resolution Agreement,
dated August 10, 2006, the board of directors effectively discontinued
 operations and eliminated all of the debt of the Company. This was achieved
 by the exchanging the operations of the Company, as well as all of its assets
 and liabilities for forgiveness of the debt owed to Dr. I A Horowitz in terms
 of the Asset Transfer and Debt Resolution Agreement.

The company recognized additional paid in capital from forgiveness of debt, by
the then majority stockholder, in the amount of $2,525,131.

Since all of the revenue producing assets were sold, discontinuing operations,
the Financial operations have been restated for comparative purposes.  The
comparative operations were as follows:


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


                             Three Months Ended                Nine Months Ended
                               August 31,                         August 31,
                        -------------------------      -------------------------
                                 2006        2005        2006               2005
                              ---------   ---------   ---------        ---------
SALES
Coin and leasing revenue  $     64,563  $  115,355     $ 359,174     $   427,554
          Service fees                     218,676                       399,926
                               --------    -------    ----------         -------
                                64,563     334,031       359,174         827,480
                                ------    -------     ----------         -------

COSTS AND EXPENSES
Cost of sales                   66,054      79,942       153,148         263,220
Depreciation expense             2,298       2,294         6,893           6,889
Selling, general and admin      93,965     121,528       424,553         327,226
                               -------     -------     ---------        --------
                               162,317     203,764       584,594         597,335
                               -------     -------       ------          -------



LOSS FROM DISCONTINUED OPERATIONS
                              (97,754)     130,267     (225,420)         230,145
                             ---------     -------    ----------        --------




Note C - Going Concern

The accompanying consolidated financial statements have been prepared assuming
that the company will be continuing as a going concern.  The company has
incurred net operating losses resulting in an accumulated deficit of
approximately $14,350,000 through August 31, 2006. The Company has decided to
 discontinue operations, and on August 10,2006, agreed to consummate the sale of
 substantially all of its assets in Exchange for relief of a portion of its debt
 pursuant to the terms of an Asset Transfer and Debt Resolution Agreement. The
remaining debt of the Company, which was payable to the then majority
 shareholder, was forgiven and accounted for as additional contribution to
capital. In view of these matters there is considerable doubt as to the
company's ability to continue as a going concern.

In addition, on August 25,2006 the Company entered into a Stock Purchase
Agreement, which has effected a share transfer and change in management.

Note D -  Stock Compensation

The Company has in the past granted warrants and options to purchase shares of
its common stock to various employees and other individuals based on the
discretion of the
Company's Board of Directors.

Options were generally granted at the fair market value of the stock on the date
of grant, and generally have immediate vesting. During the nine months ended
August
31, 2006, there were no options granted or exercised. All outstanding options to
purchase shares were rescinded pursuant to the Stock Purchase Agreement dated
August 25, 2006, except for 950 (post-split) options.

Effective January 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123 (R), "Share-Based Payment."
Prior to the adoption of SFAS 123(R) we accounted for stock option grants using
the intrinsic value method prescribed in APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and accordingly, recognized no compensation expense
for stock option grants.

Under the modified prospective approach, SFAS 123(R) applies to new awards
granted subsequent to the date of adoption, January 1, 2006. Compensation cost
recognized during the nine months ended August 31,2006 includes compensation
 cost for all share-based payments granted prior to, but not yet vested as
of January 1, 2006, based on the grant date fair value estimated in accordance
 with the original provisions of SFAS 123, and compensation cost for all share
 based payments granted subsequent to January 1, 2006, based on the
grant date fair value estimated in accordance with the provisions of SFAS
123(R). Prior periods were not restated to reflect the impact of adopting the
new standard, and there is no cumulative effect.

As a result of adopting SFAS 123(R), there was no impact to our income from
operations, and basic and diluted earnings per share for the three and nine
months ended August 31, 2006.

We use the Black-Scholes option pricing model to estimate the fair value of
stock-based awards on the date of grant, using weighted average assumptions as
noted in the following table. We have used one grouping for the assumptions as
our option grants are primarily basic with similar characteristics. The expected
term of options granted has been derived based upon the Company's history of
actual exercise behavior and represents the period of time that options granted
are expected to be outstanding. Historical data was also used to estimate option
exercises and employee terminations. Estimated volatility is based upon the
Company's historical market price at consistent points in a period equal to the
expected life of the options. The risk-free interest rate is based on the
U.S.Treasury yield curve in effect at the time of grant and the dividend yield
 is based on the Company's historical dividend yield.
                                             2006               2005
                                             ----               ----
         Expected volatility                319.00%           421.00%
         Risk-free interest rate              4.17%             4.17%
         Expected life of options         5 - 7 years       5 - 7 years
         Grant date fair value                $ -               $ -

At August 31, 2006, there was no unrecognized compensation cost related to
share-based payments.



<PAGE>




The following table represents stock option activity (post reverse stock split)
for the nine months ended August 31, 2006:




                                                                    Weighted
Weighted Average
                                                 Number of          Average
Remaining
                                                  shares         Exercise Price
Contractual Life
                                                ------------     --------------


Options Outstanding  December 1, 2005               157,080          $     .01

Granted -                                                                    -
Exercised -                                                                  -
Forfeited -                                                                  -
Rescinded (*)                                     (156,130)                .01

                                                 ===========      ============
Outstanding Exercisable - August 31, 2006            950            $ .05
  3.83 years
                                                 ===========      ============

(*) These options have been rescinded in terms of the Stock Purchase Agreement ,
dated August 25,2006.

The outstanding stock options were excluded from weighted average common shares
outstanding, for the purpose of calculating earnings per share, since they are
anti-dilutive.


Note E - Investments

The Company had an investment in an affiliated corporation, Evolve One, Inc
("Evolve One"), where the President and CEO of Diversifax was also the President
and CEO of the Evolve One. Accordingly, the Company was considered to have
significant influence over the affiliated corporation and, therefore, the
investment was accounted for using the equity method under APB 18, "The Equity
Method of Accounting for Investments in Common Stock (as amended)."


On April 28, 2006, a group of investors, including Diversifax, Inc.,
representing 80% of the issued shares of Evolve One sold their interest in
Evolve One. The Company sold 12,137,784 of its total holding of the 12,848,916
shares, retaining 711,132 shares and 6,000,000 warrants, which expire on June
20, 2010. The Company received $108,553 for the shares, as well as receiving
reimbursement of $53,339 for expenses incurred and paid by Diversifax. The
company recorded a gain of $64,002 for the sale and an impairment charge of
$7,111 for the shares and warrants of Evolve One that were retained. The gain
 and impairment charges are included in the consolidated statement of
 operations, as other income. As of August 10, 2006 the investment
in Evolve One was part of the assets exchanged in terms of the Asset Transfer
and Debt Resolution Agreement.




Note F - Issue of Stock

On July 20, 2006, the Diversifax issued a total of
25,000,000 shares (pre reverse split) of its common stock to Dr. Irwin Horowitz,
the Diversifax 's chief executive officer, who is an accredited investor. Dr.
Horowitz purchased the shares at $0.017 per share, for an aggregate purchase
price of $425,000. He paid the consideration by
reducing the Registrant's preexisting liability to him. Prior to the
transaction, Dr. Horowitz owned approximately 64% of our outstanding common
stock. After the transaction, Dr. Horowitz owned approximately 81% of our
outstanding common stock. The transaction was exempt from registration under
Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder
and was not underwritten



Note G - Reverse Stock Split

On  September  19, 2006, notice was given to inform the holders of record, as of
September  21,  2006,  of shares of common stock, par value $0.001 per share  of
Diversifax,  Inc.  that  our  board of directors recommended and the holder of a
majority  of  our  outstanding  Common  Stock  voted  in favor of resolutions in
connection  with  the  following  actions:

     A.  Amending  the  Company's  Articles of Incorporation, as amended, (i) to
effect  a  reverse  stock  split of our shares of Common Stock outstanding as of
October  11,  2006  on  the  basis  of  one  (1) post-split share of Common
 Stock for every one hundred (100) pre-split shares of
Common  Stock  and (ii) maintain the total number of authorized shares of Common
Stock  at  70,000,000.

All  necessary  corporate  approvals  in connection with the matters referred to
herein  have  been obtained. The accompanying Information Statement is furnished
to  all  stockholders of the Company pursuant to Section 14(c) of the Securities
Exchange  Act  of  1934,  as  amended,  and  the rules thereunder solely for the
purpose  of  informing  shareholders  of  these  corporate  actions.

The  Board  of  Directors approved the adoption of the Reverse Stock Split dated
September  11,  2006,  as  it  believes  that such
actions  are  in  the best interests of the Company. Stockholder approval of the
adoption  of  the  Reverse  Stock  Split, the decision to maintain the par value
($.001)  and  the number of authorized shares of Common Stock at 70,000,000. The
Amendment  was  effected  pursuant  to  Section  228  of  the  Delaware  General
Corporation  Law  by  a  written  consent  of  the  holder  of a majority of our
outstanding Common Stock, dated September 11, 2006
,  that  was  signed  by  the  owner  of  approximately  70%  of  our issued and
outstanding  Common Stock. As of September 1, 2006,
we had outstanding 51,726,200 shares of Common Stock. Each share of Common Stock
entitles the holder to one vote on all matters on which holders are permitted to
vote.







<PAGE>





ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS  (See Note B - Discontinued 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, 2005. 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.

On August 10, 2006, the Company exchanged all of
its operations, as well as all of its assets in terms of an agreement with a
related party, to relieve itself of all debt. The company has discontinued it's
operations.

On August 25, 2006, the Company effected a majority change in directors and
ownership.




Going concern


The accompanying consolidated financial statements have been prepared assuming
that the company will be continuing as a going concern.  The company has
incurred net operating losses resulting in an accumulated deficit of
approximately $14,350,000 through August 31, 2006. The Company has decided to
discontinue operations, and on August 10,2006, agreed to consummate the sale of
 substantially all of its assets in Exchange for relief of a portion of its debt
 pursuant to the terms of an Asset Transfer and Debt Resolution Agreement. The
 remaining debt of the Company, which was payable to the then majority
shareholder, was forgiven and accounted for as additional contribution to
capital. In view of these matters there is considerable doubt as to the
 company's ability to continue as a going concern.



Management's plans

Our plan is to seek, investigate, and if such investigation warrants, consummate
a merger or other business combination, purchase of assets or other strategic
transaction (i.e. Merger) with a corporation, partnership, limited liability
company or other business entity (a "Merger Target") desiring the perceived
advantages of becoming a publicly reporting and publicly held corporation. At
this time, we have no binding agreement to enter into a Merger with any specific
business or company. Discussion of management's plan of operation under this
caption and throughout this filing is purposefully general and is not meant to
restrict our virtually unlimited discretion to search for and enter into
potential business opportunities.

We will not restrict our search to any specific business, industry, or
geographical location, and may participate in business ventures of virtually any
kind or nature. We may seek a Merger with an entity which only recently
commenced operations, or a developing company in need of additional funds to
expand into new products or markets or seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and needs additional capital which is perceived to be
easier to raise by a public company. Indeed, our most common merger candidates
are often companies that lack the ability to conduct an IPO, or whose business

industry is not well received by the investment banking community. In some
instances, a Merger may involve entering into a transaction with a corporation
which does not need substantial additional cash but which desires to establish a
public trading market for its common stock. We may purchase assets and establish
wholly-owned subsidiaries in various businesses or purchase existing businesses
as subsidiaries. It is impossible to predict at this time the status of any
business in which we may become engaged.

Selecting a Merger Target will be complex and involve a high degree of risk.
Because of general economic conditions, rapid technological advances being made
in some industries, and shortages of available capital, management believes that
there are numerous entities seeking the benefits of being a publicly-traded
corporation. Many potential Merger Targets are in industries that have
essentially not presented well in the conventional IPO market, regardless of
their financial success, and suffer from low initial valuations. The perceived
benefits of being a publicly traded corporation may include facilitating or
improving the terms on which additional equity financing may be sought,
providing liquidity (subject to restrictions of applicable statutes and
regulations) for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes and regulations) for
all stockholders, and other items. Potential Merger Targets may exist in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such Merger Targets
extremely difficult and complex.

We believe we can offer owners of Merger Targets the opportunity to acquire a
controlling ownership interest in a public company at substantially less cost
than is required to conduct an initial public offering. Nevertheless, we have
not conducted any specific market research and we are not aware of statistical
data which would support the perceived benefits of a Merger or acquisition
transaction for the owners of a Merger Target.


In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporate entity. We may also seek to acquire stock or
assets of an existing business. On the consummation of a transaction, it is
probable that our present management and stockholders will no longer be in
control of our company; In addition, our directors may, as part of the terms of
the acquisition transaction, resign and be replaced by new directors without a
vote of our stockholders or may sell their stock. Any terms of the sale of the
shares presently held by the officers and/or directors will be also afforded to
all other stockholders on similar term and conditions. Any and all such sales
will only be made in compliance with federal and applicable state securities
laws.

We anticipate that any securities issued in such any such reorganization would
be issued in reliance upon exemption from registration under the applicable
federal and state securities laws. In some circumstances, however, as negotiated
element of a transaction, we may agree to register all or a part of such
securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after we have
successfully consummated a merger or acquisition and we are no longer considered
a "shell" company. Until such time as this occurs, we will not attempt to
register any additional securities. The issuance of substantial additional
securities and their potential sale into the trading market which may develop in
our securities may have a depressive effect on the value of our securities in
the future, if such a market develops, of which there is no assurance.


While the actual terms of a transaction to which we may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so-called "tax-free" reorganization under Sections 368(a)
(1) or 351 of the Internal Revenue Code. In order to obtain tax-free treatment,
it may be necessary for the owners of the acquired business to own 80% or more
of the voting stock of the surviving entity. In such event, our stockholders
would retain less then 20% of the issued and outstanding shares of the surviving
entity, which would result in significant dilution in the equity of such
holders.

We will participate in a business opportunity only after the negotiation and
execution of appropriate written agreements, Although the terms of such
agreements cannot be predicted, generally such agreements will require some
specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with our attorneys and accountants, will set forth remedies on
default and will include miscellaneous other terms.

We do not intend to make any loans to any prospective acquisition or merger
candidates or to unaffiliated third parties or to obtain funds in one or more
private placements to finance the operation of any acquired business opportunity
until such time as we have successfully consummated such a Merger, if ever. We
do not intend to provide our stockholders with any complete disclosure
documents, including audited financial statements, concerning an acquisition or
merger candidate and its business prior to the consummation of any acquisition
or merger transaction, so stockholders will be dependent upon the judgment of
current management and our Board of Directors regarding the fairness of any
transaction.

There can be no assurance that we will find a suitable Merger Target. If no such
Merger Target is found, no return on an investment in our securities will be
realized, and there will not, most likely, be a market for the Company's stock.


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 country-regionplaceUnited 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.

There is no cash in the Company.

There are no Revenues after August 10,2006.


The equity method of accounting is used when the Company has a 20% to 50%
interest in other entities or less then 20% interest with the ability to
significant influence the entity's operating and financial activities. Under the
equity method, original investments are recorded at cost and adjusted by the
Company's share of undistributed earnings or losses of these entities.
Non-marketable investments in which the Company has less than 20% interest and
in which it does not have the ability to exercise significant influence over the
investee are initially recorded at cost. Both methods require periodic reviewed
the investment for impairment. The Company's investments have been considered
impaired and written off.



Basic earnings per share has been computed using the weighted average number of
common and common equivalent shares outstanding during each period presented.
Common equivalent shares for outstanding options and warrants were not included
in the weighted average shares outstanding where the effect would be
anti-dilutive.

Results of Discontinued Operations for Three Months Ended
August 31, 2006 Compared to August 31,2005

Sales: Sales for the third quarter of 2006 decreased $269,468 or 81% to
$64,563 from $334,031 for the second quarter of 2005. This decrease relates
primarily to the recognition of deferred service fee income in connection with
the nine-month contract with Evolve One, Inc. this income stream has ceased. In
2005, the service fee recognized amounted to $218,676.

Cost of Sales: Cost of sales for the third quarter of 2006 decreased $13,888 or
17% to $66,054 from $79,942 for the third quarter of 2005. Cost of sales
represented 102% of sales for the third quarter of 2006 compared to 69% of coin
sales for the third quarter of 2005. Purchases of paper, supplies, etc. are not
necessarily driven by sales volume.

Selling, general and administrative expenses: Selling, general and
administrative expenses decreased $27,563 or 23% from $121,528 to $93,965. This
decrease was a result of reduced revenues, and no support costs for the Evolve
One service contract. SG&A expenses still, however, increased to 46% of sales
for the third quarter of 2006, compared to 36% of sales for the third quarter of
2005.

Other income: Other income for the third quarter of 2005 represented the earned
portion of management fees flowing from the contract with Evolve One, Inc. which
has ceased.

The above factors resulted in net loss of $107,754 for the third quarter of
2006 compared to net income of $139,281 for the third quarter of 2005.

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. All copier activities have ceased, in terms of
the Asset Transfer and Debt Resolution Agreement.


<PAGE>


Results of Discontinued Operations for Nine Months Ended
August 31, 2006 Compared to August 31, 2005  (See Note B)

Sales:  Sales for the first nine months of 2006 decreased $468,306, or 57% to
$359,174 from $827,480 for the first nine months of 2005. $399,926 of this
decrease represents the termination of the service contract with Evolve One,
Inc. The decrease in coin revenues represents the continuing decline in demand
for the Company's products. The majority of the Company's customers are
maintained pursuant to contractual agreements, generally ranging from three to
five years. Over the past few years, the Company's
business has become increasingly more competitive. Accordingly, when contracts
come up for renewal, the Company may be out bid by its competitors. Secondly,
the Company has continued a critical review of its customer base, and has
determined not to renew customer contracts where the costs of maintaining such
customers exceeded the benefits. This often occurs when the required commission
structure is excessive or the customer's demands for equipment are not
reasonable.

Cost of Sales: Cost of sales for the first nine months of 2006 decreased
$110,072, or 42% to $153,148 from $263,220 for the first nine months of 2005.
 Cost of sales represented 43% of sales for the first nine months of 2006
compared to 32% of sales for the first nine months of 2005. The decrease is
 generally due to reduced sales in the current quarter.

Selling, general and administrative expenses: Selling, general and
administrative expenses increased to $424,553 or 118% of sales for the first
nine months of 2006 from $327,226 or 40% of sales for the first nine months of
2005. This increase is primarily attributable to the accrual of professional
fees, as well as
expenses incurred in the disposition of the Company's interest in Evolve One,
Inc.

Other income: Other income for the first nine months  of 2005 represented the
earned portion of management fees flowing from the contract with Evolve One,
Inc. which has ceased.

The above factors resulted in net loss of $191,441 for the first nine months of
2006 as compared to net income of $296,097 for the first nine months of 2005.

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.   All copier activity has ceased.


Liquidity and Capital Resources

At August 31, 2006, the Company had cash of $0 as compared to $15,741 at
November 30, 2005. All bank accounts were disposed of in terms of the Asset
Transfer and Debt Resolution Agreement.

Net cash provided in operating activities of $3,894 during the first nine months
of 2006 resulted primarily from non-cash items. In addition, net cash provided
in discontinued operating activities included the assumption of debt, and the
acquisition of assets in terms of the Asset Transfer and Debt Resolution
Agreement.

Net cash used in financing activities amounted to $11,847 during the first nine
months of 2006. This was primarily the repayment of the loan payable,
officer/stockholder by the Company to Dr. Irwin Horowitz, prior to the
discontinuance of operations.

The company recognized additional paid in capital from forgiveness of debt, by
the then majority stockholder, in the amount of $2,525,131.


The above resulted in a net decrease in cash of $15,741 for the  first nine
months of 2006.



























                                   15


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) Despite the changes in management, there were no significant changes in
internal controls or in other factors  that could significantly affect internal
controls subsequent to the date of evaluation, during the most recent quarter,
including any corrective actions with regard to significant deficiencies and
material weaknesses.











<PAGE>


                                       16


                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS -

The Company is not a party to any material legal proceedings.


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

The Common Stock was traded on the over-the-counter market with quotations
reported on the National Association of Securities Dealers Automatic Quotation
System (NASDAQ), Small Cap Market, under the symbol "DFAX."

As of August 31, 2006, there were approximately 236 holders of record of the
 Common Stock, including record holders which may hold such stock for beneficial
 owners and which have not been polled to determine the extent of beneficial
 ownership.

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 therefore.
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.

On July 20, 2006 the Company issued 25,000,000(pre reverse split)shares of
 common stock, at $.017 per share, in exchange for
$425,000 of pre-existing debt owed to an officer/stockholder.

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.

ITEM 5 - OTHER INFORMATION - None

ITEM 6 - EXHIBITS

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

10.1     Asset Transfer and Debt Resolution Agreement, dated August 10, 2006.

31.1     Certification of the Chief Executive Officer, dated October 4, 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 October 4, 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)
<PAGE>

                                       17

                                   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/ Juxiang Yu
                                       -------------------------------
Date:  October 13, 2006                 Yuxiang Yu
                                        President
                                       (principal executive officer)