##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                to
 Commission File Number: 000-24684
 ADUDDELL INDUSTRIES, INC.
  Oklahoma
    
    73-1587867(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1601 N.W. ExpresswayOklahoma City, Oklahoma
    
    73118(Address of principal executive offices)
    
    (Zip Code)
 
  þ o
  o o þ
  o þ




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##### 



PagePart I  Financial Information
    
    
    1Item 1. Financial Statements
    
    
    1Consolidated Balance Sheets
    
    
    1Consolidated Statements of Operations
    
    
    3Consolidated Statements of Cash Flows
    
    
    4Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II  Other Information
    
    
    24Item 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



Cautionary Statement Regarding Forward Looking Information
  
    
    our ability to expand our markets and maintain or increase profit margins;
    
    actions of our competitors;
    
    statements regarding our anticipated revenues, expense levels, liquidity
and capital resources and projections of positive operating cash flow; and
    
    the matters described under Part II  Item 1A  Risk Factors




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ADUDDELL INDUSTRIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCurrent AssetsCash
    
    $
    723,267
    
    
    $
    22,330,751Accounts receivable, net of allowance
for doubtful accounts
    
    
    6,614,328
    
    
    
    4,614,895Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    5,718,550
    
    
    
    2,158,971Income tax receivable
    
    
    401,191
    
    
    
    Prepaid expenses
    
    
    341,186
    
    
    
    168,839Employee and other receivables, net of
allowance for doubtful accounts
    
    
    31,756
    
    
    
    16,19913,830,278
    
    
    
    29,289,655Non-Current Related Party Receivable
    
    
    
    
    
    
    1,801,133Property and EquipmentField and shop equipment
    
    
    1,227,464
    
    
    
    637,565Office furniture and equipment
    
    
    829,333
    
    
    
    228,927Transportation equipment
    
    
    3,139,790
    
    
    
    1,107,193Leasehold improvements
    
    
    203,896
    
    
    
    96,0015,400,483
    
    
    
    2,069,686Less: accumulated depreciation
    
    
    (1,196,007
    )
    
    
    (879,737
    )4,204,476
    
    
    
    1,189,949OtherIntangible asset customer list, net
    
    
    537,783
    
    
    
    Investments
    
    
    578,611
    
    
    
    423,1101,116,394
    
    
    
    423,110$
    19,151,148
    
    
    $
    32,703,847
  1




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##### Table of Contents

\

ADUDDELL INDUSTRIES, INC.
 CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)Liabilities and Shareholders EquityCurrent LiabilitiesAdvances on Line of Credit
    
    
    1,170,567Current portion of long-term debt
    
    
    40,305
    
    
    
    213,410Accounts and subcontract payables
    
    
    3,482,844
    
    
    
    11,825,466Accrued liabilities
    
    
    675,192
    
    
    
    250,883Insurance payable
    
    
    97,164
    
    
    
    40,458Income tax payable
    
    
    
    
    
    
    5,349,105Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    94,892
    
    
    
    97,7845,560,964
    
    
    
    17,777,106Long-Term Debt (Net of Current Portion)
    
    
    135,742
    
    
    
    81,980Deferred Income Taxes
    
    
    180,000
    
    
    
    144,000Shareholders EquityPreferred stock ($0.001 par value, 20,000,000
shares authorized, no shares issued and
Outstanding)
    
    
    
    
    
    
    Common stock ($0.001 par value, 100,000,000
shares authorized, 50,187,921 and 48,737,921
shares issued and outstanding at September 30, 2006
and December 31, 2005)
    
    
    50,188
    
    
    
    48,738Paid-in capital
    
    
    3,342,262
    
    
    
    4,860,632Unrealized gain (loss) on available-for-sale securities
    
    
    5,656
    
    
    
    (3,569
    )Retained earnings
    
    
    9,876,336
    
    
    
    9,794,96013,274,442
    
    
    
    14,700,761$
    19,151,148
    
    
    $
    32,703,847
  2




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ADUDDELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended September 30,
    
    
    Nine Months Ended Sept 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    11,574,763
    
    
    $
    34,746,247
    
    
    $
    23,947,068
    
    
    $
    41,863,612Operating ExpensesCost of sales
    
    
    10,174,307
    
    
    
    22,543,572
    
    
    
    20,924,829
    
    
    
    28,950,703Selling, general and administrative
    
    
    1,344,290
    
    
    
    848,056
    
    
    
    3,232,753
    
    
    
    2,081,760Warranty expense
    
    
    34,966
    
    
    
    56,215
    
    
    
    121,749
    
    
    
    92,24411,553,563
    
    
    
    23,447,843
    
    
    
    24,279,331
    
    
    
    31,124,707Operating Income (Loss)
    
    
    21,200
    
    
    
    11,298,404
    
    
    
    (332,263
    )
    
    
    10,730,905Other IncomeInterest and dividend income
    
    
    18,145
    
    
    
    23,465
    
    
    
    300,102
    
    
    
    58,268Gain(loss) on sale of equipment
    
    
    2,500
    
    
    
    4,561
    
    
    
    28,739
    
    
    
    7,370Other income
    
    
    32,498
    
    
    
    58,817
    
    
    
    79,798
    
    
    
    247,05253,143
    
    
    
    86,843
    
    
    
    408,639
    
    
    
    312,690Net Income (Loss) from Operations
Before Income Taxes
    
    
    74,343
    
    
    
    11,385,247
    
    
    
    76,376
    
    
    
    11,051,595Provision for income taxes:Current
    
    
    (46,800
    )
    
    
    4,443,219
    
    
    
    (41,000
    )
    
    
    4,267,389Deferred
    
    
    58,000
    
    
    
    (25,000
    )
    
    
    36,000
    
    
    
    36,00011,200
    
    
    
    4,418,219
    
    
    
    (5,000
    )
    
    
    4,303,389Net Income (Loss)
    
    
    63,143
    
    
    
    6,917,028
    
    
    
    81,376
    
    
    
    6,748,206Other Comprehensive IncomeUnrealized holding gains (losses)
    
    
    (45,010
    )
    
    
    31,816
    
    
    
    9,225
    
    
    
    32,800Reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income
    
    $
    18,133
    
    
    $
    6,948,844
    
    
    $
    90,601
    
    
    $
    6,781,006Basic Net Income (Loss) per
Common Share
    
    $
    
    
    
    $
    .14
    
    
    $
    
    
    
    $
    .14Diluted Net Income (Loss) per
Common Share
    
    $
    
    
    
    $
    .09
    
    
    $
    
    
    
    $
    .08Weighted Average Common
Shares Basic
    
    
    50,187,921
    
    
    
    48,737,921
    
    
    
    50,187,921
    
    
    
    48,737,921Weighted Average Common
Shares Assuming Dilution
    
    
    79,853,005
    
    
    
    80,624,187
    
    
    
    79,853,005
    
    
    
    80,624,187
  3




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ADUDDELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSept 30,
    
    
    Sept 30,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet income
    
    $
    81,376
    
    
    $
    6,784,206Reconciliation of net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    472,620
    
    
    
    152,894Bad debt expense
    
    
    119,215
    
    
    
    Issuance of debt for interest expense
    
    
    
    
    
    
    4,500(Gain) on sale of property and equip
    
    
    (28,739
    )
    
    
    (12,369
    )Realized gain on forgiveness of debt(Increase) Decrease from changes in:Accounts receivable
    
    
    (2,118,648
    )
    
    
    (3,889,058
    )Costs and estimated earnings in excess of
Billings on uncompleted contracts
    
    
    (3,559,579
    )
    
    
    (26,723,107
    )Officer receivable
    
    
    
    
    
    
    Income tax receivable
    
    
    (401,191
    )
    
    
    Related party receivable
    
    
    (40,787
    )
    
    
    (51,768
    )Deferred taxes
    
    
    
    
    
    
    (26,000
    )Prepaid expenses
    
    
    (172,347
    )
    
    
    (20,472
    )Employee and other receivables
    
    
    (15,557
    )
    
    
    73,128Intangible asset customer list
    
    
    (392,537
    )
    
    
    Increase (Decrease) from changes in:Accounts payable
    
    
    (8,342,622
    )
    
    
    13,183,117Insurance payable
    
    
    56,706
    
    
    
    (27,255
    )Accrued liabilities
    
    
    424,309
    
    
    
    81,339Income tax payable
    
    
    (5,349,105
    )
    
    
    4,207,268Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    (2,892
    )
    
    
    (143,807
    )Deferred taxes
    
    
    36,000
    
    
    
    Net adjustments to net income
    
    
    (19,315,154
    )
    
    
    (13,191,590
    )Net cash used by operating activities
    
    
    (19,233,778
    )
    
    
    (6,443,384
    )
  4




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ADUDDELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSept 30,
    
    
    Sept 30,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Cash Flows from Investing ActivitiesProceeds from sale of property and equipment
    
    
    37,863
    
    
    
    88,295Purchase of investments
    
    
    (146,276
    )
    
    
    Purchase of property and equipment
    
    
    (3,247,759
    )
    
    
    (560,062
    )Net cash used by investing activities
    
    
    (3,356,172
    )
    
    
    (471,767
    )Cash Flows from Financing ActivitiesNet change in line of credit
    
    
    1,170,567
    
    
    
    4,979,337Retirement of long-term debt
    
    
    (308,101
    )
    
    
    (244,725
    )Proceeds from issuance of stock
    
    
    120,000
    
    
    
    Net cash provided by financing activities
    
    
    982,466
    
    
    
    4,734,612Net Increase (Decrease) in Cash
    
    
    (21,607,484
    )
    
    
    (2,180,539
    )Cash at Beginning of Period
    
    
    22,330,751
    
    
    
    2,500,561Cash at End of Period
    
    $
    723,267
    
    
    $
    320,022Supplemental Disclosure of Cash Flow
InformationCash paid for:Interest
    
    $
    30,902
    
    
    $
    50,033Taxes
    
    
    252,450
    
    
    
    122,120Supplemental Schedule of Non-Cash
Investing and Financing ActivitiesFixed asset additions
    
    $
    135,220
    
    
    $
    130,220Liabilities assumed or incurred
    
    $
    135,220
    
    
    $
    130,220Common stock issued for acquisition
    
    $
    205,000
    
    
    $
    
  5




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ADUDDELL INDUSTRIES, INC.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the Nine Months Ended September 30, 2006
 (UNAUDITED
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization and Nature of Business
     Principles of Consolidation
  6




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Revenue Recognition
   Cash and Cash Equivalents
  Investments
 Statement of Financial
Accounting Standards No. 115 Accounting for Certain Investments in Debt and Equity Securities
(SFAS No. 115).
 SFAS No. 115
 Intangible Assets
 Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets SFAS No. 142 SFAS No. 142
 7




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Fair Value of Financial Instruments
  Share-Based Compensation
  Depreciation
  Field and shop equipment
    
    5 - 7 YearsOffice furniture and equipment
    
    5 - 10 YearsTransportation equipment
    
      5 YearsLeasehold improvements
    
    15  39 Years
 Income Taxes
 Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109) SFAS No. 109 SFAS No. 109
   Net Income (Loss) Per Common Share
 SFAS No. 128 Earnings per
Share (SFAS No. 128) SEC Staff Accounting Bulletin No. 98 (SAB 98). SFAS No. 128 SAB 98,
 8




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Use of Estimates
  Reclassifications
  NOTE 2  ACQUISITIONS
     NOTE 3  CONTRACT RECEIVABLES
  September 30,
    
    
    December 31,2006
    
    
    2005Completed contracts
    
    $
    960,413
    
    
    $
    2,510,811Contracts in progress
    
    
    3,779,995
    
    
    
    1,439,198Retainage
    
    
    1,873,920
    
    
    
    664,8866,614,328
    
    
    
    4,614,895Less allowance for doubtful amounts
    
    
    
    
    
    
    $
    6,614,328
    
    
    $
    4,614,895
 9




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##### Table of Contents



NOTE 4  UNCOMPLETED CONTRACTS
  September 30,
    
    
    December 31,2006
    
    
    2005Costs incurred on uncompleted contracts
    
    $
    24,002,155
    
    
    $
    35,222,123Estimated earnings
    
    
    2,436,842
    
    
    
    16,992,36626,438,997
    
    
    
    52,214,489Billings to date
    
    
    20,815,339
    
    
    
    50,153,302$
    5,623,658
    
    
    $
    2,061,187
  September 30,
    
    
    December 31,2006
    
    
    2005Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    $
    5,718,550
    
    
    $
    2,158,971Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    (94,892
    )
    
    
    (97,784
    )$
    5,623,658
    
    
    $
    2,061,187
 NOTE 5  LINE OF CREDIT
  NOTE 6  LONG-TERM DEBT
  September 30
    
    
    December 31,2006
    
    
    2005Note payable secured by all accounts,
equipment and general intangibles, bearing
interest at 2.75% over New York Prime, with a
maximum of 7.75% and a minimum of 5.75%
(7.75% currently), due in monthly installments
of $17, 581 through November 2006
    
    $
    
    
    
    $
    182,5626% to 7.75% notes payable secured by
transportation equipment, due in varying
monthly installments through May 2011
    
    
    176,047
    
    
    
    112,828176,047
    
    
    
    295,390Less: current portion of long-term debt
    
    
    40,305
    
    
    
    213,410$
    135,742
    
    
    $
    81,980
  Year
    
    
    
    Amount2008
    
    
    
    $
    43,4642009
    
    
    
    
    46,8722010
    
    
    
    
    37,1332011
    
    
    
    
    8,273$
    135,742
  10




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##### Table of Contents



NOTE 7  LETTER OF CREDIT
  NOTE 8  PENSION PLAN
 Internal Revenue Code
 NOTE 9  SHARE-BASED COMPENSATION PLANS
 Section 422 Internal Revenue Code of 1986
 Options Issued During the Quarter:
  Options Issued Previously
     11




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NOTE 10  INCOME TAXES
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Current tax provision
    
    $
    (46,800
    )
    
    $
    4,442,319
    
    
    $
    (41,000
    )
    
    $
    4,267,389Deferred tax provision
    
    
    58,000
    
    
    
    (25,000
    )
    
    
    36,000
    
    
    
    36,000Total provision for income taxes
    
    $
    11,200
    
    
    $
    4,418,219
    
    
    $
    (5,000
    )
    
    $
    4,404,389
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Computed tax at the statutory rates
tax provision
    
    $
    25,276
    
    
    $
    4,440,246
    
    
    $
    29,786
    
    
    $
    4,310,122Difference between book and tax
depreciation
    
    
    (72,076
    )
    
    
    2,973
    
    
    
    (70,786
    )
    
    
    (42,733
    )Total current income tax provision
    
    $
    (46,800
    )
    
    $
    4,443,219
    
    
    $
    (41,000
    )
    
    $
    4,267,389
   12




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##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005Deferred tax liability on IDC and depreciation
    
    $
    (245,000
    )
    
    $
    (245,000
    )Deferred tax asset for loss carry forward and
share-based compensation
    
    
    304,000
    
    
    
    304,000Deferred tax asset
    
    
    59,000
    
    
    
    59,000Less: valuation allowance
    
    
    203,000
    
    
    
    203,000Net deferred tax asset (liability)
    
    $
    (180,000
    )
    
    $
    (144,000
    )
 NOTE 11  RELATED PARTY TRANSACTIONS
    NOTE 12  BACKLOG
  NOTE 13  STOCK OPTIONS
   13




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NOTE 14  EARNINGS PER SHARE
 September 30,
    
    
    September 30,2006
    
    
    2005Basic net income (loss) per share:Common shares outstanding
    
    
    50,187,921
    
    
    
    48,737,921Weighted average shares outstanding
    
    
    50,187,921
    
    
    
    48,737,921Net Income (Loss) per share
    
    $
    0.00
    
    
    $
    0.14Diluted net income (loss) per common share:Common shares outstanding
    
    
    79,853,005
    
    
    
    80,624,187Weighted average shares outstanding
    
    
    79,853,005
    
    
    
    80,624,187Net Income (Loss) per share
    
    $
    0.00
    
    
    $
    0.08
  NOTE 15  LEASES
   Year
    
    
    
    Amount2007
    
    
    
    $
    107,9062008
    
    
    
    
    107,9062009
    
    
    
    
    107,9062010
    
    
    
    
    62,946$
    386,664
  14




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##### Table of Contents



NOTE 16  COMMITMENTS AND CONTINGENCIES
  Federal Deposit Insurance Corporation
  Lawsuit
     NOTE 17  CONCENTRATIONS
  15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Introduction
  Recent Developments:
        16




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Overview
    17




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##### Table of Contents



Three
    
    
    
    
    
    Threemonths
    
    %
    
    months
    
    Nine months
    
    %
    
    Nine monthsended
    
    Increase
    
    ended
    
    ended
    
    Increase
    
    endedSept 30, 2006
    
    (Decrease)
    
    Sept 30, 2005
    
    Sept 30, 2006
    
    (Decrease)
    
    Sept 30, 2005Aduddell Roofing Revenue
    
    $
    11,574,763
    
    
    
    93
    %
    
    $
    6,010,532
    
    
    $
    23,947,068
    
    
    
    82
    %
    
    $
    13,127,897E2MS Revenue
    
    $
    
    
    
    
    (100
    )%
    
    
    28,735,715
    
    
    $
    
    
    
    
    (100
    )%
    
    $
    28,735,715Total Revenue
    
    $
    11,574,763
    
    
    
    (67
    )%
    
    $
    34,746,247
    
    
    $
    23,947,068
    
    
    
    (43
    )%
    
    $
    41,863,612Aduddell Roofing Gross
Margin
    
    $
    1,487,756
    
    
    
    (1
    )%
    
    $
    1,496,169
    
    
    $
    3,150,939
    
    
    
    43
    %
    
    $
    2,206,403E2MS Gross Margin
    
    $
    (87,300
    )
    
    
    (101
    )%
    
    $
    10,706,506
    
    
    $
    (128,700
    )
    
    
    (101
    )%
    
    $
    10,706,506Total Gross Margin
    
    $
    1,400,456
    
    
    
    (89
    )%
    
    $
    12,202,675
    
    
    $
    3,022,239
    
    
    
    (77
    )%
    
    $
    12,912,909Corporate Admin & Sales
    
    $
    651,784
    
    
    
    691
    %
    
    $
    82,368
    
    
    $
    1,350,473
    
    
    
    684
    %
    
    $
    172,344Cash Flow from Operations
    
    $
    (1,364,168
    )
    
    
    73
    %
    
    $
    (5,024,196
    )
    
    $
    (19,233,778
    )
    
    
    (199
    )%
    
    $
    (6,443,384
    )EBITDA
    
    $
    250,444
    
    
    
    (98
    )%
    
    $
    11,465,602
    
    
    $
    887,062
    
    
    
    (92
    )%
    
    $
    11,302,927Net Income
    
    $
    18,133
    
    
    
    (100
    )%
    
    $
    6,948,844
    
    
    $
    90,601
    
    
    
    (99
    )%
    
    $
    6,781,006Free Cash Flow
    
    $
    (1,978,894
    )
    
    
    62
    %
    
    $
    (5,243,736
    )
    
    $
    (22,481,537
    )
    
    
    (221
    )%
    
    $
    (7,003,446
    )
  Cash Flow from Operations
    
    $
    (1,364,168
    )
    
    $
    (5,024,196
    )
    
    $
    (19,233,778
    )
    
    $
    (6,443,384
    )Capital Expenditures
    
    
    614,726
    
    
    
    219,540
    
    
    
    3,247,759
    
    
    
    560,062Free Cash Flow
    
    
    (1,978,894
    )
    
    
    (5,243,736
    )
    
    
    (22,481,537
    )
    
    
    (7,003,446
    )
  Net Income
    
    
    18,133
    
    
    
    6,984,844
    
    
    
    90,601
    
    
    
    6,781,006Interest (Income)
    
    
    18,145
    
    
    
    23,465
    
    
    
    300,102
    
    
    
    58,268(Gain) Loss on Sale
of Equipment
    
    
    2,500
    
    
    
    4,561
    
    
    
    28,739
    
    
    
    7,370Provision (Benefit)
for Income Taxes
    
    
    11,200
    
    
    
    4,418,219
    
    
    
    (5,000
    )
    
    
    4,303,389Depreciation
    
    
    200,466
    
    
    
    55,513
    
    
    
    472,620
    
    
    
    152,894EBITDA
    
    
    250,444
    
    
    
    11,465,602
    
    
    
    887,062
    
    
    
    11,302,927
 18




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##### Table of Contents



Critical Accounting Policies and Estimates
 General
  Revenue Recognition
  19




---



##### Table of Contents



Cash and Cash Equivalents
  Investments
   Fair Value of Financial Instruments
  Share-Based Compensation
  Income Taxes
  20




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##### Table of Contents



Net Income (Loss) Per Share
  Property and Equipment
  Changes from the Prior Period
  Results of Operations
 Comparison of 3rd Quarter 2006 and 2005
 Revenues
 Operating Expenses
 Income(Loss) before Provision for Income Taxes
 Net Income ( Loss).
 21




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##### Table of Contents



Comparison of nine months ended September 30, 2006 and 2005
 Revenues
 Operating Expenses
 Income (Loss) before Provision for Income Taxes
 Net Income ( Loss).
 Off-Balance Sheet Arrangements
  Seasonality
   22




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##### Table of Contents



Commitments and Contingencies
    Liquidity and Capital Resources
   Adequacy of Current Liquidity
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk .
 
 Item 4. Controls and Procedures
  23




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
     
 Item 1A. Risk Factors
  24




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##### Table of Contents



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
 Exhibit No.
    
    Description of Exhibit2.1
    
    Agreement and Plan of Split-off and Merger, dated as
of September 27, 2002, by and among Zenex International,
its subsidiary and Aduddell Roofing (filed as exhibit to
our Form 8-K/A filed on November 15, 2002 and
incorporated by reference herein)3.1
    
    Amended and Restated Articles of Incorporation of
Zenex (filed as exhibit to our Form S-3 Registration
Statement filed on August 2, 2000 and incorporated by
reference herein)3.2
    
    Amended and Restated Bylaws of Zenex (filed as
exhibit to our Form S-3 Registration Statement filed on
August 2, 2000 and incorporated by reference herein).3.3
    
    Amendment to the Articles of Incorporation of Lone
Wolf Energy, Inc. changing the name to Zenex Telecom,
Inc. effective November 29, 2001 (filed as exhibit to our
Form 8-K filed on November 28, 2001 and incorporated by
reference herein)3.4
    
    Amendment to the Articles of Incorporation changing
Zenex Telecom, Inc. to Zenex International, Inc.
effective August 6, 2002 (filed as exhibit to our Form
8-K filed on August 15, 2002 and incorporated by
reference herein)31.1
    
    Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes Oxley Act of 200232.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 25




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##### Table of Contents



ADUDDELL INDUSTRIES, INC.November 14, 2006
    
    By:
    
    /s/ Ron CarteRon Carte, PresidentNovember 14, 2006
    
    By:
    
    /s/ Reggie CookReggie Cook, ChiefFinancial Officer (Principal Accounting Officer)
 
  EXHIBITNO.
    
    DESCRIPTION
    
    METHOD OF FILING2.1
    
    Agreement and Plan of Split-off and
Merger, dated as of September 27, 2002,
by and among Zenex International, its
subsidiary and Aduddell Roofing
    
    Incorporated herein by reference3.1
    
    Amended and Restated Articles of
Incorporation of Zenex
    
    Incorporated herein by reference3.2
    
    Amended and Restated Bylaws of Zenex
    
    Incorporated herein by reference3.3
    
    Amendment to the Articles of
Incorporation of Lone Wolf Energy, Inc.
changing the name to Zenex Telecom, Inc.
effective November 29, 2001
    
    Incorporated herein by reference3.4
    
    Amendment to the Articles of
Incorporation changing Zenex Telecom,
Inc. to Zenex International, Inc.
effective August 6, 2002
    
    Incorporated herein by reference31.1
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
    
    Filed herewith electronically31.2
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
    
    Filed herewith electronically32.1
    
    Section 1350 Certification of Chief
Financial Officer
    
    Filed herewith electronically32.2
    
    Section 1350 Certification of chief
Financial Officer
    
    Filed herewith electronically
 26