##### 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 June 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




---



##### 



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
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    22Part II  Other Information
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Section 1350 Certification of CEOSection 1350 Certification of CFO




---



##### 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; and
    
    statements regarding our anticipated revenues, expense levels, liquidity
and capital resources and projections of positive operating cash flow.




---



##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ADUDDELL INDUSTRIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCurrent AssetsCash
    
    $
    1,703,034
    
    
    $
    22,330,751Accounts receivable, net of allowance
for doubtful accounts
    
    
    8,845,774
    
    
    
    4,614,895Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    1,911,655
    
    
    
    2,158,971Income tax receivable
    
    
    159,017
    
    
    
    Prepaid expenses
    
    
    430,798
    
    
    
    168,839Employee and other receivables, net of
allowance for doubtful accounts
    
    
    26,676
    
    
    
    16,19913,076,954
    
    
    
    29,289,655Non-Current Related Party Receivable
    
    
    
    
    
    
    1,801,133Property and EquipmentField and shop equipment
    
    
    1,129,976
    
    
    
    637,565Office furniture and equipment
    
    
    663,691
    
    
    
    228,927Transportation equipment
    
    
    2,798,694
    
    
    
    1,107,193Leasehold improvements
    
    
    203,896
    
    
    
    96,0014,796,257
    
    
    
    2,069,686Less: accumulated depreciation
    
    
    (1,035,918
    )
    
    
    (879,737
    )3,760,339
    
    
    
    1,189,949OtherIntangible asset customer list, net
    
    
    567,660
    
    
    
    Investments
    
    
    462,675
    
    
    
    423,1101,030,335
    
    
    
    423,110$
    17,867,628
    
    
    $
    32,703,847
  1




---



##### Table of Contents



ADUDDELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)Liabilities and Shareholders EquityCurrent LiabilitiesCurrent portion of long-term debt
    
    $
    39,566
    
    
    $
    213,410Accounts and subcontract payables
    
    
    3,195,417
    
    
    
    11,825,466Accrued liabilities
    
    
    758,747
    
    
    
    250,883Insurance payable
    
    
    111,136
    
    
    
    40,458Income tax payable
    
    
    
    
    
    
    5,349,105Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    253,210
    
    
    
    97,7844,358,076
    
    
    
    17,777,106Long-Term Debt (Net of Current Portion)
    
    
    145,912
    
    
    
    81,980Deferred Income Taxes
    
    
    122,000
    
    
    
    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 June 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
    
    
    35,996
    
    
    
    (3,569
    )Retained earnings
    
    
    9,813,194
    
    
    
    9,794,96013,241,640
    
    
    
    14,700,761$
    17,867,628
    
    
    $
    32,703,847
  2




---



##### Table of Contents



ADUDDELL
INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    8,637,728
    
    
    $
    3,831,637
    
    
    $
    12,372,306
    
    
    $
    7,117,365Operating ExpensesCost of sales
    
    
    7,902,525
    
    
    
    3,736,607
    
    
    
    10,750,521
    
    
    
    6,407,131Selling, general and administrative
    
    
    575,898
    
    
    
    610,785
    
    
    
    1,888,463
    
    
    
    1,233,704Warranty expense
    
    
    36,228
    
    
    
    16,298
    
    
    
    86,783
    
    
    
    36,0298,514,651
    
    
    
    4,363,690
    
    
    
    12,725,767
    
    
    
    7,676,864Operating Income (Loss)
    
    
    123,077
    
    
    
    (532,053
    )
    
    
    (353,461
    )
    
    
    (559,499
    )Other IncomeInterest and dividend income
    
    
    79,925
    
    
    
    17,327
    
    
    
    281,956
    
    
    
    34,803Gain(loss) on sale of equipment
    
    
    22,739
    
    
    
    (3,388
    )
    
    
    26,239
    
    
    
    2,809Other income
    
    
    39,211
    
    
    
    80,583
    
    
    
    47,300
    
    
    
    188,235141,875
    
    
    
    94,522
    
    
    
    355,495
    
    
    
    225,847Net Income (Loss) from Operations
Before Income Taxes
    
    
    264,952
    
    
    
    (437,531
    )
    
    
    2,034
    
    
    
    (333,652
    )Provision for income taxes:Current
    
    
    45,800
    
    
    
    (175,000
    )
    
    
    5,800
    
    
    
    (158,700
    )Deferred
    
    
    58,000
    
    
    
    25,774
    
    
    
    (22,000
    )
    
    
    (6,130
    )103,800
    
    
    
    (149,226
    )
    
    
    (16,200
    )
    
    
    (164,830
    )Net Income (Loss)
    
    
    161,152
    
    
    
    (288,305
    )
    
    
    18,234
    
    
    
    (168,822
    )Other Comprehensive IncomeUnrealized holding gains (losses)
    
    
    25,830
    
    
    
    410
    
    
    
    54,235
    
    
    
    984Reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income
    
    $
    186,982
    
    
    $
    (287,895
    )
    
    $
    72,469
    
    
    $
    (167,838
    )Basic Net Income (Loss) per
Common Share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Diluted Net Income (Loss) per
Common Share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Weighted Average Common
Shares Basic
    
    
    50,187,921
    
    
    
    48,737,921
    
    
    
    50,187,921
    
    
    
    48,737,921Weighted Average Common
Shares Assuming Dilution
    
    
    83,666,739
    
    
    
    80,737,921
    
    
    
    83,666,739
    
    
    
    80,737,921
  3




---



##### Table of Contents



ADUDDELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    18,234
    
    
    $
    (168,822
    )Reconciliation of net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    272,154
    
    
    
    97,381Bad Debt Expense
    
    
    87,000
    
    
    
    Issuance of debt for interest expense
    
    
    
    
    
    
    3,000(Gain) Loss on sale of property and equip
    
    
    (26,238
    )
    
    
    (2,809
    )Realized gain on forgiveness of debt
(Increase) Decrease from changes in:Accounts receivable
    
    
    (4,317,879
    )
    
    
    (642,995
    )Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    247,316
    
    
    
    725,961Officer receivable
    
    
    
    
    
    
    Income tax receivable
    
    
    (159,017
    )
    
    
    Related party receivable
    
    
    (40,787
    )
    
    
    (33,556
    )Deferred taxes
    
    
    
    
    
    
    (170,000
    )Prepaid expenses
    
    
    (261,959
    )
    
    
    (67,329
    )Employee and other receivables
    
    
    (10,477
    )
    
    
    (47,521
    )Intangible asset customer list
    
    
    (392,537
    )
    
    
    Increase (Decrease) from changes in:Accounts payable
    
    
    (8,630,049
    )
    
    
    (1,683,350
    )Insurance payable
    
    
    70,678
    
    
    
    17,223Accrued liabilities
    
    
    507,864
    
    
    
    369,944Income tax payable
    
    
    (5,349,105
    )
    
    
    Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    155,426
    
    
    
    183,685Deferred taxes
    
    
    (22,000
    )
    
    
    Net adjustments to net income (loss)
    
    
    (17,869,610
    )
    
    
    (1,250,366
    )Net cash used by operating activities
    
    
    (17,851,376
    )
    
    
    (1,419,188
    )
  4




---



##### Table of Contents



ADUDDELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Cash Flows from Investing ActivitiesProceeds from sale of property and equipment
    
    
    35,363
    
    
    
    78,295Purchase of property and equipment
    
    
    (2,633,033
    )
    
    
    (340,522
    )Net cash used by investing activities
    
    
    (2,597,670
    )
    
    
    (262,227
    )Cash Flows from Financing ActivitiesProceeds from long-term debt
    
    
    
    
    
    
    Retirement of long-term debt
    
    
    (298,671
    )
    
    
    (170,673
    )Proceeds from issuance of stock
    
    
    120,000
    
    
    
    Net cash provided(used) by financing activities
    
    
    (178,671
    )
    
    
    (170,673
    )Net Increase (Decrease) in Cash
    
    
    (20,627,717
    )
    
    
    (1,852,088
    )Cash at Beginning of Period
    
    
    22,330,751
    
    
    
    2,500,561Cash at End of Period
    
    $
    1,703,034
    
    
    $
    648,473Supplemental Disclosure of Cash Flow
InformationCash paid for:Interest
    
    $
    30,902
    
    
    $
    33,029Taxes
    
    
    
    
    
    
    5,169Supplemental Schedule of Non-Cash
Investing and Financing ActivitiesFixed asset additions
    
    $
    135,220
    
    
    $
    130,220Liabilities assumed or incurred
    
    $
    135,220
    
    
    $
    130,220Common stock issued for services
    
    $
    205,000
    
    
    $
    
  5




---



##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization and Nature of Business
    Principles of Consolidation
  Revenue Recognition
  6




---



##### Table of Contents



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 each
of
 Fair Value of Financial Instruments
  Share-Based Compensation
  7




---



##### Table of Contents



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,
 Use of Estimates
  8




---



##### Table of Contents



Reclassifications
  NOTE 2  ACQUISITIONS
  years
 NOTE 3  CONTRACT RECEIVABLES
  June 30,
    
    
    December 31,2006
    
    
    2005Completed contracts
    
    $
    578,014
    
    
    $
    2,510,811Contracts in progress
    
    
    6,994,177
    
    
    
    1,439,198Retainage
    
    
    1,273,583
    
    
    
    664,8868,845,774
    
    
    
    4,614,895Less allowance for doubtful amounts
    
    
    
    
    
    
    $
    8,845,774
    
    
    $
    4,614,895
 NOTE 4  UNCOMPLETED CONTRACTS
  June 30,
    
    
    December 31,2006
    
    
    2005Costs incurred on uncompleted contracts
    
    $
    17,880,207
    
    
    $
    35,222,123Estimated earnings
    
    
    734,154
    
    
    
    16,992,36618,614,361
    
    
    
    52,214,489Billings to date
    
    
    16,955,916
    
    
    
    50,153,302$
    1,658,445
    
    
    $
    2,061,187
  June 30,
    
    
    December 31,2006
    
    
    2005Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    $
    1,911,655
    
    
    $
    2,158,971Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    (253,210
    )
    
    
    (97,784
    )$
    1,658,445
    
    
    $
    2,061,187
 9




---



##### Table of Contents



NOTE 5  LINE OF CREDIT
   NOTE 6  LONG-TERM DEBT
  June 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
        
    185,478
    
    
    
    112,828185,478
    
    
    
    295,390Less: current portion of long-term debt
    
    
    39,566
    
    
    
    213,410$
    145,912
    
    
    $
    81,980
  Year
    
    Amount2008
    
    $
    42,6672009
    
    
    46,0132010
    
    
    46,0002011
    
    
    11,232$
    145,912
  NOTE 7  LETTER OF CREDIT
  10




---



##### Table of Contents



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




---



##### Table of Contents



NOTE 10  INCOME TAXES
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Current tax provision
    
    $
    45,800
    
    
    $
    (175,000
    )
    
    
    5,800
    
    
    
    (158,700
    )Deferred tax provision
    
    
    58,000
    
    
    
    25,774
    
    
    
    (22,000
    )
    
    
    (6,130
    )Total provision for income taxes
    
    $
    103,800
    
    
    $
    (149,226
    )
    
    
    (16,200
    )
    
    
    (164,830
    )
    June 30,
    
    
    December 31,2006
    
    
    2005Deferred tax liability on IDC and depreciation
    
    $
    (276,000
    )
    
    $
    (245,000
    )Deferred tax asset for loss carry forward and
share-based compensation
    
    
    357,000
    
    
    
    304,000Deferred tax asset
    
    
    81,000
    
    
    
    59,000Less: valuation allowance
    
    
    203,000
    
    
    
    203,000Net deferred tax asset (liability)
    
    $
    (122,000
    )
    
    $
    (144,000
    )
 NOTE 11  RELATED PARTY TRANSACTIONS
   12




---



##### Table of Contents



NOTE 12  BACKLOG
  NOTE 13  STOCK OPTIONS
     NOTE 14  EARNINGS PER SHARE
 June 30,
    
    
    June 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
    
    
    $
    0.00Diluted net income (loss) per common share:Common shares outstanding
    
    
    83,666,739
    
    
    
    80,737,921Weighted average shares outstanding
    
    
    83,666,739
    
    
    
    80,737,921Net Income (Loss) per share
    
    $
    0.00
    
    
    $
    0.00
 13




---



##### Table of Contents



NOTE 15  LEASES
   Year
    
    Amount2007
    
    $
    107,9062008
    
    
    107,9062009
    
    
    107,9062010
    
    
    89,922$
    413,640
   NOTE 16  COMMITMENTS AND CONTINGENCIES
  Federal Deposit Insurance Corporation
  Lawsuit
  14




---



##### Table of Contents



NOTE 17  CONCENTRATIONS
    
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Introduction
  15




---



##### Table of Contents



Recent Developments:
    Overview
    Three months
    
    
    
    
    
    Three months
    
    Six months
    
    
    
    
    
    Six monthsended
    
    % Increase
    
    ended
    
    ended
    
    % Increase
    
    endedJune 30,2006
    
    (Decrease)
    
    June 30, 2005
    
    June 30, 2006
    
    (Decrease)
    
    June 30, 2005Aduddell Roofing Revenue
    
    $
    8,637,728
    
    
    
    125.4
    %
    
    $
    3,831,637
    
    
    $
    12,372,306
    
    
    
    73.8
    %
    
    $
    7,117,365E2MS Revenue
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Total Revenue
    
    $
    8,637,728
    
    
    
    125.4
    %
    
    $
    3,831,637
    
    
    $
    12,372,306
    
    
    
    73.8
    %
    
    $
    7,117,365Aduddell Roofing Gross
Margin
    
    $
    735,203
    
    
    
    673.7
    %
    
    $
    95,030
    
    
    $
    1,621,785
    
    
    
    128.3
    %
    
    $
    710,234E2MS Gross Margin
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    0Total Gross Margin
    
    $
    735,203
    
    
    
    673.7
    %
    
    $
    95,030
    
    
    $
    1,621,785
    
    
    
    128.3
    %
    
    $
    710,234Cash Flow from Operations
    
    $
    (3,643,326
    )
    
    
    (924.4
    )%
    
    $
    (355,663
    )
    
    $
    (17,869,610
    )
    
    
    (1159.1
    )%
    
    $
    (1,419,188
    )EBITDA
    
    $
    533,334
    
    
    
    245.5
    %
    
    $
    (366,547
    )
    
    $
    584,140
    
    
    
    387.3
    %
    
    
    (203,293
    )Net Income
    
    $
    186,982
    
    
    
    164.9
    %
    
    $
    (287,895
    )
    
    $
    72,469
    
    
    
    143.2
    %
    
    $
    (167,838
    )Free Cash Flow
    
    $
    (5,885,876
    )
    
    
    (1072.2
    )%
    
    $
    (502,137
    )
    
    $
    (20,502,643
    )
    
    
    (1065.1
    )%
    
    $
    (1,759,710
    )
 16




---



##### Table of Contents



Cash Flow from Operations
    
    $
    (3,643,326
    )
    
    $
    (355,663
    )
    
    $
    (17,869,610
    )
    
    $
    (1,419,188
    )Capital Expenditures
    
    
    2,242,550
    
    
    
    146,474
    
    
    
    2,633,033
    
    
    
    340,522Free Cash Flow
    
    
    (5,885,876
    )
    
    
    (502,137
    )
    
    
    (20,502,643
    )
    
    
    (1,759,710
    )
  Net Income
    
    
    186,982
    
    
    
    (287,895
    )
    
    
    72,469
    
    
    
    (167,838
    )Interest (Income)
    
    
    79,925
    
    
    
    17,327
    
    
    
    281,956
    
    
    
    34,803(Gain) Loss on Sale
of Equipment
    
    
    (22,739
    )
    
    
    3,388
    
    
    
    (26,239
    )
    
    
    (2,809
    )Provision (Benefit)
for Income Taxes
    
    
    103,800
    
    
    
    (149,226
    )
    
    
    (16,200
    )
    
    
    (164,830
    )Depreciation
    
    
    185,366
    
    
    
    49,859
    
    
    
    272,154
    
    
    
    97,381EBITDA
    
    
    533,334
    
    
    
    (366,547
    )
    
    
    584,140
    
    
    
    (203,293
    )
    17




---



##### Table of Contents



Critical Accounting Policies and Estimates
 General
  Revenue Recognition
   Cash and Cash Equivalents
  Investments
 18




---



##### Table of Contents



Fair Value of Financial Instruments
  Share Based Compensation
  Income Taxes
  Net Income (Loss) Per Share
  Property and Equipment
  19




---



##### Table of Contents



Changes from the Prior Period
  Results of Operations
 Comparison of 2nd Quarter 2006 and 2005
 Revenues
 Operating Expenses
 Income(Loss) before Provision for Income Taxes
 Net Income ( Loss).
 Comparison of six months ended June 30, 2006 and 2005
 Revenues nd
 Operating Expenses
 20




---



##### Table of Contents



Income (Loss) before Provision for Income Taxes
 Net Income ( Loss).
 Off-Balance Sheet Arrangements
  Seasonality
   Commitments and Contingencies
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  21




---



##### Table of Contents



Interest Rate Risk .
 
 Item 4. Controls and Procedures
   
 PART II   OTHER INFORMATION
 
 Item 1. Legal Proceedings
    22




---



##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  ISSUER REPURCHASES OF EQUITY SECURITIES
 (d) Maximum Number (or(c) Total Number of
    
    Approximate Dollar Value)(b) Average
    
    Shares (or Units)
    
    of Shares (or Units) that(a) Total Number
    
    Price Paid per
    
    Purchased as Part of
    
    May Yet Be Purchasedof Shares (or
    
    Share (or
    
    Publicly Announced
    
    Under the Plans orUnits) Purchased
    
    Unit)
    
    Plans or Programs
    
    ProgramsMonth #1
April 1, 2006 
April 30, 2006
    
    
    0
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aMonth #2
May 1, 2006  May
31, 2006
    
    
    0
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aMonth #3
June 1, 2006  June
30, 2006
    
    
    1,471,182
    (1)
    
    $
    1.252
    
    
    
    0
    
    
    
    0Total
    
    
    1,471,182
    (1)
    
    $
    1.252
    
    
    
    0
    
    
    
    0
 
 (1)
    
    On June 6, 2006, the Board of Directors voted to allow Tim Aduddell to surrender a
certain portion of his stock options in satisfaction of a note receivable from an affiliate
entity of Mr. Aduddell in the amount of $1,841,920 (including accrued and unpaid interest).
For purposes of determining the redemption value of Mr. Aduddells options, the options were
valued at the prior twenty day closing price of our common stock ($1.52) discounted by 15%
($1.292), less the exercise price of the options to be surrendered by Mr. Aduddell ($.04)
for a total value of $1.252 per option. Based upon this valuation, Mr. Aduddell surrendered
1,471,182 options to us in satisfaction of the debt. 23




---



##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Votes
    
    Votes
    
    
    
    
    
    Broker Non-Director
    
    Votes For
    
    Against
    
    Withheld
    
    Abstentions
    
    VotesDavid Aduddell
    
    
    49,762,324
    
    
    
    
    
    
    
    175,597Tim Aduddell
    
    
    49,765,824
    
    
    
    
    
    
    
    172,097Ron Carte
    
    
    49,776,174
    
    
    
    
    
    
    
    161,747Stan Genega
    
    
    49,781,174
    
    
    
    
    
    
    
    156,747Debra Morehead
    
    
    49,616,313
    
    
    
    
    
    
    
    321,608Thomas Parrish
    
    
    49,782,174
    
    
    
    
    
    
    
    156,747Jerry Whitlock
    
    
    49,781,174
    
    
    
    
    
    
    
    156,747
  Votes
    
    Votes
    
    
    
    BrokerFor
    
    Against
    
    Abstentions
    
    Non-Votes49,842,331
    
    39,389
    
    56,201
  Votes
    
    Votes
    
    
    
    BrokerFor
    
    Against
    
    Abstentions
    
    Non-Votes36,592,643
    
    264,550
    
    49,935
    
    13,030,793
  Votes
    
    Votes
    
    
    
    BrokerFor
    
    Against
    
    Abstentions
    
    Non-Votes49,579,581
    
    346,070
    
    12,270
 24




---



##### Table of Contents



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




---



##### Table of Contents



ZENEX INTERNATIONAL, INC.August 14, 2006
    
    
    
    By:
    
    /s/ Ron CarteRon Carte, PresidentAugust 14, 2006
    
    
    
    By:
    
    /s/ Reggie CookReggie Cook, ChiefFinancial 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
Executive Officer
    
    Filed herewith electronically32.2
    
    Section 1350 Certification of chief
Financial Officer
    
    Filed herewith electronically
 26