Mail Stop 7010
April 3, 2006
Via U.S. mail and facsimile
Mr. Ron Carte
Chief Executive Officer
Zenex International, Inc.
14220 S. Meridian Avenue
Oklahoma City, OK 73173
RE: Zenex International, Inc.
Form 10-K for the fiscal year ended December 31, 2005
File No. 0-24684
Dear Mr. Carte:
We have reviewed this filing and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2005
Comment applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions, please show us what the revisions will look like in
your
response. With the exception of comments that specifically
request
an amendment, all revisions may be included in your future
filings.
Item 3. Legal Proceedings, page 12
2. You disclosed that Eric Beitchman filed a shareholder`s
derivative
action relating to certain transactions you entered into. Please
expand your disclosure to include whether any amounts have been
accrued relating to this matter, if so, state the line item in
which
this was recorded in your statements of operations and the period
in
which it was recorded. Please also include in your disclosure
your
conclusion and the related assumptions used to determine your
conclusion based on the guidance in paragraphs 3 and 8-10 of SFAS
5
relating to this matter. Please similarly include this
information
in note 15 to your financial statements.
Item 6. Selected Financial Data, page 14
3. As previously requested in our comment 10 from our letter dated
May 31, 2002, please revise your disclosure to rename your primary
earnings (loss) per share to basic earnings per share. Please
also
revise your earnings per share information throughout the filing
to
round only to the nearest cent, in order to not imply a greater
degree of precision than exists. Please ensure the remainder of
your
document is similarly revised, including but not limited to, your
statements of operations and the earnings per share information
disclosed in note 14 to your financial statements.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 16
Introduction, page 16
4. Your disclosure includes a presentation of EBITA and Free Cash
Flow, which are non-GAAP financial measures. Please expand your
disclosure to include a statement, which identifies these as non-
GAAP
financial measures. Refer to Item 10(e)(1)(i)(B) of Regulation S-
K.
Item 9A. Controls and Procedures, page 26
5. Your disclosure states "It is the responsibility of the chief
executive officer and the chief financial officer to ensure that
[you] maintain disclosure controls and procedures designed to
provide
reasonable assurance that material information, both financial and
non-financial, and other information required under the securities
laws to be disclosed is identified and communicated to senior
management on a timely basis." This disclosure is not the
definition
of disclosure controls and procedures as defined in Exchange Act
Rule
13a-15(e). Please revise your disclosure to include the correct
definition, or alternatively, please remove this reference in its
entirety.
Notes to Financial Statements
6. Please expand your disclosure to include the selected quarterly
financial data pursuant to Item 302 of Regulation S-X.
Note 1 - Summary of Significant Accounting Policies, page F-10
Organization and Nature of Business, page F-10
7. You disclosed that during the fiscal year ended December 31,
2005
you created Carothers/Aduddell, a joint venture. Please expand
your
disclosure to discuss in greater detail the terms and structure of
the joint venture, including but not limited to your percentage
ownership in the joint venture and the amount of assets you
contributed to form the joint venture. Please also tell us how
you
reflected the joint venture in your financial statements. Please
include in your response the accounting guidance you used as the
basis for your conclusion. Please refer to SOP 78-9, EITF 00-1,
EITF
02-14, EITF 03-16 and FIN 46(R), as applicable.
Note 10 - Income Taxes, page F-18
8. Please expand your disclosure to include the information
pursuant
to paragraphs 45 and 47 of SFAS 109.
Note 13 - Stock Options, page F-19
9. Please expand your disclosure to include information relating
to
your stock options required by paragraphs 45 through 48 of SFAS
123
as amended by SFAS 148.
Note 14 - Earnings Per Share, page F-20
10. Please expand your disclosure to include a reconciliation of
the
numerators and the denominators for your basic and diluted per-
share
computations for income from continuing operations for each period
presented. Please also include in your disclosure for each period
presented, the securities that were not included in the
computation
of diluted earnings per share because their effect would have been
antidilutive for the periods presented. Refer to paragraphs 40(a)
and (c) of SFAS 128.
Note 15 - Commitments and Contingencies, page F-20
11. You disclosed that you guaranteed a portion of Red River`s
borrowings, which they were in default of their required payment
obligations as of December 31, 2005. You also disclosed on page
22
that you guaranteed approximately $9.0 million of short-term
loans.
On page 24 you disclosed that you have not recorded any amounts in
your financial statements related to these guarantees. Please
expand
your disclosure to include the basis for your conclusion that no
amounts were required to be recorded in your financial statements
for
the fiscal year ended December 31, 2005. Refer to paragraphs 8 to
11
and 13 of FIN 45.
Exhibits
12. Your certifications included in Exhibits 31.1 and 31.2
reference
disclosure controls and procedures as defined in Exchange Act
Rules
13a-14 and 15d-14. Disclosure controls and procedures are now
defined in Exchange Act Rules 13a-15(e) and 15d-15(e).
Additionally,
your certifications contain other inconsistencies from the most
current certifications pursuant to Item 601(B)(31) of Regulation
S-X.
Please file an amendment to your Form 10-K to correct this. In
doing
so, please ensure that you refer to the Form 10-K/A in the revised
certifications and that you refile the entire Form 10-K. Please
also
ensure that the certifications are currently dated.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days, or tell us when you will provide
us
with a response. Please provide us with a response letter that
keys
your responses to our comments and provides any requested
information. Detailed letters greatly facilitate our review.
Please
file your letter on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Meagan Caldwell, Staff Accountant, at (202) 551-
3754
or, in her absence, to the undersigned at (202) 551-3769.
Sincerely,
Rufus Decker
Accounting Branch Chief
Mr. Ron Carte
Zenex International, Inc.
April 3, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE