U.S.
      SECURITIES AND EXCHANGE COMMISSION





Washington,
      D.C. 20549





FORM
      10-QSB








(Mark
      One)




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





For
      the
      quarterly period ended March 31, 2006





[ 
]
      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 0-25455





**LEXINGTON
      RESOURCES, INC.**


(Exact
      name of small business issuer as specified in its charter)





NEVADA
            88-0365453(State
                or other jurisdiction of
                incorporation of organization)
            (I.R.S.
                Employer Identification
                No.)








7473
      West
      Lake Mead Road


Las
      Vegas, Nevada 89128


(Address
      of Principal Executive Offices)





(702)
      382-5139


(Issuer's
      telephone number)




n/a


(Former
      name, former address and former fiscal year, if
      changed since last report)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the 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
o






Indicate
      by checkmark whether the registrant is a shell company (as defined in Rule
      12b-2
      of the Exchange Act).




Yes
oNo
x




Applicable
      only to issuers involved in bankruptcy proceedings during the preceding five
      years.


N/A


1





Check
      whether the Registrant filed all documents required to be filed by Section
      12,
      13 and 15(d) of the Exchange Act after the distribution of securities under
      a
      plan confirmed by a court.




Yes o No o





Applicable
      only to corporate issuers





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date:






Class
            
            Class
                Outstanding as of May 14,
                2006Common
                Stock, $.00025 par value
            
            33,716,701







Transitional
      Small Business Disclosure Format (check one)





Yes
oNo
x








2




Table
                  Of Contents
              PagePART
                I.
              FINANCIAL
                INFORMATION
              4ITEM
                1.
              INTERIM
                CONSOLIDATED FINANCIAL STATEMENTS
              4CONSOLIDATED
                BALANCE SHEETS
              5INTERIM
                CONSOLIDATED STATEMENTS OF OPERATIONS
              6INTERIM
                CONSOLIDATED STATEMENTS OF CASH FLOWS
              7NOTES
                TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
              8ITEM
                2.
              MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION OR PLAN OF OPERATION
              14ITEM
                3.
              CONTROLS
                AND PROCEDURES
              22PART
                II.
              OTHER
                INFORMATION
              23ITEM
                1.
              LEGAL
                PROCEEDINGS
              23ITEM
                2.
              UNREGISTERED
                  SALES OF EQUITY  SECURITIES AND USE OF PROCEEDS
              23ITEM
                3.
              DEFAULTS
                UPON SENIOR SECURITIES
              25ITEM
                4.
              SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
              25ITEM
                5.
              OTHER
                INFORMATION
              25ITEM
                6.
              EXHIBITS
              26SIGNATURES
              26


3








**PART
      1. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**LEXINGTON
        RESOURCES, INC.**
 
 
 **INTERIM
        CONSOLIDATED**  **FINANCIAL
        STATEMENTS**
 
 
 **MARCH
        31, 2006**
 **(UNAUDITED)**
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  4
 **LEXINGTON
        RESOURCES, INC.**
 
 **CONSOLIDATED
        BALANCE SHEETS**
 March
                  31,
                2006
              
              
              December
                  31,
                2005(Unaudited)**ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              10,608
              
              $
              520,332Accounts
                  receivable
              
              
              583,714
              
              
              184,546Due
                  from related parties
              
              
              35,870
              
              
              -Prepaid
                  expenses and other
              
              
              11,757
              
              
              -Current
                  portion of deferred finance fees (Note 5)
              
              
              181,125
              
              
              401,715823,074
              
              
              1,106,593**DEFERRED
                  FINANCE FEES**(Note
                  5)
              
              
              83,863
              
              
              267,810**PROPERTY
                  AND EQUIPMENT**(Note 4)Oil
                  and gas properties - full cost method of accountingProved,
                  net of accumulated depletion $491,160 (2005 - $420,937)
              
              
              2,230,225
              
              
              2,329,448Unproved
              
              
              5,566,739
              
              
              4,000,0247,796,964
              
              
              6,329,472Other
                  equipment, net of accumulated depreciation of $117,909 (2005 -
                  $1,328)
              
              
              5,117,947
              
              
              2,16712,914,911
              
              
              6,331,639$
              13,821,848
              
              $
              7,706,042**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued liabilities
              
              $
              2,623,314
              
              $
              936,265Current
                  portion of long term debt (Note 5)
              
              
              209,013
              
              
              -Promissory
                  note and other short term advances (Note 5)
              
              
              1,116,767
              
              
              601,973Current
                  portion of convertible notes and accrued interest (Note 5)
              
              
              1,316,402
              
              
              1,940,7815,265,496
              
              
              3,479,019**CONVERTIBLE
                  NOTES**(Note
                  5)
              
              
              240,424
              
              
              1,220,965**LONG
                  TERM DEBT**(Note
                  5)
              
              
              1,295,961
              
              
              -6,801,881
              
              
              4,699,984**CONTINGENCIES
                  AND COMMITMENTS**(Notes 1, 4, 5 & 7)**STOCKHOLDERS’
                  EQUITY**(Note
                  7)Common
                  stock $.00025 par value: 200,000,000 shares authorizedPreferred
                  stock, $.001 par value: 75,000,000 shares authorizedIssued
                  and outstanding:28,701,817
                  common shares (December 31, 2005 - 18,627,523)
              
              
              8,094
              
              
              5,575Additionalpaid-in
                  capital
              
              
              24,118,644
              
              
              16,297,665Common
                  stock purchase warrants
              
              
              2,809,836
              
              
              2,809,836Accumulated
                  deficit
              
              
              (19,916,607
              )
              
              (16,107,018
              )7,019,967
              
              
              3,006,058$
              13,821,848
              
              $
              7,706,042
 
 The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
 5
  **LEXINGTON
        RESOURCES, INC.**
 
 **INTERIM
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 
 For
                  the three month period endedMarch
                  31,2006
              
              
              2005**REVENUES**Oil
                  and gas revenue
              
              $
              167,207
              
              $
              130,060Drilling
                  revenue
              
              
              134,099
              
              
              -301,306
              
              
              130,060**OPERATING
                  EXPENSES**Operating
                  costs and taxes
              
              
              60,098
              
              
              58,065Rig,
                  well and pulling unit expense
              
              
              221,486
              
              
              -Salaries,
                  wages and related
              
              
              156,380
              
              
              -Depreciation,
                  depletion and amortization
              
              
              186,804
              
              
              54,907General
                  and administrative
              
              
              265,878
              
              
              300,521Consulting
                  - stock-based
              
              
              -
              
              
              775,753Investor
                  relations and promotion
              
              
              1,599,174
              
              
              590,9482,489,820
              
              
              1,780,197**NET
                  INCOME (LOSS) FROM OPERATIONS**
              
              
              (2,188,514
              )
              
              (1,650,134
              )**INTEREST
                  AND FINANCE FEES**(Note 5)
              
              
              (1,621,075
              )
              
              -**NET
                  LOSS FOR THE PERIOD**
              
              $
              (3,809,589
              )
              $
              (1,650,134
              )
 
 
 
 **BASIC
                  AND FULLY DILUTED NET LOSS PER SHARE**
              
              $
              (0.16
              )
              $
              (0.10
              )**WEIGHTED
                  AVERAGE COMMON SHARES OUTSTANDING**
              
              
              23,954,794
              
              
              17,049,854
 
 
 
 
 
 
 
  The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
 
  6
   **LEXINGTON
        RESOURCES, INC.**
 
 **INTERIM
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 
 For
                  the three month period endedMarch
                  31,2006
              
              
              2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  loss for the period
              
              $
              (3,809,589
              )
              $
              (1,650,134
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Stock-based
                  compensation
              
              
              -
              
              
              775,753Non-cash
                  expenses
              
              
              37,500
              
              
              81,354Oil
                  and gas depletion
              
              
              70,223
              
              
              54,907Depreciation
              
              
              116,581
              
              
              166Non-cash
                  interest and finance fees (Note 5)
              
              
              1,494,051
              
              
              -Changes
                  in working capital assets and liabilities:Accounts
                  receivable
              
              
              402,341
              
              
              38,925Prepaid
                  expenses and other
              
              
              8,692
              
              
              -Accounts
                  payable
              
              
              844,213
              
              
              90,729Accrued
                  interest payable
              
              
              (73,496
              )
              
              -**NET
                  CASH FLOWS USED IN OPERATING ACTIVITIES**
              
              
              (909,484
              )
              
              (608,300
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  of equipment
              
              
              (3,625
              )
              
              -Oil
                  and gas properties
              
              
              (1,537,715
              )
              
              (15,310
              )Cash
                  acquired on acquisition of Oak Hills, net of transaction
                  costs
              
              
              119,544
              
              
              -**NET
                  CASH FLOWS USED IN INVESTING ACTIVITIES**
              
              
              (1,421,796
              )
              
              (15,310
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Drilling
                  obligation payments
              
              
              -
              
              
              (94,306
              )Advances
                  (to) from related parties
              
              
              (20,698
              )
              
              -Convertible
                  note repayments
              
              
              (581,836
              )
              
              -Long
                  term debt repayments
              
              
              (13,410
              )
              
              -Promissory
                  notes and other short term advances
              
              
              500,000
              
              
              -Proceeds
                  on sale of common stock
              
              
              1,937,500
              
              
              454,630**NET
                  CASH FLOWS PROVIDED BY FINANCING
                  ACTIVITIES**
              
              
              1,821,556
              
              
              360,324**INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              (509,724
              )
              
              (263,286
              )**CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD**
              
              
              520,332
              
              
              326,293**CASH
                  AND CASH EQUIVALENTS, END OF PERIOD**
              
              $
              10,608
              
              $
              63,007
 
 
 **SUPPLEMENTAL
        CASH FLOW INFORMATION** (Note
        8).
 
 
 The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
 
 
  7
 
 **LEXINGTON
          RESOURCES, INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 **(Unaudited)**
  **NOTE
        1:****NATURE
        OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION**
 
 Lexington
        Resources, Inc., a Nevada corporation, and its wholly owned subsidiary Lexington
        Oil & Gas Ltd. Co., an Oklahoma Limited Liability Corporation (“Lexington”),
        were organized for the purposes of the acquisition and development of oil
        and
        natural gas properties in the United States, concentrating on unconventional
        gas
        production initiatives that include coal bed methane gas acquisitions and
        developments in the Arkoma Basin in the State of Oklahoma as well as Barnett
        Shale targeted acquisitions and developments in the Dallas Fort Worth Basin
        in
        the State of Texas.
 
 On
        January 23, 2006, the Company acquired 100% of the shares of Oak Hills Drilling
        and Operating International, Inc., and its wholly owned operating subsidiary,
        Oak Hills Drilling and Operating LLC (“Oak Hills”). The purpose of the
        acquisition of Oak Hills was to enable the Company to improve scheduling
        of
        property development, to decrease costs associated with drilling and completing
        wells, and to increase the Company's control over its oil and gas leasehold
        developments by utilizing Oak Hills’ in house drilling and completion teams for
        its property exploration initiatives and gas well development
        programs.
 
 **Going
        Concern**
 The
        consolidated financial statements have been prepared on the basis of a going
        concern which contemplates the realization of assets and the satisfaction
        of
        liabilities in the normal course of business. The Company has a working capital
        deficiency of $4,442,422 at March 31, 2006, has incurred losses since inception
        of $19,916,107 and further losses are anticipated in the development of its
        oil
        and gas properties raising substantial doubt as to the Company’s ability to
        continue as a going concern. The ability of the Company to continue as a
        going
        concern is dependent on raising additional capital to fund ongoing losses
        and
        property development and ultimately on generating future profitable operations.
        The Company will continue to fund operations with advances and debt instruments,
        as well as further equity placements.
 
 Subsequent
        to March 31, 2006 the Company has commenced a private placement of units
        at
        $1.00 per unit as described in Note 9. To date the Company has completed
        the
        issuance of 3,750,000 units for gross proceeds of $3,750,000 and has received
        further subscription proceeds of $3,900,000 in connection with this private
        placement offering.
 
 **Unaudited
        Interim Financial Statements**
 The
        accompanying unaudited interim consolidated financial statements have been
        prepared in accordance with generally accepted accounting principles for
        interim
        financial information and with the instructions to Form 10-QSB of Regulation
        S-B. They do not include all information and footnotes required by United
        States
        generally accepted accounting principles for complete financial statements.
        However, except as disclosed herein, there have been no material changes
        in the
        information disclosed in the notes to the financial statements for the year
        ended December 31, 2005 included in the Company's Annual Report on Form 10-KSB
        filed with the Securities and Exchange Commission. The interim unaudited
        consolidated financial statements should be read in conjunction with those
        financial statements included in the Form 10-KSB. In the opinion of management,
        all adjustments considered necessary for a fair presentation, consisting
        solely
        of normal recurring adjustments, have been made. Operating results for the
        three
        months ended March 31, 2006, are not necessarily indicative of the results
        that
        may be expected for the year ending December 31, 2006.
 
 
 **NOTE
        2:****STOCK-BASED
        COMPENSATION**
 
 On
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        Financial Accounting Standards Board (“FASB”) Statement No. 123(R), *Share-Based
        Payment,* (“SFAS
        123R”). Prior to January 1, 2006, the Company accounted for share-based payments
        under the recognition and measurement provisions of APB Opinion No. 25, *Accounting
        for Stock Issued to Employees* (“APB
        25”), and related Interpretations, as permitted by FASB Statement No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        123”). In accordance with APB 25, no compensation cost was required to be
        recognized for options granted that had an exercise price equal to the market
        value of the underlying common stock on the date of grant.
 
 The
        Company adopted SFAS 123R using the modified-prospective-transition method.
        Under this method, compensation cost recognized for the three months ended
        March
        31, 2006 includes: a) compensation cost for all share-based payments granted
        prior to, but not yet vested as of December 31, 2005, based on the grant-date
        fair value estimated in accordance with the original provisions of SFAS 123,
        and
        b) compensation cost for all share-based payments granted subsequent to December
        31, 2005, based on the grant-date fair value estimated in accordance with
        the
        provisions of SFAS 123R. In addition, deferred stock compensation related
        to
        non-vested options is required to be eliminated against additional paid-in
        capital upon adoption of SFAS 123R. The results for the prior periods have
        not
        been restated.
  8
 
 **LEXINGTON
          RESOURCES, INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 **(Unaudited)**
  **NOTE
        2:**  **STOCK-BASED
        COMPENSATION (continued)**
 
 All
        previously granted stock options had fully vested as at December 31, 2005
        and
        during the period ended March 31, 2006, the Company did not grant any new
        stock
        options or modify any previously existing stock options. Accordingly, the
        Company’s results of operations for the period ended March 31, 2006 were no
        different than if the Company had not adopted SFAS 123R. As a result, no
        pro
        forma disclosure of the impact of adopting SFAS 123R has been
        provided.
 
 During
        the period ended March 31, 2005, all stock options granted were to consultants
        and accounted for in accordance with the provisions of SFAS 123. Accordingly,
        no
        pro forma disclosure of the impact of not having adopted SFAS 123 has been
        provided.
 
 
 **NOTE
        3:****ACQUISITION
        OF OAK HILLS DRILLING AND OPERATING INTERNATIONAL,
        INC.**
 
 On
        January 23, 2006, the Company acquired 100% of the shares of Oak Hills Drilling
        and Operating International, Inc., and its wholly owned operating subsidiary,
        Oak Hills Drilling and Operating LLC (“Oak Hills”). The companies were acquired
        from the existing shareholders for an aggregate of 6,000,000 restricted
        shares of the Company’s common stock. The assets of Oak Hills were independently
        valued at approximately $5.85 million and management of the Company determined
        a
        net tangible fair value of approximately $3.82 million as the basis for the
        total number of common shares issued at a price per share of $0.637. As of
        the
        acquisition date, Oak Hills had secured promissory notes totaling $1.29 million
        owed to certain of the Oak Hills vendors. The $1.29 million in promissory
        notes
        accrue interest at 9% per annum, and require no payments of interest or
        principal until the end of a two year term ending January 22, 2008.
 
 The
        purpose of the acquisition of Oak Hills was to enable the Company to improve
        scheduling of property development, to decrease costs associated with drilling
        and completing wells, and to increase the Company's control over its oil
        and gas
        leasehold developments by utilizing Oak Hills’ in house drilling and completion
        teams for its property exploration initiatives and gas well development
        programs.
 
 Prior
        to
        the acquisition of Oak Hills, there were 18,627,523 shares of common stock
        of
        the Company outstanding. Accordingly, the pre-acquisition shareholders of
        the
        Company owned approximately 76% of the post-acquisition issued and outstanding
        shares of the Company’s common stock. As a result this business combination has
        been accounted for using the purchase method with the Company being the
        acquirer.
 
 The
        fair
        value of the assets acquired and liabilities assumed effective January 23,
        2006
        are as follows;
 
 Current
                  assets
              
              $
              1,024,458Property,
                  plant and equipment
              
              
              5,228,736Current
                  liabilities
              
              
              (842,836
              )Due
                  to related parties
              
              
              (1,280,789
              )Long
                  term debt
              
              
              (222,423
              )$
              3,907,146Consideration
                  paid-
                  6,000,000 common shares at $0.6374 per share
              
              $
              3,824,190-
                  transaction costs
              
              
              82,956$
              3,907,146
 
 The
        results of operations and cash flows presented include those of the Company
        for
        all periods presented and those of Oak Hills for the period from January
        23,
        2006 to March 31, 2006.
  The
          following unaudited pro forma information presents the results of operations
          as
          if the acquisition had occurred as of the January 1, 2006. Oak Hills did
          not
          have revenue in the three month period ended March 31, 2005 and its net
          loss for
          the period was not significant as the Company was only acquiring drilling
          equipment at that time, and hence pro forma results are not presented for
          the
          three month period ended March 31, 2005. The pro forma information is not
          necessarily indicative of what would have occurred had the acquisition
          been made
          as of such January 1, 2006, nor is it indicative of future results of
          operations. The pro forma amounts give effect to appropriate adjustments
          for
          increases in depreciation expense and shares outstanding.
  FOR
                      THE THREE MONTHSENDED
                      MARCH 31, 2006Revenues
                  
                  $
                  647,949Net
                      income (loss)
                  
                  $
                  (3,785,917
                  )Net
                      income (loss) per share -
                    basic
                      and diluted
                  
                  $
                  (0.15
                  )
  9
 
 **LEXINGTON
          RESOURCES, INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 **(Unaudited)**
  **NOTE
        4:****PROPERTY
        AND EQUIPMENT**
 
 Property
        and equipment includes the following:
 
 **March
                  31,**
              
              
              **December
                  31,****2006**
              
              
              **2005****Oil
                  and gas properties:**Proved,
                  subject to depletion
              
              $
              2,721,385
              
              $
              2,750,385Unproved,
                  not subject to depletion
              
              
              5,566,739
              
              
              4,000,024Accumulated
                  depletion
              
              
              (491,160
              )
              
              (420,937
              )Net
                  oil and gas properties
              
              
              7,796,964
              
              
              6,329,472Other
                  equipment
              
              
              5,235,856
              
              
              3,495Accumulated
                  depreciation
              
              
              (117,909
              )
              
              (1,328
              )Net
                  other property and equipment
              
              
              5,117,947
              
              
              2,167Property
                  and equipment, net of accumulated depreciation and
                  depletion
              
              $
              12,914,911
              
              $
              6,331,639
 
 The
        Company's oil and gas activities are currently conducted in the United States.
        During the period ended March 31, 2006, the Company completed the following
        transactions related to its oil and gas activities:
 
 **Joint
        Exploration Agreement - Arkoma Basin, Oklahoma**
 
 On
        March
        3, 2006, effective January 31, 2006, the Company entered into an exploration
        agreement with Dylan Peyton, LLC (“Dylan”) of Dallas, Texas to jointly develop
        Lexington’s Arkoma Basin leases located in Hughes and MacIntosh Counties in the
        State of Oklahoma (the “Arkoma Basin Exploration Agreement”). The property will
        be developed on a 50/50 equal working interest basis. An affiliate to Dylan,
        named Avatar Energy, LLC, will become the operator for the project supplying
        at
        least one drilling rig to the project. The Company has assigned 50% of its
        undeveloped leasehold interests in Oklahoma in exchange for cash proceeds
        of
        $575,000 which equates to approximately 50% of the Company’s originally incurred
        leasing costs. Assignments to 50% of the Company’s undeveloped leasehold
        interests in Coal Creek, South Lamar, Middle Creek, and H-9 Prospects have
        been
        effected to Dylan. Well bores and acreage relating to previously drilled
        and
        completed wells by the Company will not form part of any assignments under
        the
        Arkoma Basin Exploration Agreement. Proceeds from this disposal were recorded
        as
        a reduction of the capitalized costs without recognition of a gain or loss
        as
        the disposal did not result in a change of 20 percent or more in the Company’s
        depletion rate.
 
 **Joint
        Exploration Agreement - Comanche County, Texas**
 On
        March
        3, 2006, effective January 31, 2006, the Company entered into an exploration
        agreement with Dylan to jointly develop approximately 5,000 acres of Barnett
        Shale and shallow gas targets in Comanche County, Texas (the “Comanche County
        Exploration Agreement”). The property will be developed on a 50/50 equal working
        interest basis. The Company’s subsidiary, Oak Hills will become the operator of
        the project. The Company will pay approximately $1,250,000 for its 50% working
        interest in the new acreage through a combination of $575,000 in cash (paid
        during the period) and approximately $675,000 of carried drilling costs in
        the
        first Comanche Barnett Shale test well expected to be drilled on or before
        September 2006.
 
 **Acquisition
        of Oak Hills Drilling and Operating International, Inc.**
 
 On
        January 23, 2006, the Company completed the acquisition of Oak Hills as
        described in Note 3.
 
  10
 
 **LEXINGTON
          RESOURCES, INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
          31, 2006**
 **(Unaudited)**
  **NOTE
        5:****LONG
        TERM DEBT, SHORT TERM DEBT AND OTHER ADVANCES**
 
 During
        the period ended March 31, 2006, the Company had the following activity in
        connection with long term debt, short term debt and other advances:
 
 **Promissory
        note**
 On
        December 20, 2005 the Company obtained an unsecured loan by way of promissory
        note from a shareholder of the Company totaling $600,000. The term of the
        loan
        is for two years with interest calculated at 10% per annum. Interest is to
        be
        paid on a quarterly basis with the principal to be repaid on or before the
        two
        year loan period. As of March 31, 2006, $16,767 (December 31, 2005 - $1,973)
        of
        interest had accrued on this loan. The Company intends to repay this loan
        during
        2006 and accordingly it has been classified as a current liability.
 
 **Long
        term debt**
 As
        at the
        date of the Oak Hills acquisition, Oak Hills had outstanding notes payable
        to
        financial institutions secured by certain assets of Oak Hills with interest
        rates ranging from 6.25% to 11.5% and maturing through October 2010. The
        March
        31, 2006 balance outstanding of $209,013 was subsequently repaid and accordingly
        it has been classified as a current liability.
 
 As
        at the
        date of the Oak Hills acquisition, Oak Hills had outstanding promissory notes
        totaling $1,295,961 which accrue interest at 9% per annum, and require no
        payments of interest or principal until the end of a two year term ending
        January 22, 2008. These promissory notes are owed to certain former shareholders
        of Oak Hills, being vendors in the Oak Hills acquisition described in Note
        3 and
        are secured against the assets of Oak Hills. During the period ended March
        31,
        2006, the Company accrued $18,854 of interest on these loans resulting in
        $138,260 of accrued interest owing.
 
 **Secured
        convertible notes**
 As
        at
        December 31, 2005, the Company had secured convertible debt principal
        outstanding of $4,834,314 less an unamortized discount of $1,801,901 resulting
        in a net carrying value of $3,032,413 of which $1,831,448 plus accrued interest
        of $109,333 was recorded as a current liability. During the period ended
        March
        31, 2006, the Company paid a total of $176,688 of interest, repaid a total
        of
        $581,836 of principal, converted a total of $2,010,701 of principal and $13,607
        of interest into common shares of the Company at a price of $1.00 per share
        under the provisions of the Convertible Note agreements. Also during the
        period,
        the Company recorded non-cash finance fees totaling $1,089,514 relating to
        the
        amortization of the discount on both converted and unconverted notes and
        $404,537 relating to the amortization of deferred issuance costs. As at March
        31, 2006, the Company had convertible debt principal outstanding of $2,261,771
        less an unamortized discount of $712,387 resulting in a net carrying value
        of
        $1,549,384 of which $1,308,960 plus accrued interest of $7,442 was recorded
        as a
        current liability. (Refer to Note 6).
 
 **Other
        short term advances**
 During
        the period ended March 31, 2006, the Company received an advance from a
        shareholder of the Company of $500,000. This amount is unsecured, non-interest
        bearing and without specific terms of repayment. Subsequently this amount
        was
        applied towards subscriptions in connection with the Company’s current private
        placement. (Refer to Note 9).
 
 
 **NOTE
        6:****STOCKHOLDERS'
        EQUITY**
 
 The
        authorized capital of the Company consists of 200,000,000 voting common shares
        with $0.00025 par value, and 75,000,000 non-voting preferred shares with
        $0.001
        par value.
 
 **Common
        Stock Issuances -Three months ended March 31, 2006**
 
 The
        Company entered into a one year consulting contract with a third party
        contractor, to provide financial and investor public relations and related
        matters in Germany. In connection with this agreement the Company issued
        400,000
        restricted shares of the Company’s common stock with a fair value of $300,000
        and agreed to pay approximately $353,000 (EUR $293,000) over the term of
        the
        agreement. The $300,000 was initially recorded as a deferred compensation
        equity
        item of which $37,500 was expensed during the period.
 
  11
 
 **LEXINGTON
            RESOURCES, INC.**
 **NOTES
            TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
            31, 2006**
 **(Unaudited)**
  **NOTE
        6:**  **STOCKHOLDERS'
        EQUITY (continued)**
 
 During
        the period 1,150,000 stock options were re-assigned from International Market
        Trend, Inc. (“IMT”) to two consultants of IMT in connection with business
        development services provided by IMT and the consultants to the Company.
        The
        options are exercisable at $1.25 per share for a term of 5 years and replaced
        1,150,000 options previously granted to IMT which were concurrently cancelled.
        The exercise prices, terms and conditions of the new options issued were
        identical to those of the stock options cancelled. As these options are a
        reissuance of the original options and not a modification or replacement
        of the
        original option, the Company has not remeasured the fair value of the options
        at
        the reissuance date.
 
 A
        total
        of 1,650,000 options were exercised (500,000 at $1.00 per share and 1,150,000
        at
        $1.25 per share) for cash proceeds of $1,937,500. All shares issued were
        previously registered on Form S-8.
 
 The
        Company issued 6,000,000 restricted shares of common stock in connection
        with
        the acquisition of Oak Hills as described in Note 3.
 
 The
        Company issued 2,024,294 shares of common stock on conversion of certain
        convertible note principal and interest amounts as described in Note
        5.
 
 
 **NOTE
        7:****RELATED
        PARTY TRANSACTIONS**
 
 The
        Company previously entered into a one year contract with IMT on November
        10,
        2003, a private company that performs a wide range of management,
        administrative, financial, and business development services to the Company.
        The
        contract has been renewed annually. During the period, the Company incurred
        $20,000 in fees to IMT of which $10,000 remains unpaid as at March 31, 2006.
 
 During
        the period ended March 31, 2006 the Company incurred (a) $45,000 to its officers
        for management fees, (b) $15,000 to an officer and director for expense
        reimbursements and (c) $15,000 in fees to a director.
 
 During
        the period, the Company incurred $22,500 in fees to the sole officer and
        director of Oak Hills who is also a director of the Company. In addition,
        Oak
        Hills incurred $11,500 to this director and a relative of this director for
        rent
        on the Company’s field offices in Oklahoma. This director has previously been
        assigned a 10% carried working interest in each well successfully drilled
        on the
        Wagnon lease, as partial compensation for his involvement in obtaining and
        facilitating the execution of the Farm-Out Agreement and to compensate for
        his
        services relating to operation and completion of wells to be located on the
        Wagnon lease , and has also been provide the right to purchase up to an
        additional 5% working interest of the Company total interest in all wells
        drilled by the Company on its properties provided that funds for this
        participation are paid prior to the commencement of drilling of said
        wells.
 
 On
        January 1, 2005, the Company appointed Oak Hills as its elected operator
        for
        wells on its Wagnon Lease, and for further drilling to be conducted by the
        Company. During the period the Company acquired Oak Hills who continues to
        act
        as operator.
 
 Refer
        to
        Notes 3 and 4.
 
 
 **NOTE
        8:****SUPPLEMENTAL
        DISCLOSURE WITH RESPECT TO CASH FLOWS**
 
 Three
                  months ended March 31,2006
              
              
              2005Cash
                  paid during the period for:Interest
              
              $
              176,688
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -
 
  12
 
 **LEXINGTON
              RESOURCES, INC.**
 **NOTES
              TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
              31, 2006**
 **(Unaudited)**
  **NOTE
        9:****SUBSEQUENT
        EVENTS**
 
 Subsequent
        to March 31, 2006, in connection with the secured convertible notes, the
        Company
        paid a total of $1,609 of interest, repaid a total of $13,926 of principal,
        converted a total of $1,102,175 of principal and $13,263 of interest into
        common
        shares of the Company at a price of $1.00 per share under the provisions
        of the
        Convertible Note agreements (total of 1,115,438 common shares issued) leaving
        an
        outstanding principal balance of convertible notes of $1,145,665.
 
 The
        Company issued 150,000 shares of common stock on the exercise of Series B
        warrants at a price of $1.25 per warrant for total proceeds of $187,500.
        The
        Series B warrants were originally issued as part of the secured convertible
        note
        unit offering and the shares of common stock underlying the warrants were
        registered by way of a Registration Statement on Form SB-2.
 
 On
        April
        28, 2006 and May 2, 2006, the Company completed the initial tranches of a
        private placement pursuant to which the Company issued an aggregate of 3,750,000
        units ("Unit") of the Company’s securities at a subscription price of U.S. $1.00
        per Unit; with each such Unit being comprised of one common share and one
        non-transferable common stock purchase warrant ("Warrant"). Each resulting
        Warrant entitles the subscriber to purchase an additional common share (“Warrant
        Share”) of the Company at a price of $1.25 per share for the period commencing
        upon the date of issuance of the Units by the Company and ending on the day
        which is the earlier of (i) 18 months from the date of issuance of the Units
        and
        (ii) 12 months from the effective date of the Company’s proposed registration
        statement. Both the Warrant Shares and the common shares issued pursuant
        to the
        private placement offering are to be proposed for registration under the
        United
        States Securities Act of 1933, as amended. The Company will pay finders fees
        of
        5% of the gross cash proceeds received under the private placement offering
        and
        10% restricted common shares on the gross units issued, with such restricted
        shares carrying piggy back registration rights.
 
 Through
        May 16, 2006, additional subscriptions totaling $3,900,000 have been received
        by
        the Company toward the private placement offering on similar terms to those
        outlined above.







































































13





Statements
      made in this Form 10-QSB that are not historical or current facts are
      "forward-looking statements" made pursuant to the safe harbor provisions of
      Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
      Securities Exchange Act of 1934. These statements often can be identified by
      the
      use of terms such as "may," "will," "expect," "believe," "anticipate,"
      "estimate," "approximate" or "continue," or the negative thereof. We intend
      that
      such forward-looking statements be subject to the safe harbors for such
      statements. We wish to caution readers not to place undue reliance on any such
      forward-looking statements, which speak only as of the date made. Any
      forward-looking statements represent management's best judgment as to what
      may
      occur in the future. However, forward-looking statements are subject to risks,
      uncertainties and important factors beyond our control that could cause actual
      results and events to differ materially from historical results of operations
      and events and those presently anticipated or projected. We disclaim any
      obligation subsequently to revise any forward-looking statements to reflect
      events or circumstances after the date of such statement or to reflect the
      occurrence of anticipated or unanticipated events. Please note that throughout
      this Quarterly Report, and unless otherwise noted, the words “we”, “our” or the
“Company” refer to Lexington Resources, Inc.





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION**





**GENERAL**





Lexington
      Resources, Inc. is a corporation organized under the laws of the State of
      Nevada. We currently trade on the OTC Bulletin Board under the symbol "LXRS"
      and
      on the Frankfurt and Berlin Stock Exchanges under the symbol “LXR”; WKN: AØBKLP.





**CURRENT
      BUSINESS OPERATIONS**





We
      are a
      natural resource exploration company engaged in the acquisition and development
      of oil and natural gas properties in the mid-continental United States. Our
      operational focus is on horizontal gas well development initiatives in the
      Arkoma Basin, Oklahoma (Coal Bed Methane) and more recently, the Dallas Fort
      Worth Basin in Texas (Barnett Shale). Since our inception in 2003, we have
      have
      weighted our development initiatives towards unconventional gas production.





We
      have
      wholly owned subsidiary interests as follows:





Our
      wholly owned subsidiary, Lexington Oil & Gas Ltd. Co., an Oklahoma limited
      liability company (“Lexington”), conducts oil and gas exploration and production
      initiatives in our two areas of interest in the Barnett Shale gas domain of
      the
      Dallas Fort Worth Basin in Texas and the Coal Bed Methane producing areas of
      the
      Arkoma Basin in Oklahoma. Lexington acquires and develops property, lease,
      well,
      and production interests.























14





Our
      wholly owned subsidiaries, Oak Hills Drilling and Operating International Inc.,
      a Nevada company, and Oak Hills Drilling and Operating, LLC, (“Oak Hills”), an
      Oklahoma limited liability company, were acquired in the first quarter of 2006.
      Oak Hills Drilling and Operating International Inc., is the private parent
      company to Oak Hills that provides comprehensive well drilling, well completion,
      and well services.





We
      have
      evolved into an integrated drilling and production company by acquiring
      with our contract operator Oak Hills. This enables us to more
      comprehensively control our development process and more easily schedule the
      rate of drilling and production initiatives. We acquired Oak Hills as a 100%
      owned subsidiary. We now benefit from both service industry revenues and gas
      revenues from exploration and production while being able to drill and complete
      wells on our own schedule with higher quality control.








**Acquisition
      of Oak Hills**





On
      January 23, 2006, we entered into a definitive share exchange agreement (the
      “Oak Hills Share Exchange Agreement”) with Oak Hills International, Inc., Oak
      Hills, and each of the shareholders of Oak Hills International, Inc. (the “Oak
      Hills International Shareholders”), pursuant to which the Oak Hills
      International Shareholders agreed to sell to us the total issued and outstanding
      shares of Oak Hills International, Inc. and its wholly owned subsidiary, Oak
      Hills in consideration of the issuance by us to the Oak Hills International
      Shareholders of an aggregate of 6,000,000 shares of restricted common stock
      in
      the capital of the Company at a price of approximately $0.64 per share.





Oak
      Hills
      is currently our designated oil and gas operator for our well interests in
      the
      Barnett Shale, Texas Project leases. Oak Hills was originally created to drill,
      complete, and operate wells according to our exploration and development program
      when we had difficultly obtaining access to drilling rig service providers
      during the latter half of fiscal year 2004. On November 9, 2004, we had entered
      into an agreement with Oak Hills to drill a ten well program (the “Drilling
      Agreement”). We entered into the Drilling Agreement to eliminate wait times for
      proceeding with planned drilling initiatives due to high drilling demand and
      thus limited rig availability and to ensure continuous availability of a
      dedicated drilling rig and crew. On January 23, 2006, we acquired Oak Hills
      and
      Oak Hills Drilling and Operating International Inc. We believe that by having
      Oak Hills drill our prospects, we will immediately decrease our drilling costs
      on a consolidated basis and increase our control over our oil and gas leasehold
      developments enabling us to evolve into a vertically integrated oil and gas
      company with the capacity to take oil and gas development initiatives from
      land
      acquisition through drilling and to completion and production.
































15


**Joint
      Exploration Agreement - Arkoma Basin, Oklahoma**





On
      March
      3, 2006, effective January 31, 2006, we entered into an exploration agreement
      with Dylan Peyton, LLC ("Dylan") to jointly develop Lexington’s Arkoma
      Basin leases located in Hughes and MacIntosh Counties in the State of Oklahoma
      (the “Arkoma Basin Exploration Agreement”). The properties will be developed on
      a 50/50 equal working interest basis. An affiliate to Dylan, Avatar Energy,
      LLC,
      will become the operator for the project supplying at least one drilling rig
      to
      the project. We have assigned 50% of our undeveloped leasehold interests in
      Oklahoma in exchange for cash proceeds of $575,000 which equates to
      approximately 50% of the Company’s originally incurred leasing costs.
      Assignments to 50% of our undeveloped leasehold interests in Coal Creek, South
      Lamar, Middle Creek, and H-9 Prospects have been effected to Dylan. Well bores
      and acreage relating to previously drilled and completed wells by us do not
      form
      part of any assignments under the Arkoma Basin Exploration Agreement.





Under
      the
      exploration joint venture between us and Dylan, our operating subsidiary, Oak
      Hills, will be utilized for well completion and service, as well as geological
      and engineering work associated with the joint exploration. The joint
      exploration provides the ability for us to drill continuously and simultaneously
      on our leases in both the Arkoma Basin, Oklahoma through Avatar Energy, LLC,
      and
      the Barnett Shale in Texas through Oak Hills.





**Joint
      Exploration Agreement - Comanche County, Texas**





On
      March
      3, 2006, effective January 31, 2006, we entered into an exploration agreement
      with Dylan to jointly acquire and develop approximately 5,000 acres of Barnett
      Shale and shallow gas targets in Comanche County, Texas (the “Comanche County
      Exploration Agreement”). The property will be developed on a 50/50 equal working
      interest basis. Our subsidiary, Oak Hills will become the operator of the
      project. We will pay approximately $1,250,000 for our 50% working interest
      in
      the new acreage through a combination of $575,000 in cash (paid during the
      period) and approximately $675,000 of carried drilling costs in the first
      Comanche Barnett Shale test well expected to be drilled on or before September
      2006.








**Well
      Drilling and Prospect Development**





**Arkoma
      Basin, Oklahoma**





**South
      Lamar Prospect, Hughes County, OK - Peyton 1-25, Dylan Peyton 1-24H, Nicole
      1-23H wells** :
      As at
      the date of this Quarterly Report, we, through Dylan and Avatar Energy, LLC,
      began drilling and development of three wells located on our South Lamar
      prospects. One vertical well (Peyton 1-25) and two horizontal wells (Nicole
      1-23H and Dylan Peyton 1-24H) targeting a Coal Bed Methane (“CBM”) gas target
      wells are in stages of drilling and completion.





**Non-Operated
      Interest Hughes County, OK - Gates 1-19 well** :
      Lexington and its Arkoma Basin CMB exploration-drilling partner Dylan have
      elected to participate equally in an 11.25% working interest and 8.91% net
      revenue interest “Gates 1-19” horizontal CB well being drilled by Orion
      Exploration in McIntosh County, Oklahoma. Lexington and Dylan have 72 acres
      of
      the 640 acre section undergoing drilling by Orion, which if drilled and
      completed successfully, will hold three other possible horizontal CBM drilling
      sites with the same participation percentage. The acreage forms part of our
      5,170 gross acre H-9 Prospect. The well has been drilled and is proceeding
      to
      completion stages.


16




**Barnett
      Shale, Texas**





**Oliver
      Lease, Tarrant County, TX - Oliver Unit #1H well** :
      During
      first quarter of 2006, through Oak Hills, we completed the drilling portion
      of a
      horizontal Barnett Shale gas well named the Oliver Unit #1H. As of the date
      of
      this Quarterly Report, the well has been fracture stimulated, and is flowing
      back fluid related to the well stimulation procedure. The well is being prepared
      for final production including tank battery, metering, pipeline, gas processing,
      and marketing. We have a 100% working interest and a 70% net revenue interest
      in
      this well.




**Martin
      Cantrell Lease, Parker County, TX:** We are
      currently undergoing drill site preparation, road access, and permitting for
      a
      new Barnett Shale horizontal well on our Martin Cantrell lease in which we
      own a
      100% working interest and 72.5% net revenue interest. We have obtained seismic
      data from a Devon Energy related company that was required to identify possible
      faulting in the area of the lease to minimize drilling risk and for engineering
      of the new horizontal well bore.





**Non-Operated
      Interest, Parker County, TX: Paradise Park #1H well** :
      Oak
      Hills acted as drilling contractor to Ray Richey Management Company, Inc. for
      the drilling of the horizontal Barnett Shale gas well named Paradise Park #1H.
      As a result, Lexington was able to obtain a 10% working interest in the well
      and
      drilling contract service income at the rate of $14,500 per day, in addition
      to
      mobilization and demobilization fees. The well has been drilled and will be
      proceeding through fracture stimulation and completion phases of
      development.





**Gilbert
      Lease Development, Palo Pinto County, TX:** As of
      the date of this Quarterly Report, Lexington has completed the field gathering
      testing phase of a 3D seismic program on its 1,211 contiguous acre Gilbert
      lease
      located in Palo Pinto County, Texas with TimeSlice Technology Inc. of Texas.
      Data obtained is under processing, review and analysis. Our 100% working
      interest in the Gilbert lease can support up to 10 horizontal gas wells on
      120
      acre spacing, so the information obtained will aid in the development of
      engineering and geological planning for drilling operations and help lower
      risks
      associated with drilling. The testing will also decrease future costs and help
      in the planning of economic sharing of fracture pit locations, compression,
      gas
      treatment, and gas transportation infrastructure. In addition, shallow gas
      production in the area from the Strawn formation may also be identified as
      a
      secondary gas producing target from the 3D seismic testing.







**RESULTS
      OF OPERATION**





**Three-Month
      Period Ended March 31, 2006 Compared to Three-Month Period Ended March 31,
      2005**




Our
      net
      loss for the three-month period ended March 31, 2006 was ($3,809,589) compared
      to a net loss of ($1,650,134) during the three-month period ended March 31,
      2005
      (an increase of $2,159,455).











17





During
      the three-month period ended March 31, 2006, we generated $301,306 in gross
      revenue compared to $130,060 in gross revenue generated during the three-month
      period ended March 31, 2005 (an increase of $171,246 or 131.7%), resulting
      primarily from drilling services revenue from Oak Hills providing third party
      drilling services and to a smaller degree, the sale of gas produced from an
      increasing number of coal bed methane gas well interests brought into
      production.





During
      the three-month period ended March 31, 2006, we incurred operating expenses
      in
      the aggregate amount of $2,489,820 compared to $1,780,197 incurred during the
      three-month period ended March 31, 2005 (an increase of $709,623 or 39.9%).
      The
      operating expenses incurred during the three-month period ended March 31, 2006
      consisted of: (i) operating costs and taxes of $60,098 (2005: $58,065); (ii)
      rig, well and pulling unit expense of $221,486 (2005: $-0-); (iii) salaries,
      wages and related costs of $156,380 (2005: $-0-); (iv) depreciation, depletion
      and amortization expenses of $186,804 (2005: $54,907); (v) general and
      administrative expenses of $265,878 (2005: $300,521); (vi) investor relations
      and promotion expenses of $1,599,174 (2005: $590,948); and stock-based
      compensation relating to the fair value of stock options granted to consultants
      of $-0- (2005: $775,753). The increase in operating expenses incurred during
      the
      three-month period ended March 31, 2006 compared to the three-month period
      ended
      March 31, 2005 resulted primarily from the increase in investor relations and
      promotion relating to creation of an investor awareness program. The increase
      in
      operating expenses also resulted from an increase in rig, well and pulling
      unit
      expense and in depreciation, depletion and amortization expenses relating to
      increased business operations and estimated depletion resulting from the
      increased number of operating wells and the increased activity resulting from
      the acquisition of Oak Hills. General and administrative expenses generally
      include corporate overhead, financial and administrative contracted services,
      marketing, and consulting costs.





Of
      the
      $2,489,820 incurred as operating expenses during the three-month period ended
      March 31, 2006, an aggregate of $20,000 was incurred with $10,000 remaining
      payable to International Market Trend (“IMT”) for amounts due and owing for
      operational, administrative and consulting services rendered during the
      three-month period ended March 31, 2006. On November 10, 2003, we entered into
      a
      consulting agreement with IMT (the “Consulting Agreement”), whereby IMT performs
      a wide range of management, administrative, financial, and business development
      services for us. On August 19, 2005, we granted to IMT an aggregate of 1,150,000
      Stock Options exercisable at $1.25 per share for a period of five years and
      on
      March 1, 2006, the Stock Options were re-assigned from IMT to two consultants
      of
      IMT under identical terms and conditions of the original grant in connection
      with business development services rendered to us.





Of
      the
      $2,489,820 incurred as operating expenses during the three-month period ended
      March 31, 2006, an aggregate of $45,000 was incurred to our officers for
      management fees, $15,000 to an officer/director for expense reimbursement,
      and
      $15,000 in fees to a director. Furthermore, $22,500 was recorded as additional
      compensation expense to one of our directors, Mr. Humphreys during the
      three-month period ended March 31, 2006. In addition, Oak Hills incurred $11,500
      to Mr. Humphreys for rent on our field offices in Oklahoma.





Our
      net
      loss from operations during the three-month period ended March 31, 2006 also
      increased by $1,621,075 related to interest and finance fees, resulting in
      a net
      loss of $3,809,589. As discussed above, the increase in net loss
      during the three-month period ended March 31, 2006 compared to the three-month
      period ended March 31, 2005 is attributable primarily to the interest and
      finance fees incurred and to the increase in investor relations and promotion
      expenses and depreciation, depletion and amortization expenses/rig, well and
      pulling unit expenses. Our net loss during the three-month period ended March
      31, 2006 was ($3,809,589) or ($0.16) per share compared to a net loss of
      ($1,650,134) or ($0.10) during the three-month period ended March 31, 2005.
      The
      weighted average number of shares outstanding was 23,954,794 for the three-month
      period ended March 31, 2006 compared to 17,049,854 for the three-month period
      ended March 31, 2005.


18





**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      financial statements have been prepared assuming that we will continue as a
      going concern and, accordingly, do not include adjustments relating to the
      recoverability and realization of assets and classification of liabilities
      that
      might be necessary should we be unable to continue in operation.





**Three-Month
      Period Ended March 31, 2006**





As
      of
      March 31, 2006, our current assets were $823,074 and our current liabilities
      were $5,265,496, which resulted in a working capital deficit of $4,442,422.
      As
      of March 31, 2006, our total assets were $13,821,848 consisting of: (i) $10,608
      in cash and cash equivalents; (ii) $583,714 in accounts receivable; (iii)
      $35,870 due from related parties; (iv) $11,757 in prepaid expenses and other;
      (v) $264,988 in deferred charges; (vi) $2,230,225 carrying value of proved
      oil
      and gas properties (net of accumulated depletion); (vii) $5,566,739 carrying
      value of unproved oil and gas properties; and (viii) $5,117,947 in other
      equipment (net of accumulated depreciation). The increase in total assets during
      the three-month period ended March 31, 2006 from fiscal year ended December
      31,
      2005 was primarily due to the increase in carrying value of unproved oil and
      gas
      properties and in the increase in other equipment resulting primarily from
      the
      acquisition of Oak Hills.





As
      of
      March 31, 2006, our total liabilities were $6,801,881 consisting of: (i)
      $2,623,314 in accounts payable and accrued liabilities; (ii) $1,504,974 in
      long
      term debt; (iii) $1,116,767 in promissory note and other short term advances;
      and (iv) $1,556,826 in convertible notes and related accrued interest. The
      increase in total liabilities during the three-month period ended March 31,
      2006
      from fiscal year ended December 31, 2005 was primarily due to the increase
      in
      accounts payable and accrued liabilities and in long term debt resulting
      primarily from the acquisition of Oak Hills.





Stockholders'
      equity increased from $3,006,058 as of December 31, 2005 to $7,019,967 as of
      March 31, 2006.





We
      have
      not generated positive cash flows from operating activities. For the three-month
      period ended March 31, 2006, net cash flows used in operating activities was
      ($909,484) compared to net cash flows used in operating activities for the
      three-month period ended March 31, 2005 of ($608,300). Net cash flows used
      in
      operating activities for the three-month period ended March 31, 2006 consisted
      primarily of a net loss of ($3,809,589) adjusted by $1,494,051 relating to
      non-cash interest and finance fee expenses and by $186,804 relating to non-cash
      oil and gas depletion and depreciation.








19


Net
      cash
      flow used in investing activities was ($1,421,796) for the three-month period
      ended March 31, 2006 compared to net cash flows used in investing activities
      for
      the three-month period ended March 31, 2005 of ($15,310). Net cash flow used
      in
      investing activities during the three-month period ended March 31, 2006 was
      primarily a result of acquisition and exploration costs related to our oil
      and
      gas properties.





Net
      cash
      flows from financing activities was $1,821,556 for the three-month period ended
      March 31, 2006 compared to net cash flows from financing activities for the
      three-month period ended March 31, 2005 of $360,324. Net cash flows from
      financing activities for the three-month period ended March 31, 2006 pertained
      primarily to $1,937,500 received as proceeds from the sale of our common stock,
      $500,000 received as proceeds from other short term advances less $581,836
      for
      convertible note repayments.





As
      at
      March 31, 2006, our current assets were $823,074 and current liabilities were
      $5,265,496, resulting in a working capital deficit of $4,442,422. We expect
      that
      working capital requirements will continue to be funded through a combination
      of
      securities. Our working capital requirements are expected to increase in line
      with the growth of our business.











**PLAN
      OF OPERATION AND FUNDING**





As
      of the
      date of this Quarterly Report, we have completed a private placement offering
      pursuant to which we will issue an aggregate of 7,650,000 units (the “Units”),
      at a subscription price of $1.00 per Unit for gross proceeds of $7,650,000.
      Each
      such Unit is comprised of one common share and one non-transferable common
      stock
      purchase warrant (the “Warrant”). Each resulting Warrant entitled the holder
      thereof to purchase an additional share of common stock (the “Warrant Share”) at
      a price of $1.25 per Warrant Share for the period commencing upon the date
      of
      issuance of the Units and ending on the day which is the earlier of: (i)
      eighteen months from the date of issuance of the Units, and (ii) twelve months
      from the effective date of a proposed registration statement. Both the Warrant
      Shares and the share of common stock issued pursuant to the private placement
      offering are to be proposed for registration under the Securities Act of 1933,
      as amended (the “Securities Act”). We will pay a finder’s fees of 5% of the
      gross cash proceeds received under the private placement offering and 10%
      restricted common shares on the gross units issued, with such restricted shares
      carrying piggy back registration rights.





Existing
      working capital, further advances and possible debt instruments, anticipated
      warrant exercises, further private placements, and anticipated cash flow are
      expected to be adequate to fund our operations over the next six months. We
      have
      no lines of credit or other bank financing arrangements. Generally,
      we have financed operations to date through the proceeds of the private
      placement of equity and debt securities. In connection with our business plan,
      management anticipates additional increases in operating expenses and capital
      expenditures relating to: (i) oil and gas operating properties; (ii) drilling
      initiatives; and (iii) property acquisitions. We intend to finance these
      expenses with further issuances of securities, debt and or advances, and
      revenues from operations. Thereafter, we expect we will need to raise additional
      capital and increase revenues to meet long-term operating
      requirements.








20


Additional
      issuances of equity or convertible debt securities will result in dilution
      to
      our current shareholders. Further, such securities might have rights,
      preferences or privileges senior to our common stock. Additional financing
      may
      not be available upon acceptable terms, or at all. If adequate funds are not
      available or are not available on acceptable terms, we may not be able to take
      advantage of prospective new business endeavors or opportunities, which could
      significantly and materially restrict our business operations.





The
      report of the independent registered public accounting firm that accompanies
      our
      December 31, 2005 and December 31, 2004 consolidated financial statements
      contains an explanatory paragraph expressing substantial doubt about our ability
      to continue as a going concern. The consolidated financial statements have
      been
      prepared "assuming that we will continue as a going concern," which contemplates
      that we will realize our assets and satisfy our liabilities and commitments
      in
      the ordinary course of business.





**MATERIAL
      COMMITMENTS**





**Convertible
      Notes**





During 
      2006, a material commitment for us relates to the repayment to convertible
      debenture holders of the outstanding amounts of principal and interest accruing
      at 8% per annum on an aggregate face value of $2,261,771 in Convertible Notes.
      At year ended December 31, 2005, the outstanding amount of the Convertible
      Notes
      was $4,854,314. During the three-month period ended March 31, 2006, we paid
      an
      aggregate of $176,688 in interest, repaid an aggregate of $581,836 in principal,
      converted an aggregate of $2,010,701 of principal and $13,607 of interest into
      shares of our common stock at a conversion price of $1.00 per share under the
      provisions of the Convertible Notes. See “Part II. Item 2. Unregistered
      Sales of Equity Securities and use of Proceeds.





The
      remaining amount due and owing under the Convertible Notes is payable in
      seventeen monthly principal and interest payments in either cash or shares
      of
      our common stock at the rate of $1.00 per share (the “Fixed Conversion Price”)
      beginning on or about December 17, 2005 if our share price is trading above
      $1.00 per share at the date of payment. Commencing on the fourth month
      anniversary of the closing date of the issue of the Convertible Notes (September
      16, 2005 and October 11, 2005), and on the first day or each month thereafter,
      the Convertible Notes must be repaid in cash in amount equal to 5% of the
      principal amount of the Notes together with all accrued interest due and payable
      up to the repayment date. If our shares are trading at less than $1.00 per
      share
      at the date of repayment, then we may repay outstanding monthly principal and
      interest in either cash or shares in our capital at a different rate than the
      Fixed Conversion Price. If the volume weighted average share price (the "VWAP")
      of the five trading days prior to a monthly payment date is less than the Fixed
      Conversion Price, then we may pay the monthly amount in cash or registered
      shares of our common stock at 75% of the VWAP for the five trading days prior to
      the monthly payment date. As of the date of this Quarterly Report, required
      monthly payments of principal and interest are approximately $80,000 monthly.
      The holders of the Convertible Notes have a secured first interest in our
      assets.

















21





**Promissory
      Note**





During 
      2006, a material commitment for us relates to an unsecured promissory note
      from
      one of our shareholders aggregating $600,000 (the “Promissory Note”). The
      provisions of the Promissory Note are:(i) two-year term with interest at the
      rate of 10% per annum; and (ii) interest to be paid on a quarterly basis with
      the principal to be repaid on or before the due date of the Promissory Note.
      As
      at March 31, 2006, $16,767 of interest has accrued on this loan. We intend
      to
      repay this loan during  2006.





**Oak
      Hills Debt**





During
      2006, a material commitment for us on behalf of Oak Hills relates to outstanding
      promissory notes totaling $1,295,961, which accrue interest at 9% per annum,
      and
      require no payments of interest or principal until the end of a two-year term
      ending January 22, 2008. The promissory notes are owed to certain former
      shareholders of Oak Hills and are secured against the assets of Oak Hills.
      During the three-month period ended March 31, 2006, we accrued $18,854 of
      interest on these loans resulting in $138,260 in accumulated accrued interest
      due and owing.








**ITEM
      3. CONTROLS AND PROCEDURES**





Our
      management is responsible for establishing and maintaining a system of
      disclosure controls
      and procedures
      (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is
      designed to ensure that information required to be disclosed by the Company
      in
      the reports that we file or submit under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      Commission’s rules and forms. Disclosure controls
      and procedures
      include, without limitation, controls
      and procedures
      designed to ensure that information required to be disclosed by an issuer in
      the
      reports that it files or submits under the Exchange Act is accumulated and
      communicated to the issuer’s management, including its principal executive
      officer or officers and principal financial officer or officers, or persons
      performing similar functions, as appropriate to allow timely decisions regarding
      required disclosure.





In
      accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was
      completed under the supervision and with the participation of our management,
      including Mr. Grant Atkins, our Chief Executive Officer, and Mr. Vaughn Barbon,
      our Principal Financial Officer, of the effectiveness of the design and
      operation, our Chief Financial Officer of our disclosure controls
      and procedures
      as of the end of the period covered by this Quarterly Report. Based on that
      evaluation, our management including the Chief Executive Officer and Principal
      Financial Officer, concluded that our disclosure controls
      and procedures
      are effective, to provide reasonable assurance that information required to
      be
      disclosed in our reports filed or submitted under the Exchange Act is recorded,
      processed, summarized, and reported within the time periods specified in the
      Commission’s rules and forms. There have been no changes to our internal controls
      over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under
      the
      Securities Exchange Act of 1934) that occurred during our three-month quarterly
      period ended March 31, 2006, that materially affected, or were reasonably likely
      to materially affect, our internal controls
      over financial reporting.


22


**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





Management
      is not aware of any legal proceedings contemplated by any governmental authority
      or any other party involving us or our properties. As of the date of this
      Quarterly Report, no director, officer or affiliate is (i) a party adverse
      to us
      in any legal proceeding, or (ii) has an adverse interest to us in any legal
      proceedings. Management is not aware of any other legal proceedings pending
      or
      that have been threatened against us or our properties.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





**PRIVATE
      PLACEMENT OFFERING**





As
      of the
      date of this Quarterly Report, we have completed a private placement offering
      under Regulation D and Regulation S of the Securities Act pursuant to which
      we
      will issue an aggregate of 7,650,000 Units at a subscription price of $1.00
      per
      Unit for gross proceeds of $7,650,000. Each such Unit is comprised of one common
      share and one non-transferable common stock purchase Warrant. Each resulting
      Warrant entitles the holder thereof to purchase an additional share of common
      stock (the “Warrant Share”) at a price of $1.25 per Warrant Share for the period
      commencing upon the date of issuance of the Units and ending on the day which
      is
      the earlier of: (i) eighteen months from the date of issuance of the Units,
      and
      (ii) twelve months from the effective date of a proposed registration statement.
      Both the Warrant Shares and the share of common stock issued pursuant to the
      private placement offering are to be proposed for registration under the
      Securities Act. We will pay finder’s fees of 5% of the gross cash proceeds
      received under the private placement offering and 10% restricted common shares
      on the gross units issued, with such restricted shares carrying piggy back
      registration rights.





The
      per
      share price of the offering was arbitrarily determined by our Board of Directors
      based upon analysis of certain factors including, but not limited to, stage
      of
      development, industry status, investment climate, perceived investment risks,
      our assets and net estimated worth. We issued Units to investors who were either
      a U.S. resident- or a non-U.S. resident. The investors executed subscription
      agreements and acknowledged that the securities to be issued have not been
      registered under the Securities Act, that they understood the economic risk
      of
      an investment in the securities, and that they had the opportunity to ask
      questions of and receive answers from our management concerning any and all
      matters related to acquisition of the securities.




**CONVERSION
      OF NOTES**





During
      the first quarter of 2006, we issued an aggregate of 2,024,294 shares of our
      common stock in connection with the conversion of the Convertible Notes. An
      aggregate of $2,010,701 in principal and $13,607 in interest in the Convertible
      Notes was converted into 2,024,308 shares of our common stock at a conversion
      price of $1.00 per share. We issued the shares of common stock in reliance
      upon
      Section 4(2) of the Securities Act.











23





**EXERCISE
      OF SERIES B WARRANTS**





As
      at the
      date of this Quarterly Report, we have issued an aggregate of 150,000 shares
      of
      our common stock in connection with the exercise of Series B Warrants at $1.25
      per Series B Warrant for aggregate proceeds of $187,500. The Series B Warrants
      were originally issued as part of a secured convertible note unit offering
      and
      the shares of common stock underlying the warrants were registered under the
      Securities Act pursuant to a registration statement on Form SB-2.




**STOCK
      OPTIONS**





During
      the three-month period ended March 31, 2006, we issued an aggregate of 1,650,000
      shares of our common stock pursuant to the exercise of a total of 1,650,000
      Stock Options, of which 500,000 were exercised at $1.00 per share and 1,150,000
      at $1.25 per share, for aggregate proceeds of $1,937,500. The shares of common
      stock were subject to S-8 registration statements.





**OAK
      HILLS SHARE EXCHANGE AGREEMENT**





On
      January 23, 2006, we issued an aggregate of 6,000,000 shares of our restricted
      common stock to the shareholders of Oak Hills International, Inc. at a price
      of
      approximately $0.637645 per share in accordance with the terms and provisions
      of
      the Oak Hills Share Exchange Agreement. The per share consideration was
      calculated by reference to the assets of Oak Hills obtained from the independent
      third party valuation, and management’s further calculation of net tangible
      value inclusive of all other balance sheet assets, current, and long-term
      liabilities of the acquired companies resulting in the shares issued as
      consideration, with such shares issued at a 6.3% discount to the trading value
      of our stock as at December 22-23, 2005, the transaction valuation date. The
      shares were issued pursuant to an exemption from registration under Section
      4(2)
      of the 1933 Securities Act. We also negotiated favorable terms on long term
      debt
      that formed part of the acquisition deferring payment of interest and principal
      for a period of two years. Oak Hills has outstanding promissory notes totaling
      $1,295,961, which accrue interest at 9% per annum and require no payments of
      interest or principal until the end of a two year term ending January 22, 2008.




**EURXCHANGE
      CONSULTING LTD.**





On
      February 15, 2006, we issued an aggregate of 400,000 shares of our restricted
      common stock in accordance with the terms and provisions of a consulting
      agreement (the “Consulting Agreement”), with EurXchange Consulting Ltd., a
      Canadian corporation (“EurXchange”). Pursuant to the terms and provisions of the
      EurXchange Consulting Agreement: (i) EurXchange agreed to render to us
      consulting services including, but not limited to, translations of webpage,
      business plan and new releases into German, establishment of communication
      during European business hours, chat line coordination, web portal presence
      through Wallstreet Online, production and distribution of a MIDAS research
      report and a penny stock report, presentation of roadshows, production of
      certain mailers, and establishment of a Stock Hotline telephone line; (ii)
      we
      will pay to EurXchange a cash retainer in the aggregate amount of 293,000 EUR,
      with the first installment of 153,000 EUR due on date of execution of the
      EurXchange Consulting Agreement and the second and third installment of 70,000
      EUR payable on April 15, 2006 and May 15, 2006, respectively; and (iii) we
      shall
      issue to EurXchange an aggregate of 400,000 shares of our restricted common
      stock. The shares were issued pursuant to an exemption from registration under
      Section 4(2) of the 1933 Securities Act.


24


**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





No
      report
      required.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
      report
      required.





**ITEM
      5. OTHER INFORMATION**





No
      report
      required.





**ITEM
      5. OTHER INFORMATION**




On
      April
      13, 2006, our Board of Directors approved and authorized the termination of
      the
      services of Dale Matheson Carr-Hilton LaBonte Chartered Accountants (“DMCL”) as
      our principal independent accountant. The termination of the services of DMCL
      was a result of communication between us and DMCL and the subsequent decision
      by
      our Board of Directors that it would be in our best interests to effect a change
      in auditors in order to address the needs of a small business development
      company with growing operations located in Oklahoma and Texas. During our two
      most recent fiscal years and any subsequent interim period preceding the
      resignation of DMCL, there were no disagreements with DMCL which were not
      resolved on any matter concerning accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which disagreements,
      if
      not resolved to the satisfaction of DMCL, would have caused DMCL to make
      reference to the subject matter of the disagreements in connection with its
      reports. The report of DMCL for fiscal years ended December 31, 2005 and 2004
      indicated the following:





“The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, to date the Company has reported significant losses since inception
      from operations and requires additional funds to meet its obligations and fund
      the costs of its operations. These factors raise substantial doubt about the
      Company's ability to continue as a going concern. Management's plans in this
      regard are described in Note 1. The financial statements do not include any
      adjustments that might result from the outcome of this
      uncertainty.”





Except
      as
      described in the immediately preceding paragraph, the report of DMCL did not
      contain an adverse opinion or a disclaimer of opinion, and was not qualified
      or
      modified as to uncertainty, audit scope, or accounting principles.





On
      April
      13, 2006, our Board of Directors approved and authorized the engagement of
      the
      services of Whitley Penn LLP (“WP”), as our principal independent accountant.
      The address and telephone/facsimile numbers for WP are as follows: 5420 LBJ
      Freeway, Suite 1440, Dallas, Texas 75240, telephone no. 972.392.6600 and
      facsimile no. 972.392.6601.





We
        did
        not previously contact WP prior to its engagement regarding application of
        accounting principles to a specific completed or contemplated transaction,
        or
        the type of audit opinion that might be rendered on our financial statements,
        and nether written nor oral advice was sought by us from WP prior to its
        engagement regarding an important factor considered by us in reaching a decision
        as to the accounting, auditing or financial reporting issue.


25


**ITEM
      6. EXHIBITS**





Exhibits:





31.1
            Certification
                of Chief Executive Officer pursuant to SecuritiesExchange
                Act of 1934 Rule 13a-14(a) or
                15d-14(a).





31.2
            Certification
                of Chief Financial Officer pursuant to SecuritiesExchange
                Act of 1934 Rule 13a-14(a) or
                15d-14(a).





32
            Certifications
                pursuant to Securities Exchange Act of 1934 Rule 13a-14(b)
                or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant toSection
                906 of the Sarbanes-Oxley Act of 2002.




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly authorized.








LEXINGTON
      RESOURCES, INC.





Dated:
      May 14, 2006


By:
      /s/ Grant Atkins


Grant
      Atkins, President and Chief
      Executive Officer








Dated:
      May 14, 2006


By:
      /s/ Vaughn Barbon


Vaughn
      Barbon, Chief Financial Officer