UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the fiscal year ended November 30, 2007  ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________ to ___________. Commission file number 333-134175 LEXINGTON ENERGY SERVICES INC.(Exact name of registrant as specified in its charter) NEVADAN/A(State or Other Jurisdiction of Incorporation of Organization)(I.R.S. Employer Identification No.)  Bay A, 1115 48th Ave SE, Calgary, ABT2G 1A7(Address of principal executive offices)(ZIP Code) 403-279-4550(Registrants telephone number, including area code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant as required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo  ̈ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form-10KSB or any amendment to Form 10-KSB. þ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Noþ Issuers revenues for its most recent fiscal year: $2,743,344 Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at March 7, 2008 (computed by reference to the closing price of the last sale recorded on the NASD OTC Bulletin Board of the common shares on such date):$2,500,000 Number of common shares outstanding at March 7, 2008:  26,138,669    i


PART I Item 1. Description of Business Cautionary Statement This Annual Report on Form 10-KSB contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report. General Lexington Energy Services Inc. was incorporated as a Nevada corporation on March 30, 2005.  We are an oil field service company providing manufacturing and leasing of oilfield service equipment to oil and gas and other oil field service companies.  We have three wholly-owned subsidiaries, including Lexcore Services Inc. (Lexcore), which was incorporated as a Nevada company on April 28, 2006, Lexcoil Inc. (Lexcoil), which was incorporated as a Nevada company on October 3, 2006, and Nitro Gen Technologies Inc. (Nitro Gen), which was incorporated as an Alberta company (Canadian) on May 30, 2007. Lexcore operates our activities relating to leasing coring units.  Lexcoil operates our activities relating to coiled tubing services in well site operations. Nitro Gen operates our activities relating to our nitrogen generation unit. We have only begun our operations and have had operational losses to date, as well as an accumulated deficit. As of November 30, 2007, we had net losses since inception in the amount of ($5,578,761).  Our principal offices are temporary located at Bay A, 1115 48th Avenue SE, Calgary, AB T2G 2A7. Recent Developments On January 15, 2008, our Board appointed Robert Rosner as our Chief Executive Officer following the resignation of Brent Nimeck as President and Chief Executive Officer. Since Mr. Nimecks resignation, current managements primary activities have been involved in a significant reorganization of the Companys operations, records and databases, regaining control of certain Company assets, and identifying and evaluating the current status of customer and supplier relationships. Current management is also resolving and investigating past transactions.   Current management expects that resolution of these


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issues will continue for some period of time.  If we fail to resolve these issues satisfactorily within a reasonable period of time, our business  operations may be adversely affected.     Our Products and Services Nitrogen Generation Unit  On May 30, 2007, we incorporated a wholly owned subsidiary, Nitro Gen Technologies Inc. (Nitro Gen), under the laws of the Province of Alberta, Canada, to operate our activities relating to the operations and business of our nitrogen generation unit. We completed building a nitrogen generation unit, and we have started preliminary operations of this equipment. Nitrogen generation is a process which extracts the nitrogen content from atmospheric air and purifies it from its original content of 79% up to a purity of 99.5%.  The oil industry uses nitrogen in various applications. Nitrogen is an inert gas which does not allow corrosion and displaces oxygen from wells and other hydrocarbon based environments.  Removing the oxygen from these environments and wells eliminates the risk of causing a fire in a well or causing a surface explosion. In the case of sour wells which contain Hydrogen sulfide gas, nitrogen is used to displace oxygen. Removing oxygen from sour wells prevents corrosion of the well bore and downhole equipment.  Without nitrogen, sour wells can rapidly eat through steel in a couple of days, which can result in a major loss of assets to an oil company.  Nitrogen is used in many applications in the oil and gas services industry.  It is used to assist in well clean up or to enhance well flow rate. It is also used for removing fluids from well bores, purging vessels and pressure testing operations. In Western Canada drilling operations, nitrogen is often used daily and is in short supply. Most nitrogen generation plants are located over 500 kilometers from the markets where they are sold.  The gas is compressed, liquefied and stored under pressure so it can be transported to location and converted from a liquid back to a gas and then sold to the customer. The remote location and vast distance between point of manufacture and point of sale poses a serious logistical problem to many oil companies. The liquid nitrogen systems require trucking of thousands of gallons of product from the point of production to a transfer station and then a field pumping unit.  The liquid is handled three times and thousands of kilometers are driven to get the product to location. Our planned nitrogen generation system generates a continuous supply of nitrogen without any of the additional costs associated with liquid systems.  Our system draws in a large volume of air at low pressures, super heats the air to remove any contaminates such as oil, moisture and dirt.  From there the air is forced under pressure into a nitrogen membrane module. There modules contain thousands of hair like fibers which only allow nitrogen molecules to pass through. As the nitrogen is allowed to pass into the membrane, the waste gas oxygen is dumped from the system back into the atmosphere.  We believe this system of nitrogen production will allow us to produce a constant uninterrupted supply of nitrogen at the point of sale with low operating costs and no costs or hazards associated with liquid units.  It is management's belief that the technology related to how oxygen is used to create nitrogen in our nitrogen generation unit is too commonly used and widely known to be patentable and therefore we do not own such technology. However, we received a notice from counsel for Pacific Consolidated Industries, LLC ("PCI"), giving us notice that PCI had


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obtained an injunction against Innovative Nitrogen Systems, LLC ("INS") (the company who built our Nitrogen Generation Unit) prohibiting INS from retaining, using or disclosing any of PCI's trade secrets or other confidential information.  In a letter to us dated March 6, 2007, PCI has alleged that some of its proprietary technology may have been used by INS in building our nitrogen generation unit, and that we are therefore prohibited in using the unit.  Based on a preliminary review of PCI's allegations, our management does not believe that PCI's injunction limits or curtails our ability to use or lease our nitrogen generation equipment.  Further details of this claim are described under the heading "Legal Proceedings".   Coiled Tubing Units  On October 3, 2006, we incorporated a wholly-owned subsidiary, Lexcoil Inc. (Lexcoil), as a Nevada corporation, through which we operate our coiled tubing services  We have recently commenced preliminary operations of our coiled tubing units. The tubing units are primarily used for well cleanouts to enhance or initiate production in oil or gas wells.  Lexcoil provides coiled tubing services by injecting coiled tubing into wells to perform various well servicing operations.  Coiled tubing units are usually used together with the appropriate support equipment to pump nitrogen, acid or air into wells in order to remove unwanted corrosive acids, solids, and fluids from the well or drill hole.  Coiled tubing units can also be used to set and remove tools and perform well abandonments.  A unit uses a continuous string of pipe that is inserted into a drill hole, to facilitate the use of specialized tools, stimulation fluids, and nitrogen pumping.  Our coiled units can provide tubing services for workover operations and shallow drill outs.  After stimulation treatment, the coiled tubing can be used to blow out the well with nitrogen which eliminates the need for swabbing.  Advantages of coiled tubing include speed of getting into and out of the well, and the ability to work on the well while it is still producing.  Our coiled tubing and nitrogen units are capable of providing well maintenance and workover applications.   Mobile Well Production Testing Units  In 2006, we built and two mobile well testing units (p-tanks). Oil and gas wells need to be tested for various lengths of time depending on the well performance and repair times.  This is done so that the oil companies can estimate reservoir capabilities and size.  Typically, the oil and well testing procedure is cumbersome and difficult because of the size and volume of the equipment required, which must be moved by large trucks to location.  The p-tanks which we built and sold were able to perform these tests.  The production testing package is comprised of three major components, the pressure testing vessel (p-tank), flare stack and dog house.  When assembled on a well site location the components allow a testing company to test the productivity of the well for the oil companies.  The mobile production testing units we built last year consisted of all the equipment necessary to test a well attached to a tractor, along with a mini mobile office with satellite


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internet access in our proprietary packaging which allows us to eliminate the need for third party trucking in the testing of oil and gas wells.  We previously entered into two agreements to lease out our p-tanks. However, once we completed ordering all of the parts and assembling the p-tanks, our management determined that it would be more beneficial for us at that time to sell the units and terminate the lease agreements, and apply the proceeds of the sales of the p-tanks towards our other divisions.  The lease agreements were terminated by the consent of all parties to the agreements.  We plan to build more p-tanks on order from customers. We currently do not have any orders to build any units.  We also plan to build out p-tank business through acquisition. As of March 7, 2008 we did not have any p-tanks available for lease or in production.  Coring Units  On April 28, 2006, we incorporated a wholly-owned subsidiary, Lexcore Services Inc. ("Lexcore"), as a Nevada corporation, through which we operate our activities relating to building and leasing coring units.  Through Lexcore we provide to oil and gas companies drilling services, including equipment rental and provision of personnel to operate the equipment.  The equipment we have designed and built will be suitable for use in a variety of drilling operations, including coring, geothermal, coal methane beds and shallow natural gas.   The Coring Units  We have plans to build two more coring units in the next 12 months.  We have not yet ordered any parts, but anticipate that we will do in the fall of 2008.  Each coring unit (including the two which we have completed) consists of four trucks, as follows:  · Drilling Rig Unit.  This is the largest truck in the coring unit and is used to raise, lower and rotate the drill pipe in and out of the hole. It consists of a mud pump for circulating of drilling fluids. It is capable of handling all downhole drilling and coring tools, and is capable of drilling range 2 drill pipe and completions of wells with range 3 casing.  · Pipe Handling System.This truck is fully automated and used to feed drill pipe to the drilling rig.  Our pipe handling system is designed to carry up to 700 m of drill pipe.  · Core Van.This vehicle's purpose is primarily to pre-evaluate cored material and to prepare the material for transport to laboratories.  Attached to the vehicle is a power generator, washroom and staff change room. Also attached is an automated blow out prevention system to handle a gas kick which can occur when drilling or coring into any hydro-carbon formation and can be easily controlled with a blow out prevention system.  · Boiler Unit Mud System.The boiler truck is used to carry the boiler unit which produces steam for heat in winter drilling. It has a self contained generator. It will


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pull the drilling fluids tank which is used to recirculate drilling fluid. Drilling fluid is piped down the hole while the drill pipe is being drilled into the ground.  Coring  Oil and gas companies evaluate tar sands and coal bed methane gas by drilling evaluation holes in the earth and removing core samples. Coring involves the cutting of a vertical, cylindrical sample out of the earth of the formations encountered as a well is drilled, to allow geological analysis of the formation. The geological analysis of a core sample may determine porosity, permeability, physical characteristics, fluid content, geological age, and probable productivity of the formation.  Our coring unit systems are unique because of their drilling capacities.   We designed our units with our supplier and with suggestions from a potential customer.  Coring rigs are traditionally big and cumbersome with excessive weight.  Our rigs are unique in that we have converted water well drilling rigs into an oil and gas coring rigs.  Essentially, we have modified a smaller, lighter rig to handle the same capacity work load as a traditional oil and gas rig.  Due to the fact that these modifications were done through our supplier, we cannot apply for patent protection. We believe these lighter units allow us to drill faster than a conventional drilling rig.  Another advantage of our system is that it uses a wireline coring method.  Wireline coring method  Our coring units use a wireline coring method.  A wireline core involves putting a drill pipe into the ground and pulling the earth core samples out of the centre without moving the drill pipe.  Our coring units each have a 30 ft drill pipe which can retrieve a 3 inch wide core up to 700 m deep into the earth.  We believe wireline coring is faster and more efficient than the conventional coring method which involves having coring tools at the bottom of the drill pipe, and inserting the drill pipe into the ground, and then retrieving only 9 m of core at a time. The disadvantage to this method is that the drill operator must pull all the drill pipe out of the hole every 3 m.  When using a wireline core, the drill operator can leave the drill pipe in the ground, and pull the core sample out from the inside of the drill pipe with the wireline.  Our management estimates that about 50% of coring in oil sands in Alberta is done using the wireline coring method.  A conventional coring unit would usually require six or seven trucks (two or three more trucks than our wireline coring unit) since the conventional method requires more equipment.   Because more trucks are needed, either more personnel are required, or several trips have to be made by some drivers. Also, with conventional coring the trucks are typically larger, and require bigger roads to be built to allow them access into remote areas.  In Alberta, most core samples need to be transported to Calgary for evaluation.  Coring in oil fields usually requires travel into remote areas, often areas so remote that roads need to be built to allow the coring unit to get there.  Once there, a coring unit must usually travel anywhere from 300 m to 2 km to obtain each core sample.  We believe that our wireline coring unit (consisting of only four trucks) will be attractive to oil companies because our units are smaller and require less fuel, less manpower and are able to use smaller roads than conventional coring units.


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Another distinct benefit to wireline coring is that with the smaller unit, there is a smaller environmental footprint.  Oil companies are required to pay stumpage fees related to the number of trees that are cut down in oil exploration and production.  Also, there are regulations on how many trees may be cut down in each area.  For the wireline coring unit, the work area needed is about half the size of conventional coring units.  The work area is usually created by cutting down trees to make a clearing. The smaller size of our wireline coring units will allow oil companies that use our equipment to construct smaller areas to set up the coring unit for sampling.    The Oil and Gas Services Industry     We provide products and services to onshore oil and natural gas exploration and production companies and other oil service companies for use in the drilling and production of oil and natural gas. The main factor influencing demand for well services in our industry is the level of drilling activity by oil and natural gas companies, which, in turn, depends largely on current and anticipated future crude oil and natural gas prices and depletion rates. Current market indicators suggest an increasing demand for oil and natural gas coupled with a flat or declining production curve, which we believe should result in the continuation of historically high crude oil and natural gas commodity prices. For example, in its International Energy Outlook 2006, the Energy Information Agency of the U.S. Department of Energy (the EIA) forecasts that North American gas consumption is projected to increase an average annual rate of 1.1 percent between 2003 and 2030.  According to the same report, Canada is currently the source of almost 90% of net natural gas imports to the U.S., although that percentage is expected to drop significantly over the next 25 years.       Competition Our competition includes small and mid-size independent contractors as well as major oilfield services companies with international operations. We compete with over 100 testing companies that provide services to oil and gas companies in Western Canada, and many more companies that provide oil field services internationally.  We believe that the principal competitive factors in the market areas that we serve are price, product and service quality, efficiency and availability of equipment and technical proficiency. We differentiate ourselves from our major competition by our unique equipment.  Much of our equipment, including some of our mobile well testing equipment and our nitrogen generation unit has been designed by our management, or designed by our suppliers on the instructions of our management.  We have not created any new technology in designing our proposed equipment, but rather, we have combined existing equipment and technologies to produce better overall results such as higher purities and pressures.  We use some off-the-rack products so we can easily get replacement parts.  Our management does not believe that we would be able to obtain patents for any of the systems or processes that we have designed. Our target market is independent oil and gas companies. Based on the experience of our directors, these independents typically are relationship driven and make decisions at the local level. We believe this business model will enable us to grow our business. However, we are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.


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Intellectual Property We have not filed for any protection of our trademarks. We do not believe we could obtain a patent on the assembly design for any of our equipment.  We own the intellectual property associated with our trade names and our website at www.lexingtonenergyservices.com.   Legislation and Government Regulation  Canada has regulatory provisions relating to permits for the drilling of wells, the spacing of wells, the prevention of oil and natural gas waste, allowable rates of production and other matters.  The amount of oil and natural gas produced is subject to control by regulatory agencies in each province that periodically assign allowable rates of production.  The Province of Alberta and Government of Canada also monitor and regulate the volume of natural gas that may be removed from the province and the conditions of removal.  The right to explore for and develop oil and natural gas on lands in Alberta, Saskatchewan and British Columbia is controlled by the governments of each of those provinces.  Changes in royalties and other terms of provincial leases, permits and reservations may have a substantial effect on the operations of our customers, which in turn could affect the demand for our products and services and have a substantial effect on our operations.  In addition to the foregoing, in the future, our Canadian operations may be affected from time to time by political developments in Canada and by Canadian Federal, provincial and local laws and regulations, such as restrictions on production and export, oil and natural gas allocation and rationing, price controls, tax increases, expropriation of property, modification or cancellation of contract rights, and environmental protection controls. Furthermore, operations may also be affected by United States import fees and restrictions.  We are also subject to safety policies of the Alberta Workers Compensation Board that regulates the protection of the health and safety of workers.      Environmental Law Compliance  As our business plan involves offering equipment for lease to oil and gas companies, we do not expect that we will be governed by the comprehensive federal, provincial and local laws that regulate the discharge of materials into the environment or otherwise relate to health and safety or the protection of the environment. Our well testing equipment has been developed to assist oil and gas companies in Western Canada to comply with "Guide 40  [http://www.eub.gov.ab.ca/bbs/products/guides/g40.pdf]: Pressure and Deliverability Testing - Oil and Gas Wells" as developed by theAlberta Energy and Utilities Board.  Guide 40 provides the requirements and recommended practices for pressure and deliverability testing of oil and gas wells.  We need to ensure that the equipment which we create assists our clients in meeting these regulations.  The Alberta Energy and Utilities Board is an independent, quasi-judicial agency of the Government of Alberta which regulates the safe, responsible, and efficient development of Alberta's energy resources.  To the extent which environmental compliance may be necessary, we do not anticipate any significant compliance expense.      Employees


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We currently employ approximately six people at our Calgary office in the areas of management, operations, administration, and accounting. We also currently employ a team of 11 full time rig personnel who are currently working in Fort McMurray on a service contract though our subsidiary Lexcore. Over the next 12 months, we anticipate that we will hire two to three more people in the areas of operations, media, publicity and marketing. We are also currently reviewing potential candidates to serve on our Board of Directors and join our executive management team.  Over the next 12 months, we hope to add at least two more directors to our Board.  If we are successful in raising additional capital to build more equipment and expand, we will likely hire skilled technical workers to assemble the equipment on a short term contract basis. We currently engage independent contractors in the areas of accounting, bookkeeping and legal services.                 Risk Factors Our current management is engaged in a reorganization of our operations and resolution of other issues relating to past transactions, customers, suppliers  and our assets, and failure to resolve these issues satisfactorily could adversely affect our business operations.  On January 15, 2008, our Board appointed Robert Rosner as our Chief Executive Officer following the resignation of Brent Nimeck as President and Chief Executive Officer. Since Mr. Nimecks resignation, current managements primary activities have been involved in a significant reorganization of the Companys operations, records and databases, regaining control of certain Company assets, and identifying and evaluating the current status of customer and supplier relationships.  The current management is also resolving and investigating past transactions.  Current management expects that resolution of these issues will continue for some period of time. If we fail to resolve these issues satisfactorily within a reasonable period of time, our business  operations may be adversely affected.  There is substantial uncertainty as to whether we will continue operations.  The following factors raise substantial doubt regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; and (ii) our dependence on sale of equity securities and receipt of capital from outside sources to continue in operation. We anticipate that we will incur increased expenses without realizing enough revenues. We therefore expect to incur significant losses in the foreseeable future. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to sell our assets, curtail or cease our operations.  If we do not obtain additional financing to fund our operations and development, we will be unable to complete all planned activities which could result in the failure of our business.


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We will require significant expenditures of capital in order to continue our current operations, build two coring units, repayment of loans, and buy back our capital lease. We estimate the total costs will be approximately $7,000,000. We plan to obtain the necessary funds through private placements, a direct offering, bank loans or joint ventures with other companies. We may not be able to raise those amounts from our planned sources.  Obtaining additional financing will be subject to a number of factors including current and anticipated oil and gas prices, market conditions, investor acceptance of our business plan, and investor sentiment. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. There is no assurance that any additional financing will be available or if available, on terms that will be acceptable to us. If we are unable to raise additional financing, we will have to significantly reduce our spending, delay or cancel planned activities or substantially change our current corporate structure. In such an event, we intend to implement expense reduction plans in a timely manner. However, these actions would have material adverse effects on our business, revenues, operating results, and prospects, resulting in a possible failure of our business.  A decline in or substantial volatility of oil and gas prices could adversely affect the demand for our services, which could mean a decrease in our revenues. We anticipate that the demand for our services will be primarily determined by oil and gas prices and the related general production spending and level of drilling activity in Western Canada. Volatility or weakness in oil and gas prices (or the perception that oil and gas prices will decrease) will likely affect the spending patterns of our possible customers and may result in the drilling of fewer new wells or lower production spending on existing wells. This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment. A decline in oil and gas prices or a reduction in drilling activities could materially and adversely affect the demand for our services and could seriously decrease our revenues or prevent us from generating any revenues.  Competition within the well services industry may prevent us from becoming profitable.  The oil well services industry is highly competitive and fragmented and includes numerous small companies capable of competing effectively in our markets on a local basis as well as several large companies that possess substantially greater financial and other resources than we do. Our larger competitors' greater resources could allow those competitors to compete more effectively than we can. The amount of equipment available may exceed demand, which could result in active price competition. Many contracts are awarded on a bid basis, which may further increase competition based primarily on price. In addition, recent market conditions have stimulated the reactivation of well servicing rigs and construction of new equipment, which could result in excess equipment and lower utilization rates in future periods.  This could decrease our revenues or prevent us from generating revenues or becoming profitable.  Our business is subject to environmental legislation and any changes in such legislation could negatively affect our results of operations.  The oil and gas industry is subject to many laws and regulations which govern the protection of the environment, health and safety and the management, transportation and disposal of hazardous substances. These laws and regulations may require removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws and


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regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation and abandonment orders. The costs arising from compliance with environmental and natural resource laws and regulations may increase operating costs for both us and our potential customers. Any regulatory changes that impose additional environmental restrictions or requirements on us or on our potential customers could adversely affect us through increased operating costs and potential decreased demand for our services, which could have a material adverse effect on our results of operations.  Our business may be seasonal and influenced by weather patterns which could lower demand for our services and result in a decrease in revenues.  In Canada, the amount of oil and gas exploration and production activity is influenced by seasonal weather patterns.  In spring, wet weather can make the ground unstable, and result in road closures that restrict the movement of rigs and other heavy equipment, thereby decreasing activity levels. Also, some oil and gas producing areas are located in sections of the Western Canadian Sedimentary Basin that are inaccessible, other than during the winter, because the ground surrounding or containing the drilling sites in these areas consists of terrain known as muskeg.  Until the muskeg freezes, the terrain cannot be crossed to reach the drilling site.  Also, once rigs and other equipment have been moved to a drilling site, they may become stranded if the muskeg thaws unexpectedly. We believe that a severe change in weather patterns in western Canada could lower the demand for our services which could result in a decrease in revenues.  We do not have any patent protection for the design of our equipment which could prevent us from becoming profitable. We believe part of our competitive edge is our unique equipment that combines existing technologies and equipment to create better performing equipment.  We have not sought and do not plan on seeking patent protection for our equipment or systems.  It may not be possible for us to obtain patent protection for many aspects of our equipment.  We cannot assure you that others will not independently develop substantially equivalent information and techniques. If other companies build and lease equipment which is similar or better to ours, we may not be able to find and maintain customers for our services, which could prevent us from becoming profitable.   The loss or lack of key management and technical personnel or our inability to attract and retain experienced technical personnel could adversely affect our ability to operate.  We currently depend, to a large extent on the efforts and continued services of Robert Rosner, our Chief Executive Officer and President, and Kelly Warrack, our Chief Financial Officer and Treasurer and other key management staff.  The loss of any one of these individuals or other key management staff could adversely affect our business operations.   The success of our development, production activities depends, in part, on our ability to attract and retain experienced petroleum operations manager and other key personnel.  From time to time, competition for experienced key personnel is intense.  If we cannot retain these personnel or attract additional experienced personnel, our ability to compete in this business may fail.  We are not insured against all potential risks.  We may incur substantial losses and be subject to substantial liability claims as a result of our operations.


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We are not insured against all risks.  We ordinarily maintain insurance against various losses and liabilities arising from our operations in accordance with customary industry practices and in amounts that management believes to be prudent.  Losses and liabilities arising from uninsured and underinsured events or in amounts in excess of existing insurance coverage could have a material adverse effect on our business, financial condition or results of operations.  Our oil and gas services activities are subject to hazards and risks associated with drilling, pumping, producing and transporting can cause substantial losses resulting from:  - environmental hazards, such as uncontrollable flows of fluids, gas or other pollution into the environment; - mechanical difficulties, such as stuck oil field equipment and tools, collapsed casing; - fires and explosions; - personal injuries and death; - regulatory investigations and penalties; and - natural disasters.  Any of these risks could have a material adverse effect on our ability to conduct operations or result in substantial losses to us.  We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented.  If a significant accident or other event occurs and is not fully covered by insurance, it could have a material adverse effect on our business, financial condition and results of operations.  Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect our cost of operations or our ability to operate according to our business plans.  If drilling activity continues to increase, particularly in the fields we operate, a general shortage of drilling rigs, field equipment and qualified personnel could develop.  As a result, the costs and delivery times of rigs, equipment and personnel could be substantially greater than in previous years.  Shortages of drilling rigs, field equipment or qualified personnel could delay, restrict or curtail our operations which could in turn, harm our operating results.  Failure of the Companys internal control over financial reporting could harm its business and financial results.  The management of Lexington is responsible for establishing and maintaining effective internal control over financial reporting.  Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America.  Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Companys transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisitions, use or disposition of the Companys assets that could have a material effect on the financial statements would be prevented or detected on a timely basis.  Because of inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Companys financial statements would be prevented or detected.  Failure to maintain an effective system of internal control over financial reporting could limit the Companys ability to report its financial results accurately and timely or to detect and prevent fraud.


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Because the SEC imposes additional sales practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty reselling your shares and this may cause the price of the shares to decline. Our shares are classified as penny stocks and are covered by Section 15(g) of the Exchange Act which impose additional sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, the broker-dealer must make a special suitability determination and receive from you a written agreement prior to making a sale for you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares.  We are exposed to currency exchange risk which could cause our reported earnings or losses to fluctuate.  Although we intend to report our financial results in US dollars, a portion of our sales and operating costs may be denominated in Canadian dollars. In addition, we are exposed to currency exchange risk on any of our assets that we denominate in Canadian dollars. Since we present our financial statements in US dollars, any change in the value of the Canadian dollar relative to the US dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of our Canadian dollar assets into US dollars. Consequently, our reported earnings or losses could fluctuate materially as a result of foreign exchange translation gains or losses.  We do not intend to pay dividends. We have never paid any dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend.  Item 2. Description of Property. Our properties are as follows: Calgary, Alberta Lexingtons head office is temporary located at Bay A, 1115 48th Avenue SE, Calgary, AB T2G 2A7. Brooks, Alberta On February 23, 2006 we entered into an agreement to purchase a property in Brooks, Alberta for a purchase price of $252,066. The property is comprised of raw land and is approximately 8.2 acres.  The purchase was completed in September 2007.  Item 3. Legal Proceedings. On March 6, 2007, we received a letter from counsel for Pacific Consolidated Industries, LLC ("PCI"), giving us notice that PCI had obtained an Order of Preliminary Injunction


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issued by the U.S. District Court for the Central District of California on February 7, 2007 an injunction in U.S. against Innovative Nitrogen Systems, LLC and two of its executives, Bill Brigham and Michael Schroeder, and all  persons acting in convert with any of them, from taking a number of actions, including: "approaching, for purposes of marketing, selling or providing any type of services, including consultant, subcontractor or advisory services.to those customers set forth at Exhibit A hereto."  Lexington is listed as one of the customers that INS is prohibited from contacting.  Further, the court preliminarily enjoined INS from "retaining any of PCI's trade secrets or other confidential information[or] using or disclosing, directly or indirectly, any of PCI's trade secrets or other confidential or proprietary information."  In its letter dated March 6, 2007, PCI has alleged that some of its proprietary technology may have been used by INS in building our nitrogen generation unit, and that our proposed lease of the unit to Nitro-Gen would constitute a transfer of PCI's technology in breach of the injunction.  As of today's date, we are not a party to the proceedings, nor has PCI threatened to add us or any of our agents or directors as a party.  Based on a preliminary review of PCI's allegations, our management does not believe that PCI's injunction limits or curtails our ability to use or lease our nitrogen generation equipment.   Further, it is management's belief that the technology related to how oxygen is used to create nitrogen in our nitrogen generation unit is commonly used and widely known and has not been patented and cannot be patented.  Further, the key elements of the design which make our unit more efficient than other systems we believe are due to innovations designed by our management, and do not come from our supplier, INS, and therefore do not originate with PCI and are not subject to any injunction.  We intend to correspond with counsel for PCI to see if a settlement regarding interpretation of PCI's injunction can be reached.  An officer of a subsidiary of the Company has claimed that he has been constructively dismissed at the end of December 2006 and seeks one years salary as compensation, which amounts to $238,176 (CDN$230,000).  The Company contends that the Vice-President voluntarily resigned.  There has been no liability recorded in the financial statements related to this contingency and any unfavorable settlement of this matter will be recorded in the period in which the contingency is resolved. The Companys subsidiary received a Garnishee Order and paid $216,584 into court pending resolution of the claim.  Subsequent to the yearend, a settlement agreement was reached and resolved out of court.  A vendor of a subsidiary of the Company has alleged that the subsidiary owes $240,719 for breach of contract.  The subsidiary disputes this claim and contends that services by the vendor were not completed in accordance to the terms of the service agreement. The liability has been recorded in the financial statements related to this contingency and any favourable or unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.  Management of the subsidiary has filed its statement of defence.  The Company has been named in a counterclaim brought by the former President, Secretary and Treasurer of the Company through association.  Management of the Company believes the claim will not materially affect the Company.  The matter is between the former President, Secretary and Treasurer of the Company and the other party.  There has been no liability recorded in the financial statements relating to this contingency and any unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.


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Management is not aware of any legal proceedings contemplated by any governmental authority against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders.  Not applicable.     PART II Item 5. Market for Common Equity and Related Stockholder Matters. There is a limited public market for our common shares. Our common shares are quoted for trading on the NASD OTC Bulletin Board under the symbol LXES.  Our common shares became eligible for quotation on November 30, 2006, but no quotes of our stock appeared on the OTC Bulletin Board until December 2006. The following table shows the high and low prices of our common shares on the NASD OTC Bulletin Board. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions: PeriodHighLowSep 1  Nov 30, 2007$0.77$0.16Jun 1  Aug 31, 2007$0.61$0.15Mar 1, 2007  May 31, 2007$0.92$0.40Dec. 1, 2006  Feb. 28, 2007$1.66$0.75 As of March 7, 2008, there were 26,138,669 common shares outstanding, held by approximately 214 shareholders of record. Our transfer agent is Pacific Stock Transfer Company of Las Vegas, Nevada. To date, we have not paid any dividends on our common shares and do not expect to declare or pay any dividends on our common shares in the foreseeable future. Payment of any dividends will depend upon future earnings, if any, our financial condition, and other factors as deemed relevant by our Board of Directors. As at March 7, 2008, the Company had 26,138,669 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.


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Section 15(g) of the Securities Exchange Act of 1934:  The Companys shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by this Section 15(g), the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale.  Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to an understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.  Equity Compensation Plans Securities Authorized for Issuance under Equity Compensation Plans  The following table sets forth information with respect to our common stock issued and available to be issued under outstanding options, warrants and rights as of November 30, 2007.   ---------------------------------------------------------------------------------------------------------------------- (a)                                                        (b)                          (c) ---------------------------------------------------------------------------------------------------------------------- Plan category            Number of securities to be  Weighted-average exercise  Number of securities issued upon exercise of      price of outstanding              remaining available for outstanding options,            options, warrants and           future issuance under warrants and rights              rights                             equity compensation plans (excluding securities reflected in column (a)) ----------------------------------------------------------------------------------------------------------------------  Equity compensation plans approved by security holders  ---------------------------------------------------------------------------------------------------------------------- Equity compensation plans not approved by security holders        5,045,000                                 $.047 253,156 ---------------------------------------------------------------------------------------------------------------------- Total                                              5,045,000 $0.47 253,156 ----------------------------------------------------------------------------------------------------------------------


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Recent Sales of Unregistered Securities On October 24, 2007, we issued 1,103,000 shares of common stock at $0.50 per unit to investors for cash proceeds of $551,500, whereby each unit entitles the holder to 1 common share and 1 share purchase warrant exercisable at $0.60 per share.  The warrants expire October 26, 2009. On October 29, 2007 we issued 50,000 common shares pursuant to a consulting agreement for services for $13,750.  On November 13, 2007, we issued 50,000 common shares pursuant to a consulting agreement for services for $22,500.  On November 23, 2007, we issued 100,000 common shares pursuant to consulting agreements for services for $26,000.  We did not employ an underwriter in connection with the issuance of the securities described above. The issuance of the foregoing securities was exempt from registration under Regulation S of the Securities Act.  Our other securities issuances were registered on one of the three Registration Statements on Form SB-2 that were declared effective during the past year.


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Item 6. Management's Discussion and Analysis or Plan of Operation.     Management's Discussion and Analysis or Plan of Operation  FORWARD LOOKING STATEMENTS  The statements contained in this annual report on Form 10KSB that are not historical are forward-looking statements, as that term is defined in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that involve a number of risks and uncertainties.  These forward-looking statements include, among others, the following: - our business and growth strategies; - our oil and gas service program estimates; - our ability to successfully find work for our operations; - our ability to develop our prospects, projects, programs, equipment; - anticipated trends in our business; - our future results of operations; - our liquidity and ability to finance our operations and development activities; - market conditions in the oil and gas service industry; - our ability to make and integrate acquisitions; and - the impact of environmental and other governmental regulation.  Forward-looking statements are typically identified by use of terms such as may, will, could, should, expect, plan, project, intend, anticipate, believe, estimate, predict, potential, pursue, target or continue, the negative of such terms or other comparable terminology, although some forward-looking statements may be expressed differently.  The forward-looking statements contained in this annual report are largely based on our expectations, which reflects estimated and assumptions made by our management.  These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors.  Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties tat are beyond our control.  In addition, managements assumptions about future events may prove to be inaccurate.  Management cautions all readers that the forward-looking statements contained in this annual report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur.  Actual results may differ materially from those anticipated or implied in the forward-looking statements  Background Lexington Energy Services Inc. was incorporated as a Nevada corporation on March 30, 2005.  We are an oil field service company providing, through three wholly-owned subsidiaries, manufacturing and leasing of oilfield service equipment to oil and gas and other oil field service companies.  We have only begun our operations and have had operational losses to date, as well as an accumulated deficit. As of November 30, 2007, we had net losses since inception in the amount of ($7,578,761).


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Our principal offices are temporary located at Bay A, 1115 48th Avenue SE, Calgary, AB T2G 2A7. Recent Developments On January 15, 2008, our Board appointed Robert Rosner as our Chief Executive Officer following the resignation of Brent Nimeck as President and Chief Executive Officer. Since Mr. Nimecks resignation, current managements primary activities have been involved in a significant reorganization of the Companys operations, records and databases, regaining control of certain Company assets, and identifying and evaluating the current status of customer and supplier relationships.  Current management is also resolving and investigating past transactions. Current management expects that resolution of these issues will continue for some period of time.  If we fail to resolve these issues satisfactorily within a reasonable period of time, our business operations may be adversely affected. Results of Operations  We are a development stage corporation and we are dependent on our ability to generate revenue from our operations or to raise capital to sustain operations.  Since our fiscal year end of November 30, 2007, we received revenues of approximately $2,743,344pursuant to the drill programs through our subsidiary Lexcore, and preliminary operations through our subsidiaries Lexcoil and Nitro Gen.   At November 30, 2007, we generated revenues and had accumulated losses of $7,578,761 since our inception.    Results of Operations for the year ended November 30, 2007 and for the year ended November 30, 2006 During the year ended November 30, 2007, we generated $2,743,344 revenues and received interest income of $8,090. We incurred a net loss of ($5,530,201).  For the year ended November 30, 2006, we incurred a net loss of ($2,048,560). Our net loss per share was ($0.24) for the year ended November 30, 2007 and ($0.13) for the year ended November 30, 2006. Our total expenses were $5,742,154 for the year ended November 30, 2007, including $406,950 in professional fees, $599,948 in management fees, $510,775 in consulting fees, $168,599 in promotion and marketing, $121,317 in travel, $861,800 in stock based compensation and $1,528,115 in general and administrative fees.  Our expenses for the year ended November 30, 2006 were $2,030,693. Our general and administrative expenses included office rent, office supplies, communication expenses (cellular, internet, fax, telephone), benefits, entertainment, vehicle expenses, courier and postage costs, salaries for our officers and for our administrative assistants. Our professional fees of $406,950 for the year ended November 30, 2007 consisted primarily of legal, accounting and auditing fees as compared to $252,066.for the prior year ended November 30, 2006. Our management fees of $599,948 for the year ended November 30, 2007 and $343,380 from the year ended November 30, 2006 consisted mainly of amounts paid to the fees paid to our operations officers and prior officers of the company.


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Our consulting fees for the year ended November 30, 2007 were $510,775.  Our consulting fees for the year ended November 30, 2006 were $62,668.  During the period from our inception to November 30, 2007, we hired consultants in the areas of administration, bookkeeping, accounting, and for our operations. We also retained an attorney for the preparation of our registration statements, and an auditor to audit our financial statements.    Plan of Operation  We plan to grow our business to offer a complete range of products and services for the entire lifecycle of oil and gas wells including exploration and development, production, operation, maintenance, refining and abandonment.  Our corporate strategy for the next 12 months (beginning 2008) includes the following: · complete our drilling programs  through our coring division; · find new drilling programs through our coring division; · build 2 more coring units for Lexcore; · identify acquisitions which will benefit from having in-house construction capabilities and develop personnel and equipment in-house to meet market demands; and · create additional service lines to complement current operations; · find programs for our nitrogen unit; · repay our loan commitments · restructure and reorganize the Company; and · resolve and investigate past transactions. We anticipate that the demand for our services over the next year will be primarily determined by current and anticipated oil and gas prices and the related general production spending and level of drilling activity in Western Canada, where we intend to initially focus our operations. Volatility or weakness in oil and gas prices (or the perception that oil and gas prices will decrease) may affect the spending patterns of our customers and may result in the drilling of fewer new wells or lower production spending on existing wells. This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment. Mobile Well Production Testing Units We completed the construction on two mobile well production testing units. We sold one unit after August 31, 2006 for approximately $260,000 and second unit in November 2006 for approximately $378,000. We made a capital gain on the sale of $75,459. As of March 7, 2007 we did not have any p-tanks available for lease or in production. Nitrogen Generation Unit We are currently negotiating the lease of our nitrogen generation unit. If we are successful in leasing the unit, we will apply the revenues to our general operating expenses. Coring Units If we are successful in raising additional financing, through Lexcore, we plan to build two more coring units at a cost of approximately $1,250,000 each in the fall of 2008.  We intend


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to direct revenues from our coring division towards our general and administrative expenses, labour and maintenance expenses for the drilling program, and for parts and labour to build more coring units. New Facility We had plans for Lexington to be headquartered in Brooks, Alberta. Brooks is located in the centre of Southern Alberta and accesses the largest areas of Alberta which extends into Saskatchewan and to the US border. We had intended to build a 10,000 square foot manufacturing and repair facility with a connected 2,000 square foot office space for our use and for possible lease to other companies, depending on how much space we need ourselves. This plan is temporary on hold. On February 23, 2006 we entered into an agreement to purchase a property in Brooks, Alberta for a purchase price of $252,066. The property is comprised of raw land and is approximately 8.2 acres.  The purchase was completed in September 2007. We are currently looking to lease a facility in Calgary, Alberta as our headquarters and office for all our wholly owned subsidiaries.    Limited operating history; need for additional capital There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products. Although we expect to continue to generate revenues, we will need to raise additional capital to carry out our business plan.  There is no assurance that any additional financing will be available or if available, on terms that will be acceptable to us. Obtaining additional financing will be subject to a number of factors including market conditions, investor acceptance of our business plan, investor sentiment, and as noted above, the potential approval of our senior equity securities. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. If we are unable to raise additional financing, we will have to significantly reduce our spending, delay or cancel planned activities or substantially change our current corporate structure. In such an event, we intend to implement expense reduction plans in a timely manner. However, these actions would have material adverse effects on our business, revenues, operating results, and prospects, resulting in a possible failure of our business.  Our independent certified public accountants have stated in their report dated March 12, 2008 included herein, that we have incurred operating losses from our inception and that we are dependent upon our ability to raise capital from stockholders or other sources to sustain operations. These factors raise substantial doubt about our ability to continue as a going concern.


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Liquidity and Capital Resources   Lexcore, Lexcoil and Nitro Gen, our wholly owned subsidiaries, received revenues of approximately $2,743,344.  Lexcore has a team of 11 full time rig personnel working on the project. The personnel are currently working in Fort McMurray. We anticipate we will continue providing services to our client until early or mid spring, 2008, depending on weather conditions. As of November 30, 2007, we had a working capital deficit of $2,666,920.  Our accumulated deficit was $7,578,761 as at November 30, 2007. Our net loss of $7,578,761 from March 30, 2005 (inception) to November 30, 2007 was funded by a combination of our equity and debt financing.  During the year ended November 30, 2007, we raised $1,874,212 in equity finance. On September 22, 2006 we registered on Form SB-2, 4,963,626 shares to be sold by selling shareholders.  We also registered 4,000,000 shares to be sold by our directors, but only 250,000 shares were sold and the remaining shares were removed from registration.  On the September 22, 2006 Form SB-2 we also registered a direct offering for 5,000,000 shares. We sold 1,790,182 shares pursuant to this direct offering for proceeds of approximately $1,521,655 and removed the balance of the shares from registration. By a registration statement on Form SB-2 declared effective on January 10, 2007, we registered 6,753,064 shares to be sold by selling shareholders.  Of those shares registered, 500,000 were shares underlying warrants and 910,000 were shares underlying options.  Since the effective date of the SB-2, 500,000 of those options or warrants have been exercised. By a registration statement on Form SB-2 declared effective on September 14, 2007, we registered 2,745,365 shares to be sold by selling shareholders.  Of those shares registered, 450,000 were shares underlying warrants and 150,000 were shares underlying options.  Since the effective date of the SB-2, none of those options or warrants have been exercised. As of November 30, 2007, we had approximately $8,149 in our bank accounts.  This is a decrease of $631,350 from November 30, 2006.  Our cash balance increased as a result of capital that we raised, less expenses we paid during the year ended November 30, 2007.  During this period we raised $1,874,212 in capital through share subscriptions.  During the period from December 1, 2005 to March 7, 2008 we raised capital pursuant to the following share issuances:  Period of IssuanceNumber of Common Shares SoldPrice per ShareTotal ProceedsDecember 2005460,000$0.20$92,000February 2006516,000$0.50$258,000


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March 20061,155,930$0.50$575,965April 2006870,696$0.50$435,348August 20062,567,952$0.85$2,182,759October 20061,790,182$0.85$1,521,655November 20061,176,470$0.851$1,000,000December 2006484,642$1.00$484,642December 200643,860$0.502$21,930December 2006255,755$0.851$217,392January 2007244,245$0.851$207,608February 2007107,489$0.502$53,745February 2007330,957$1.00$330,957February 200720,000$0.852$17,000March 2007255,000$1.00$255,000March 200712,512$0.502$6,255March 200714,585$0.753$10,939March 200720,548$0.733$15,000April 2007325,000$0.813$263,250April 200770,000$0.713$49,700April 2007100,000$0.703$70,000May 2007100,000$0.473$47,000May 200755,000$0.553$30,250July 2007113,183$0.403$45,273July 2007600,000$0.403$240,000September 200728,571$0.353$10,000October 20071,103,000$0.50$551,500


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October 200755,000$0.252$13,750October 200750,000$0.253$13,750November 200750,000$0.453$22,500November 200750,000$0.233$11,500November 2007100,000$0.263$26,000Total:$9,080,668 1 Issued pursuant to the exercise of a convertible debenture. 2 Issued pursuant to the exercise of options or warrants. 3Issued pursuant for services rendered or to be rendered  If we are successful in raising significant capital, over the next twelve months beginning March 1, 2008 we intend to build two additional coring units, buy out our capital leases, repay our loan commitments. Total cash requirements to complete those steps will be approximately $7,000,000 set out as follows:  ExpenseAmount ($)Repayment of loan commitments750,000Working capital1,200,000Buy out capital leases1,500,000Build two Coring/Drilling Rigs2,500,000Professional Fees250,000General and Administrative Expenses800,000Total7,000,000 The administrative expenses will consist of marketing and promotion, tradeshow costs, salaries, leases, travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax, telephone), benefits, office supplies, courier and postage costs and office equipment. Any money currently in our bank accounts will likely to applied to our accounts payable.  Any future revenues we receive we plan to use towards covering our administrative and operating expenses.   We require an additional $7,000,000 to carry out our planned business operations and expansion over the next 12 months. We intend to try to obtain this financing through a combination of bank financing and equity investment through the sale of our common shares. Currently none of our assets are encumbered by any loans and we are in the process of contacting banks to determine what type of bank financing is available and on what terms.  We are active in contacting broker/dealers in the US and elsewhere regarding possible financing arrangements.


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We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.      Known Material Trends and Uncertainties As of March 7, 2008, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. In view of the uncertainties concerning our continued existence as a going concern, our management plans to mitigate the effect of such conditions, management intends to take the following steps in the event that we are not able to raise sufficient funds to meet the needs of our business plans: ? negotiate with suppliers to delay deposit due dates; ? lease some equipment as individual pieces, as opposed to entire units, if we are unable to build and purchase the entire units; and ? negotiate with our management and consultants to pay parts of salaries and fees with stock and stock options instead of cash.  We believe that the above discussion contains a number of forward-looking statements. Our actual results and our actual plan of operations may differ materially from what is stated above. Factors which may cause our actual results or our actual plan of operations to vary include, among other things, decision of the Board of Directors not to pursue a specific course of action based on a re-assessment of the facts or new facts, changes in oil and gas prices or general economic conditions.    Critical Accounting Policies  Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in the notes to our financial statements as of November 30, 2007. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.  Foreign Currency Translation  Our functional currency is the Canadian dollar and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars and are translated into United States dollars, in accordance with Statement of Accounting Standards ("SFAS") No. 52Foreign Currency Translation, using exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at each balance sheet date at the exchange rate prevailing at the balance sheet date. Foreign currency exchange gains and losses are charged to operations. We have not entered into derivative instruments to offset the impact of foreign currency fluctuations.


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Stock-based Compensation We have elected to apply the intrinsic value method of APB No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for our stock options on options granted to employees and directors. Under APB 25, compensation expense will be not recorded to the extent that the exercise price is high than the market value of the underlying stock on the measurement date, which is usually the date of grant. Stock-based compensation for employees is recognized on an accelerated basis over the vesting period of the individual options. Stock options granted to non-employees are accounted for under Statement of Financial Accounting Standards (FAS) No. 123 Accounting for Stock-Based Compensation and are recognized at the fair value of the options as determined by an option pricing model as the related services are provided and the options earned.    Item 7. Financial Statements. Our consolidated financial statements for the year ended November 30, 2007, together with the Report of Independent Registered Public Accounting Firm thereon, are included at the end of this report.  Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Change of audit firm for the 2007 year end financial statements. On February 15, 2008, our board of directors determined that the Company should not renew its engagement of the independent accounting firm,  Amisano Hanson Chartered Accountants in connection with the audit of the consolidated financial statements for the year ended November 30, 2007.  The board of directors determined to engage a firm based in Saint Louis, Missouri. Amisano Hansons report on the consolidated financial statements for the year ended November 30, 2006 did not contain an adverse opinion or disclaimer of opinion.  Such report was not qualified or modified as to uncertainty, audit scope, or accounting principles. To the knowledge of the Company, during the two fiscal years ended November 30, 2006 and 2005, and from such date to the date of this report, there have been no disagreements between us and Amisano Hanson, on any matter of accounting principals or practices, financial statement disclosure or auditing scope of procedure which disagreements, if not resolved to the satisfaction of Amisano Hanson, would have caused it to make a  reference  to the subject matter of the  disagreement(s)  in  connection  with its  report.  There were no "reportable events"  (as  defined in Item  304(a)(v)  of  Regulation  S-K) that occurred within the Registrant's two most recent fiscal years. We have requested a letter from Amisano Hanson, addressed to the Securities and Exchange Commission to attach as an exhibit to the Form 8-K to be filed with respect to our change of independent auditors.  Because the company owes Amisano Hanson


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approximately $12,500, Amisano Hanson advised that they will not entertain working on the Form 8-K until payment is received in full.  This has delayed us in our filing of the Form 8-K. We have engaged a new independent accounting firm, Gruber & Company LLC (Saint Louis, Missouri), to audit our consolidated financial statements for the year ended November 30, 2007.  Item 8A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2007, being the date of our fiscal year end covered by this Annual Report.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings. Disclosure controls and procedures are controls and other procedures that are designed to ensure 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 Securities and Exchange Commission's rules and forms. During our fiscal year ended November 30, 2007, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.  Item 8B. Other Information. None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. (a)The following table sets forth the name, age, and position of the executive officers and directors of Lexington as of March 7, 2008.  NameAgePositionRobert Rosner43Director, President, Chief Executive OfficerKelly Warrack40Director, Treasurer, Chief Financial Officer


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Elston Johnston56Director, Secretary The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors.  There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Lexington's affairs.  Larry Kristof acted as our President and Chief Executive Officer since October 1, 2005,  and on March 31, 2006 was appointed as our Chief Financial Officer, Treasurer and Principal Accounting Officer.  Mr. Kristof resigned April 20, 2007 as officer of the Company and resigned May 1, 2007 as director of Lexington.  On May 1, 2007, he also resigned as officer and director of our subsidiaries, Lexcore and Lexcoil. Brent Nimeck assumed the role of President and Chief Executive Officer when Larry Kristof resigned.  He was appointed as our Senior Vice President of Operations on October 20, 2005 and was appointed secretary on October 3, 2006.  He was appointed Chief Operating Officer January 23, 2007.  Mr. Nimeck resigned on January 15, 2008 as officer and director of Lexington and all of its wholly-owned subsidiaries. Robert Rosner, President and Chief Executive Officer Robert Rosner has acted as our President, Chief Executive Officer and director since January 15, 2008. Since August 2003, Robert Rosner was involved with Wataire International Inc. as officer and director.  He has served as Secretary, President and currently, the Chief Executive Officer and Director of Wataire International Inc., a Washington corporation that markets and distributes atmospheric water generator machines for commercial and residential use.  From 1999 to 2003, Mr. Rosner was the President of Gulf Coast Oil & Gas, an oil & gas company. Prior to that, Mr. Rosner was the President and Director of Nio Gold Mining Corp. and was the President and Director of Fortuna Ventures Inc. Kelly Warrack, CMA,Treasurer and Chief Financial Officer Kelly Warrack has acted as our Chief Financial Officer since October 31, 2007 and has acted as our Treasurer since January 15, 2008.  Kelly has been our director since November 28, 2007.  For the past five years, Kelly Warrack has served as Vice President, Finance, of Metalworks Canada, a Calgary, Alberta based manufacturer of metal products for industrial, commercial and residential use.  In that capacity, Mr .Warrack has been responsible for overseeing all financial affairs of the company.  For the past two years, Mr. Warrack has also served as Controller of Impact Drilling Ltd., a Calgary, Alberta based oil & gas drilling firm with over 100 employees.   Mr. Warrack is a Certified Management Accountant, a designation he has held since 1991. Elston Johnston, PEng,Secretary Elston Johnston has acted as our Secretary since January 15, 2008.  He has been our director since April 2, 2007.  Elston Johnston has been an active professional engineer and a consultant in the areas of commercial/industrial fire protection and loss prevention for the past thirty years. He obtained a B.Sc.E.E. from the University of New Brunswick in 1976


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and is a member of the Association of Professional Engineers in both British Columbia and Alberta (APEGBC & APEGGA).  From January 1997 to July 2003, Mr. Johnston served as a director of Rock Resources Inc., a junior mineral mining company whose shares are traded on the TSX Venture Exchange.  Since March 1996, Mr. Johnston is a director of Adanac Moly Corp., a junior mineral mining company whose shares are traded on the TSX Venture Exchange.  Since January 1995, Mr. Johnston is a director of Global Tree Technologies Inc., a resource company whose shares are traded on the TSX Venture Exchange.  Mr. Johnston is the owner, president and director for Ironstone Engineering Inc. since December 1997 where he provides fire protection and loss prevention engineering services.  From June 1977 to May 2001, Mr. Johnston was the Loss Prevention Specialist Engineer for F.M. Global Insurance. Family Relationships There are no family relationships among directors, executive officers, or persons nominated or chosen by Lexington to become directors or executive officers.        No Legal Proceedings None of our directors, executive officers, promoters or control persons have been involved in any of the following events during the past five years: · any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; · any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); · being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or · being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. Board of Directors and Its Committees The Board of Directors met in person or via telephone regularly during our fiscal year ended November 30, 2007.  Each member of the Board of Directors attended at least 75% of the meetings.  The Board of Directors currently does not have a nominating committee or a compensation committee.        Audit Committee The functions of the Audit Committee are currently carried out by our Board of Directors.  Our Board of Directors has determined that we do not have an audit committee financial expert, as defined in the rules and regulations of the Securities and Exchange Commission, on our Board of Directors carrying out the duties of the Audit Committee.  Our Board of Directors has determined that the cost of hiring a financial expert to act as a


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director of Lexington and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee. Director Nominees We do not have a nominating committee.  The Board of Directors, sitting as a Board, selects those individuals to stand for election as members of our Board. Since the Board of Directors does not include a majority of independent directors, the decision of the Board as to director nominees is made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Until otherwise determined, not less than 90 days prior to the next annual Board of Directors' meeting at which the slate of Board nominees is adopted, the Board accepts written submissions that include the name, address and telephone number of the proposed nominee, along with a brief statement of the candidate's qualifications to serve as a director and a statement of why the shareholder submitting the name of the proposed nominee believes that the nomination would be in the best interests of shareholders. If the proposed nominee is not the security holder submitting the name of the candidate, a letter from the candidate agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee's qualifications to serve on the Board of Directors, as well as a list of references. The Board identifies director nominees through a combination of referrals, including by management, existing Board members and security holders, where warranted. Once a candidate has been identified, the Board reviews the individual's experience and background and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of management's slate of director nominees submitted to shareholders for election to the Board. Among the factors that the Board considers when evaluating proposed nominees are their knowledge of and experience with and knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from the candidate prior to reaching a determination. The Board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so. Code of Ethics Lexington has not yet adopted a code of ethics that applies to Lexingtons principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because it has not yet finalized the content of such a code. Companies whose equity securities are listed for trading on the OTC Bulletin Board are not currently required to do so.  However, we are in the process of drafting a code of ethics. Item 10. Executive Compensation.


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The following Summary Compensation Table sets forth the total annual compensation paid or accrued by us to or for the account of the Executive Officers who held this position during the year ended, November 30, 2007 and each other executive officer whose total cash compensation exceeds $100,000:       Summary Compensation Table  Annual CompensationLong Term CompensationAwardsPayout(s)Name and Principal PositionYearSalaryBonusOther 
Annual CompensationRestricted Stock Award(s)Securities Underlying
Options/SARsLTIP
PayoutsAll Other 
Compensation$$$$(#)$$Robert Rosner (6)2007 (5)0000000Kelly Warrack (7)2007 (5)3,099000100,00000Larry Kristof (1)2007 (5)0000002006 (2)122,73550,00000400,000002005 (3)10,000000250,00000Brent
Nimeck (4)2007 (5)0000002006
(2)102,21250,00000400,000002005
(3)5,000000250,00000  (1) Larry Kristof was appointed as Chief Executive Officer on October 1, 2005 and resigned on April 20, 2007. (2) For the year ended November 30, 2006 (3) For the period from Inception (March 30, 2005) to November 30, 2005 (4) Brent Nimeck is our Senior VP of Operations and was appointed our Secretary on October 3, 2006 and our Chief Operating Officer on January 23, 2007; He assumed as President and CEO on April 20 2007 and resigned January 15, 2008 (5) For the year ended November 30, 2007 (6) Robert Rosner was appointed as President and CEO on January 15, 2008 (7) Kelly Warrack was appointed CFO on October 31, 2007 and Treasurer on January 15, 2008    Option Grants in the Last Fiscal Year  The following table sets forth the stock options that were granted to the named executive officers in fiscal year 2007.     Number of% of Total OptionsExercise orSecurities UnderlyingGranted to EmployeesBase priceExpirationNameOptions Granted (#)In fiscal year 2007($/sh)DateKelly Warrack100,0003.60%$0.25Nov 01 08


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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values  The following table sets forth certain information concerning unexercised stock options held by the named executive officers as of November 30, 2007.  None of the named executive officers exercised any of their stock options during the period from inception (March 30, 2005) to November 30, 2007.  Number of SecuritiesUnderlying UnexercisedValue of UnexercisedOptions at 2007 FiscalIn the Money OptionsYear endAt 2007 Fiscal Year End ($)(1)NameExercisable/UnexercisableExercisable/UnexercisableKelly Warrack100,000/0$25,000/0Larry Kristof400,000/250,000$200,000/0Tannisah Kruse0/250,000$0/0Brent Nimeck400,000/250,000$200,000/0 (1) The calculation of the value of unexercised options held by the named executive officers is based upon the average sales of our unregistered stock at prices of $0.25 per share in December 2007. Employment Agreements  On October 1, 2005, we entered into a management agreement with Larry Kristof as President and Chief Executive Officer, and on June 1, 2006 this was replaced by an employment agreement.  The employment agreement provided that Mr. Kristof receive a monthly salary of approximately $7,200 per month, an increase of $2,200 per month more than the initial agreement.  Under the employment agreement, Mr. Kristof also received a monthly car allowance of approximately $1,280 per month.  On December 4, 2006, we issued a cash bonus of $50,000 to Mr. Kristof for his services.  On March 6, 2006, we entered into a new employment agreement which replaced the agreement dated June 1, 2006.  The new employment agreement provided that Mr. Kristof receive a monthly salary of approximately $18,900, an increase of $11,700 per month.  Mr. Kristof no longer received a monthly car allowance.  In addition, Mr. Kristof received 500,000 options to purchase our common shares at a price of US$0.85 per share, good for two years, or until his position with us is terminated, whichever occurs earlier.  On October 1, 2005, we entered into a management agreement with Tannisah Kruse as Chief Financial Officer, Secretary and Treasurer.  Ms. Kruse resigned these positions on March 28, 2006.  We entered into a settlement agreement with Ms. Kruse relating to her resignation. The key terms of the settlement agreement were: · Ms. Kruse was allowed to retain her options to purchase 250,000 shares at an exercise price of $0.10 per share, exercisable until October 1, 2007; · Ms. Kruse was allowed to sell 4,750,000 shares in a private transaction; · Lexington agreed to register on Form SB-2 250,000 of the remaining 500,000 shares Ms. Kruse owns; and · both parties agreed to release each other from any claims.  On October 20, 2005, we entered into a management agreement with Brent Nimeck as Senior Vice-President of Operations, and on June 1, 2006 this was replaced by an


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employment agreement.  The new agreement provided that Mr. Nimeck receive approximately $5,400 per month. On December 4, 2006, we issued a cash bonus of $50,000 to Mr. Nimeck for his services.  On November 17, 2005, we entered into a management agreement with Douglas Blackman as Vice-President of Business Development.  The agreement provides that Mr. Blackman will receive an hourly salary of approximately $45 per hour, to be invoiced monthly. In November 2006, we terminated the management agreement with Douglas Blackman.  On May 17, 2006 our subsidiary Lexcore Services Inc. entered into an employment agreement to hire Doug Chernesky as the VP, Operations for Lexcore. He is entitled to receive an annual salary of approximately $205,000.  He also received 200,000 options to purchase common stock at $0.85 per share, exercisable for a period of two years. On December 22, 2006, Mr. Chernesky informed Lexcore that he would no longer attend work as he considered himself constructively dismissed.  Lexcore takes the position that he resigned as of December 22, 2006.  On August 15, 2006, our subsidiary Lexcore entered into an employment agreement to hire Denis Desrosiers as its Drilling Rig Supervisor to oversee operation of drilling rigs.  He is entitled to receive an annual salary of approximately $108,000. He also received 25,000 options to purchase common stock at $0.85 per share, exercisable for a period of two years.  His contract may be cancelled on 30 days notice.  Mr. Desrosiers resigned on December 7, 2007.  On October 31, 2007, the Company entered into a management consulting agreement with Kelly Warrack regarding his services to the Company as consultant and as Chief Financial Officer. Pursuant to that agreement, the Company will compensate Mr. Warrack $3,000 per month during the term of the Agreement.  Additionally, the Company will issue to Mr. Warrack 200,000 S-8 shares and 100,000 S-8 stock options with an exercise price of $0.25.  Mr. Warracks options will cease to be exercisable on expiration of the agreement, by 30 days following the termination of the Agreement without cause, or immediately following termination of the agreement for cause.  The term of the agreement is effective as of October 1, 2007 and will end after September 30, 2008 unless otherwise extended by written agreement of the parties. The agreement may be terminated by either party without cause by giving 60 days notice, or immediately if a curable default is uncured for ten days or is incurable.  We have not entered into any management consulting agreement or employment agreement with Robert Rosner, our Chief Executive Officer and President.  Mr. Rosner was provided 350,000 S-8 shares as partial payment towards his remuneration.    Compensation of Directors  None of our directors received compensation for their service as directors during the fiscal year ended November 30, 2007, other than what has been disclosed elsewhere in this report..    Compensation Committee  We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.


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Termination of Employment and Change of Control Arrangements There is no compensatory plan or arrangement with respect to any individual named above which results or will result from the resignation, retirement or any other termination of employment with us, or from a change in our control. Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Security Ownership of Certain Beneficial Owners and Management The following table sets forth the ownership, as of March 7, 2008, of our common stock by each of our directors, and by all executive officers and directors as a group, and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of March 7, 2007, there were 26,138,669 common shares issued and outstanding. All persons named have sole voting and investment power with respect to the shares, except as otherwise noted.  The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this report.  Title of ClassName and Address of 
Beneficial OwnerAmount and  
Nature of  
Beneficial  
OwnershipPercent of 
Class
(%)CommonLarry Kristof (1)  Suite 1205  207 West Hastings St.
Vancouver, BC V6B 1H73,453,743   (2)13%CommonBrent Nimeck (3)
PO Box 1000
Brooks, AB  T1R 1B84,150,000   (4)15.64%CommonInter-Orient Developments Limited.
120 Sun Hey Mansion 68 Hennessy Rd
Wanchai, Hong Kong1,500,0005.74
%CommonRobert Rosner (5)
300 Warner Center, 21550 Oxnard St
Woodland Hills, CA  91367350,0001.34%CommonKelly Warrack (6)
Bay A, 1115 48th Ave SE
Calgary, AB  T2G 2A7345,483 (7)1.32%CommonElston Johnston (8)1,750,0006.27%Directors and officers as a group1,620,4838.74%


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(1) Larry Kristof , former director, President, CEO and CFO of Lexington. (2) Includes:  a. 3,053,743 owned by 0770987 B.C. Ltd., a company over which Mr. Kristof has voting and investment control (although he disclaims beneficial ownership); b. options to purchase, 150,000 common shares at a price of $0.50 until April 5, 2008 and 250,000 common shares at a price of $0.50 until May 17, 2008. (3) Brent Nimeck, former director, President, CEO, Chief Operating Officer and Senior VP, Operations of Lexington. (4) Includes:  a. 100,000 common shares in Mr. Nimeck's name; b. 3,650,000 common shares held by Greystone Holdings Ltd., a company controlled by Brent Nimeck; and c. 150,000 options to purchase shares at $0.50 until April 5, 2008, 250,000 options to purchase shares at $0.50 until May 17, 2008. (5) Robert Rosner, director, President and CEO of Lexington (6) Kelly Warrack, director, Treasurer and CFO of Lexington (7) Includes 100,000 options to purchase at $0.25 until October 31, 2008 (8) Elston Johnston, director, Secretary of Lexington, holds 600,000 options to purchase at $0.50 until Sep 28, 2009; 150,000 options to purchase at $0.50 until Apr 5, 2008; and 675,000 options to purchase at $0.50 until May 15, 2009      Changes In Control There are currently no arrangements which would result in a change in control of Lexington. Item 12. Certain Relationships and Related Transactions. During the fiscal year ended November 30, 2007, we entered into the following transactions in which certain of our officers or directors have a direct or indirect material interest. In 2006, we entered into two agreements to lease out part of our mobile p-tanks with companies partly owned and controlled by our former Chief Operating Officer, and both agreements have been terminated by mutual agreement.  On January 5, 2006, Southern Well Testing Ltd., a company controlled by our former director and Chief Operating Officer, Brent Nimeck, entered into an agreement with us whereby it agreed to lease a p-tank for 48 months for $6,105 per month commencing on June 1, 2006, or later if the p-tank was not ready by then.  On November 1, 2006, both parties agreed to terminate the agreement, effective immediately, with no penalty or costs to be paid by either party.


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Southern Well Testing (2005) Ltd., also partly owned and controlled by our former director Brent Nimeck, entered into an agreement with us on February 3, 2006 to lease a p-tank mobile testing unit on similar terms. The agreement, which will become effective once we have completed and insured the p-tank, provides for the lease of a p-tank mobile testing unit for 48 months for $6,105 per month commencing on July 1, 2006 or the first of the month following the month in which the p-tank is made available by us to the customer.  In November 2006, both parties agreed to terminate the agreement, effective immediately, with no penalty or costs to be paid by either party.  On February 7, 2007, we entered into a non binding letter of intent to acquire the assets of both of Southern Well Testing Ltd. and Southern Well Testing (2005) Ltd.  Both companies are partly owned and managed by Brent Nimeck, who was also our former Chief Operating Officer and a director on our Board of Directors.  We have stopped all negotiations to acquire the assets of these companies.  In addition, during the year we have discontinued our negotiations to lease our Nitrogen generation unit to Nitro-Gen Technologies Group Inc., a company partly owned and run by Brent Nimeck, our former Chief Operating Officer and director on our Board. We decided to commence preliminary operations the nitrogen generation system ourselves through our wholly owned subsidiary, Nitro Gen.  During the year, we have used services provided by companies partly owned, associated and/or run by Brent Nimeck, our former Chief Operating Officer and director on our Board.  These companies include, but not limited to Southern Well Testing Ltd., Southern Well Testing (2005) Ltd., Southern Coil Services Ltd., Nitro-Gen Technologies Group Inc., Brentcan Industries Ltd., Shift Restaurant, Clean P Vac & Wash Services, Integrity Towing Solutions Inc, and Integrity Heavy Hauling Services Inc.   Secured Convertible Debenture - November 6, 2006  On November 6, 2006, Lexington, Lexcore and Alliance entered into a secured convertible debenture purchase agreement (Debenture Purchase Agreement) whereby Alliance loaned $500,000 to Lexington.  Alliance had the option to have the $500,000 loan repaid in our common stock. At any time, at Alliances option, Alliance was entitled to choose to have all or any part of the outstanding principal and accrued interest repaid in shares of our common stock at a conversion rate equal to:  (1) ten percent below the fair market value of our common stock at the time of conversion, as calculated according to the average closing market price of the five business days preceding the conversion date, or if there has been no sales of our stock for five days, the price shall be determined according to the price of the last trade of our stock or,  (2) at $0.85 per share. Lexington and Alliance also entered into a secured convertible debenture and a warrant certificate pursuant to the Debenture Purchase Agreement.  Interest was to accrue on the debenture at the rate of 10% per annum.  In consideration of Alliances investment in the debenture, we also issued a warrant certificate to Alliance for 250,000 warrants to purchase shares of our common stock at an


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exercise price of $0.85 per share.  The warrant certificate represents the 250,000 warrants issued pursuant to the Debenture Purchase Agreement.  Secured Convertible Debenture - November 7, 2006  On November 7, 2006, we entered into a second Debenture Purchase Agreement, debenture, security agreement and warrant certificate with Lexcore and Alliance.  The November 7, 2006 debenture and associated agreements contain exactly the same terms as that for the November 6, 2006 debenture and associated agreements, the only difference being the description of the security interest pursuant to the security agreement and the date.  Under this second convertible debenture, we issued a further 250,000 warrants to purchase common shares of Lexington at $0.85 per share until November 1, 2008.  At the end of November 2006, Alliance chose to have both $500,000 loans, for a total of $1,000,000 repaid in our common stock, so we issued 1,176,470 common shares to Alliance upon the conversion of two convertible debentures at a price of $0.85 per share. At the time of the conversion, no interest had yet accrued.  By a Registration Statement declared effective on January 10, 2007, we registered the 500,000 shares underlying the warrants we granted to Alliance.  On December 29, 2006, Alliance exercised warrants to purchase 255,755 common shares by paying us $217,391.75, and on January 16, 2007, Alliance exercised warrants to purchase 244,245 common shares by paying us $207,608.25. As of February 27, 2006, Alliance had no outstanding convertible securities.  Item 13. Exhibits. ExhibitsExhibit 
NumberExhibit 
Description3.1Certificate (Articles) of Incorporation as filed with the Nevada Secretary of State on March 30, 2005 (1)3.2Certificate of Amendment to Articles of Incorporation filed September 30, 2005 (1)3.3Certificate of Amendment to Articles of Incorporation filed January 11, 2006 (1)3.4Bylaws (1)10.1P-tank Lease Agreement between Lexington and Southern Well Testing Ltd. dated January 5, 2006 (1)


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10.2P-tank Lease Agreement between Lexington and Southern Well Testing (2005) Ltd. dated February 3, 2006 (1)10.3Real Estate Purchase Contract between Lexington and Jackson Cattle Co. Ltd. dated February 3, 2006 (1)10.4Douglas Blackman Management Agreement dated November 17, 2005 (1)10.5Larry Kristof Management Agreement dated October 1, 2005 (1)10.6Tannisah Kruse Management Agreement dated October 1, 2005 (1)10.7Brent Nimeck Management Agreement dated October 20, 2005 (1)10.8Settlement Agreement with Tannisah Kruse dated March 31, 2006 (1)10.9Larry Kristof Employment Agreement (2)10.10Brent Nimeck Employment Agreement (2)10.11Nitrogen Generation Unit Invoice dated June 23, 2006 (2)10.12Drilling Rig 1 Invoice (2)10.13Drilling Rig 2 Invoice (2)10.14Addendum to Real Estate Purchase Agreement with Jackson Cattle Co. Ltd. (2)10.15Agreement to purchase Horizontal Separator from Bromley Mechanical Services (2)10.16Amendment dated August 2, 2006 to Real Estate Purchase Agreement with Jackson Cattle Co. Ltd. (3)10.17Letter of Intent dated August 2, 2006 with Laricina Energy Ltd. (4)10.18Sub-lease Agreement with First Truck Centre (Edmonton) Inc. (3)10.19Amendment to Real Estate Purchase Agreement with Jackson Cattle Co. dated August 31, 2006 (4)10.20Doug Chernesky Employment Agreement (4)


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10.21Virgil Cuerrier Employment Agreement (4)10.22Denis Desrosiers Employment Agreement (4)10.23Secured Convertible Debenture Purchase Agreement dated November 6, 2006 (5)10.24Secured Convertible Debenture Purchase Agreement dated November 7, 200610.25Notice of Conversion under Convertible Debenture dated November 6, 2006 (5)10.26Notice of Conversion under Convertible Debenture dated November 7, 2006 (5)10.27Addendum to Real Estate Purchase Contract between Lexington and Jackson Cattle Co. Ltd. dated November 30, 2006 (5)10.28Agreement to terminate p-tank lease agreement dated November 1, 2006 (5)10.29Agreement to terminate p-tank lease agreement dated December 19, 2006 (5)10.30Director Agreement, dated April 2, 2007, between the Company and Elston Johnston (6)10.31Vehicle Finance Lease Agreement, dated May 24, 2007, between the Company and Rocket Leasing (6)31.1Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 200232.2Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (1) Included as exhibits on our Form SB-2 filed May 16, 2006. (2) Included as exhibits on our Form SB-2 filed July 7, 2006. (3) Included as exhibits on our Form SB-2 filed August 9, 2006. (4) Included as exhibits on our Form SB-2 filed September 1, 2006. (5) Included as exhibits on our Form SB-2 filed December 21, 2006. (6) Included as an exhibit on our Form 10-QSB filed July 23, 2007.


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Item 14. Principal Accountant Fees and Services. Audit and Non-Audit Fees The aggregate fees billed for the two most recently completed fiscal years ended November 30 for professional services rendered by the principal accountant for the audit of our company's annual financial statements and review of the financial statements included our Annual Report on Form 10-KSB and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows: Year EndedNovember 30,November 30,2007 (1)2006Audit Related Fees$        75,000$      50,000Tax Fees00All Other Fees00Total75,00050,000 (1) estimated. Since our inception, our Board of Directors, performing the duties of the Audit Committee, reviews all audit and non-audit related fees at least annually. The Board of Directors as the Audit Committee pre-approved all audit related services in Fiscal 2007. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Lexington Energy Services Inc.(Registrant)/s Robert RosnerDate:  March 14, 2008Robert RosnerDirector , President, Chief Executive Officer/s/ Kelly WarrackDate:  March 14, 2008Kelly WarrackTreasurer and Chief Financial Officer Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SignatureTitleDate/s/Robert RosnerPresident, Chief ExecutiveMarch 14, 2008Robert RosnerDirector


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/s/Kelly WarrackTreasurer Chief Financial Officer and, DirectorMarch 14, 2008Kelly Warrack/s/Elston JohnstonDirectorMarch 14, 2008Elston Johnston


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LEXINGTON  ENERGY  SERVICES  INC. (A Development Stage Company)  CONSOLIDATED  FINANCIAL STATEMENTS AND NOTES  NOVEMBER 30, 2007


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   THE BOARD OF LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES  We have audited the accompanying balance sheet of Lexington Energy Services, Inc. and Subsidiaries, a developmental stage enterprise, as of November 30, 2007 and 2006, and the related statements of operations, stockholders equity and cash flows for the periods then ended.  These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lexington Energy Services, Inc. and Subsidiaries at November 30, 2007 and 2006 and the results of its operations and its stockholders equity and cash flows for the periods then ended in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management's plan in regard to these matters is described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Gruber & Company, LLC Saint Louis, Missouri March 12, 2008


43





LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED BALANCE SHEETS (Stated in US Dollars)  November 30,ASSETS20072006CurrentCash and cash equivalents$            8,149$
639,499GST receivable42,629241,764Prepaid expenses56,43236,193Account receivables650,473-Deposits238,1761,360,459995,8592,277,915Due from related parties-38,218Property & Equipment7,001,6313,249,779Land252,066175,438$
8,249,556$
5,741,350LIABILITIESCurrentAccounts payable and accrued liabilities$
1,362,462$
1,246,921Due to related parties671,365-Loan payable759,298-Current portion of obligations under capital lease869,654-3,662,7791,246,921Obligations under capital lease2,157,128-5,819,9071,246,921STOCKHOLDERS EQUITY (DEFICIT)Capital stockAuthorized:20,000,000preferred shares with a par value of $0.0001100,000,000common shares with a par value of $0.0001Issued:25,391,577common shares (2006: 20,802,230 common shares)2,5392,080Additional paid-in capital10,280,0846,294,047Stock subscriptions received-279,317Accumulated other comprehensive loss(274,213)(32,455)Deficit accumulated during the development stage(7,578,761)(2,048,560)2,429,6494,494,429$
8,249,556$
5,741,350   The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in US Dollars)  March 30,2005 (Date ofFor the twelve months endedInception) toNovember 30,November 30,200720062007RevenueSales, net$   2,743,344$                   -$    2,743,344Cost of sales(1,987,371)-(1,987,371)Gross Profit755,973-755,973ExpensesConsulting fees510,77562,668573,443Depreciation896,16413,733911,551Director fees  Note 5263,250-263,250General and administrative1,528,115332,4911,866,542Investor relations223,500-223,500Management fees  Note 5599,948343,380970,102Professional fees406,950252,066695,952Promo and marketing168,599535,826706,892Rent161,73694,637256,373Stock based compensation861,80056,400918,200Travel121,317339,492464,1565,742,1542,030,6937,849,961Loss before other items(4,986,181)(2,030,693)(7,093,988)Other items:Interest income8,0908,78816,878Interest expense(214,691)(25,000)(239,691)Gain on disposal of equipment-75,45975,459Loss on disposal of equipment(337,419)-(337,419)(544,020)59,247(484,773)Net loss for the period(5,530,201)(1,971,446)(7,578,761)Foreign currency translation adjustment(241,758)(32,455)(274,213)Comprehensive loss for the period$
(5,771,959)$
(2,003,901)$
(7,852,974)Basic and diluted loss per share$
(0.25)$
(0.13)Weighted average number of shares outstanding23,168,00015,364,000  The accompanying notes are an integral part of these financial statements


LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to November 30, 2007 (Stated in US Dollars)  COMMON STOCKAccumulatedStockAdditionalOtherNumber ofSubscriptionsPaid inComprehensiveDeficitSharesAmountReceivedCapitalLossAccumulatedTotalIssuance of common shares for cash- at $0.0001 per share at June 1, 200510,000,000$
1,000$
-$
-$
-$
-$
1,000Issuance of common shares for cash- at $0.03 per share at November 2, 20051,150,000115-34,385--34,500Issuance of commons shares for cash- at $0.10 per share at November 16, 20051,215,000122(10,000)121,378--111,500Net loss for the period-----(77,114)(77,114)Balance, November 30, 200512,365,0001,237(10,000)155,763-(77,114)69,886Common shares cancelled(100,000)(10)-(9,990)--(10,000)Share subscriptions received--10,000---10,000Issuance of common shares for cash- at $0.20 per share at December 12, 2005260,00026-51,974--52,000Issuance of common shares for cash- at $0.20 per share at December 21, 2005200,00020-39,980--40,000Issuance of common shares for cash- at $0.50 per share at February 17, 2006516,00051-257,949--258,000Issuance of common shares for cash- at $0.50 per share at March 8, 2006225,00022-112,478--112,500Issuance of common shares for cash- at $0.50 per share at March 24, 2006930,93093-465,372--465,465Issuance of common shares for cash- at $0.50 per share at April 18, 2006866,69687-433,261--433,348Issuance of common shares for cash- at $0.50 per share at April 25, 20064,0001-1,999--2,000Issuance of common shares for cash- at $ 0.85 per share at August 1, 2006431,61843-366,832--366,875Issuance of common shares for cash- at $ 0.85 per share at August 28, 20062,136,334213-1,815,671--1,815,884Subtotal17,835,5781,783-3,691,289-(77,114)3,615,958 /contd


The accompanying notes are an integral part of these financial statements


LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES Continued CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to November 30, 2007 (Stated in US Dollars)  Common StockAccumulatedStockAdditionalOtherNumber ofSubscriptionsPaid-inComprehensiveDeficitSharesAmountReceivedCapitalIncomeAccumulatedTotalSubtotal17,835,578$
1,783$
-$
3,691,289$
-$
(77,114)$
3,615,958Issuance of common stock for cash- at $0.85 per share at October 16, 2006800,61280-680,440--680,520Issuance of common stock for cash- at $0.85 per share at October 24, 2006989,57099-841,036--841,135Fair value of detachable warrants issued with convertible debentures---25,000--25,000Issuance of common stock pursuant to conversion of convertible debentures- at $0.85 per share at November 23, 20061,176,470118-999,882--1,000,000Stock based compensation---56,400--56,400Stock subscriptions received--279,317---279,317Foreign currency translation adjustment----(32,455)(32,455)Net loss for the period-----(1,971,446)(1,971,446)Balance, November 30, 200620,802,2302,080279,3176,294,047(32,455)(2,048,560)4,494,429Issuance of common stock for cash- at $1.00 per share at December 1, 2006494,64250(279,317)494,595--215,328Share subscription cancelled(10,000)(1)-(9,999)--(10,000)Issuance of common stock pursuant to stock options- at $0.50 per share at December 7, 200643,8604-21,926--21,930Issuance of common stock pursuant to warrants- at $0.85 per share at December 29, 2006255,75526-217,367--217,393Issuance of common stock pursuant to warrants- at $0.85 per share at January 16, 2007244,24524-207,585--207,609Issuance of common stock pursuant to stock options- at $0.85 per share at February 1, 200720,0002-16,998--17,000Issuance of common stock pursuant to stock options- at $0.50 per share at February 14, 2007107,48911-53,734--53,745Issuance of common stock for cash- at $1.00 per share at February 15, 2007330,95733-330,924--330,957Subtotal22,289,1782,229-7,627,177(32,455)-5,548,391 /contd


The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES, INC AND SUBSIDIARIES Continued CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to November 30, 2007 (Stated in US Dollars)  Common StockAccumulatedStockAdditionalOtherNumber ofSubscriptionsPaid-inComprehensiveDeficitSharesAmountReceivedCapitalLossAccumulatedTotalSubtotal22,289,1782,229-7,627,177(32,455)(2,048,560)5,548,391Issuance of common stock for cash- at $1.00 per share at March 20, 2007255,00025-254,975--255,000Issuance of common stock pursuant to stock options- at $0.50 per share at March 22, 200712,5121-6,254--6,255Issuance of common stock for services- at $0.75 per share at March 22, 200714,5852-10,937--10,939Issuance of common stock for services- at $0.73 per share at March 28, 200720,5482-14,998--15,000Issuance of common stock for services- at $0.81 per share at April 02, 2007325,00032-263,218--263,250Issuance of common stock for services- at $0.71 per share at April 11, 200770,0007-49,693--49,700Issuance of common stock for services- at$0.70 per share at April 17, 2007100,00010-69,990--70,000Issuance of common stock for services- at $0.47 per share at May 11, 2007100,00010-46,990--47,000Issuance of common stock for services- at $0.55 per share at May 29, 200755,0006-30,244--30,250Issuance of common stock for services- at $0.40 per share at July 06, 2007113,18311-45,262--45,273Issuance of common stock for services- at $0.40 per share at July 11, 2007600,00060-239,940--240,000Subtotal23,955,0062,395-8,659,678(32,455)(2,048,560)6,581,058 /contd    The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES, INC AND SUBSIDIARIES Continued CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to November 30, 2007 (Stated in US Dollars)  Common StockAccumulatedStockAdditionalOtherNumber ofSubscriptionsPaid-inComprehensiveDeficitSharesAmountReceivedCapitalLossAccumulatedTotalSubtotal23,955,0062,395-8,659,678(32,455)(2,048,560)6,581,058Issuance of common stock for services28,5713-9,997--10,000- at $0.35 per share at September 12, 2007Issuance of common stock for cash1,103,000110-551,390--551,500- at $0.50 per unit at October 24, 2007Issuance of common stock pursuant to stock options55,0006-13,744--13,750- at $0.25 per share at October 29, 2007Issuance of common stock for services50,0005-22,495--22,500- at $0.45 per share at October 29, 2007Issuance of common stock for services50,0005-19,995--20,000- at $0.40 per share at November 13, 2007Issuance of common stock for services50,0005-11,495--11,500- at $0.23 per share at November 21, 2007Issuance of common stock for services100,00010-25,990--26,000- at $0.26 per share at November 23, 2007Stock based compensation---861,800--861,800Fair value of detachable warrants issued---103,500--103,500Foreign currency translation adjustment----(241,758)-(241,758)Net loss for the period-----(5,530,201)(5,530,201)Balance, November 30, 200725,391,577$
2,539$
-$
10,280,084$
(274,213)$
(7,578,761)$
2,429,649  The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES, INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)   March 30,2005 (Date ofFor the twelve months endedInception) toNovember 30,November 30,200720062007Operating ActivitiesNet loss for the period$
(5,530,201)$
(1,971,446)$
(7,578,761)Adjustments to reconcile loss to cash used by
operating activities:Depreciation896,16413,733911,551Warrants issued for investor relations103,500-103,500Shares issued for services867,667-867,667Stock based compensation861,80056,400918,200Loss on sale of equipment337,419-337,419Gain on sale of equipment-(75,459)(75,459)Changes in non-cash working capital items:GST receivable197,771(243,338)(39,050)Prepaid expenses and refundable deposits(30,070)(32,637)(65,523)Accounts receivable(671,288)-(671,288)Deposits(245,798)-(245,798)Accounts payable and accrued liabilities149,6671,272,3591,396,0942,466,832991,0583,437,313Cash flows used in operating activities(3,063,369)(980,388)(4,141,448)Investing ActivitiesEquipment deposit1,360,459(1,360,459)-Purchase of property & equipment(6,165,049)(3,812,816)(9,982,826)Proceeds from sale of equipment1,132,760628,0701,760,830Purchase of land(76,628)(175,438)(252,066)Cash flows used in investing activities(3,748,458)(4,720,643)(8,474,062) /contd  The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES INC. Continued (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)   March 30,2005 (Date ofFor the twelve months endedInception) toNovember 30,November 30,200720062007Financing ActivitiesNet proceeds from loans from related parties709,583(49,685)672,146Proceeds from loans payable783,596-783,596Net capital lease obligations2,804,725-2,804,725Common stock issued for cash1,874,2126,077,7278,088,939Proceeds from stock subscriptions-279,317279,317Cash flows provided by financing activities6,172,1166,307,35912,628,723Effect of exchange rate changes on cash8,361(38,679)(5,064)Net increase (decrease) in cash(613,350)567,6498,149Cash, beginning of the period639,49971,850-Cash, end of the period$
8,149$
639,499$
8,149Supplemental disclosure of cash flow information:Cash paid during the period for interest$     214,691$                -$                 -Cash paid during the period for taxes---Supplemental disclosure of non-cash items:Warrants issued$      103,500$        25,000$      128,500Shares issued on conversion of convertible debt-1,000,0001,000,000Shares issued for services867,667-867,667Stock based compensation861,80056,400918,200Common stock issued for subscriptions279,317-279,317    The accompanying notes are an integral part of these financial statements





LEXINGTON ENERGY SERVICES INC. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS November 30, 2007 and 2006 (Stated in US Dollars)   Note 1 Nature and Continuance of Operations  The Company was incorporated in the State of Nevada on March 30, 2005 under the name Lexington Media, Inc.  On September 30, 2005, the Company changed its name to Lexington Energy, Inc., and on January 5, 2006, the Company changed its name to Lexington Energy Services Inc.  The Company is a development stage company and has built equipment to assist the oil and gas field service industry. The Company has built a nitrogen generation unit and its subsidiary, Lexcore Services Inc., has built two coring rigs to provide drilling services including equipment rental. The equipment that the Company designed and operating are suitable for use in a variety of drilling operations and applications.  The Company plans to further build other coring rigs and equipment and lease the equipment to third parties.  The Companys common shares are publicly traded on the OTC Bulletin Board under the ticker symbol LXES.  These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  At November 30, 2007, the Company had not yet achieved profitable operations, has accumulated losses of $7,578,761 since its inception. The Company expects to incur further losses in the development of its business, all of which casts substantial doubt about the Companys ability to continue as a going concern.  The Companys ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.  Note 2 Significant Accounting Policies  These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are stated in US dollars.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  Actual results may differ from these estimates.  33





Note 2 Significant Accounting Policies  (contd)  The financial statements have, in managements opinion, been properly prepared within the framework of the significant accounting policies summarized below:  a) Development Stage Company  The Company is a development stage company as defined in the Statements of Financial Accounting Standards (SFAS) No. 7.  The Company is still in the developmental stage, devoting substantially all of its present efforts to establish its business and its planned principal operations have not commenced, as only one subsidiary has started to realize some revenues but has not achieved full operations.  All losses accumulated since inception, have been considered as part of the Companys development stage activities.  b) Consolidation  These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Lexcore Services Inc., Lexcoil Inc and Nitro-Gen Technologies Inc.  All inter-company transactions and account balances have been eliminated.  c) Financial Instruments  The carrying values of cash and cash equivalents, accounts payable and accrued liabilities and due to/from related parties approximate fair value because of the short-term nature of these instruments.  Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.  d) Equipment  Equipment is recorded at cost.  Depreciation is provided on a straight-line basis over three years.  e) Impairment of Long-Lived Assets  In accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the carrying value of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.  34





Note 2 Significant Accounting Policies  (contd)  f) Basic and Diluted Net Income (Loss) Per Share  The Company computes net loss per share in accordance with SFAS No. 128, "Earnings Per Share".  SFAS 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement.  Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the year.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method.  In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential common shares if their effect is anti dilutive.  g) Comprehensive Loss  SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  h) Cash and Cash Equivalents  The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.  i) Income Taxes  The Company follows SFAS No. 109, Accounting for Income Taxes which requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.  35





Note 2 Significant Accounting Policies  (contd)  j) Foreign Currency Translation  The Companys functional currency is the Canadian dollar as substantially all of the Companys operations are in Canada.  The Companys reporting currency is the United States dollar.  Foreign currency transactions undertaken in Canadian dollars are translated into United States dollars, in accordance with SFAS No. 52 Foreign Currency Translation, using exchange rates at the date of the transaction.  Monetary assets and liabilities denominated in foreign currencies are re-measured at each balance sheet date at the exchange rate prevailing at the balance sheet date.  Foreign currency exchange gains and losses are charged to operations.  The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.  Translation adjustments arising from the use of differing exchange rates from period to period are included in the accumulated other comprehensive gain (loss) account in Stockholders Equity.  k) Stock Based Compensation  In December 2004, the FASB issued SFAS No. 123R, Share Based Payment, that addresses the accounting transactions in which a company exchanges its equity instruments for goods or services.  SFAS No. 123R requires that such transactions be accounted for using a fair value based method.  Adoption of SFAS No. 123R is effective for periods beginning after December 15, 2005.  The Company has adopted this pronouncement for the fiscal year commencing December 1, 2006.   l) Leases  Leases entered into by the Company as lessee that transfer substantially all the benefits and risks of ownership to the lessee are recorded as capital leases and are included in equipment.  All other leases are classified as operating leases under which leasing costs are recorded as expenses in the period in which they were incurred.  m) Revenue Recognition  The Company recognizes revenue when it is realized and earned.  Revenue and costs on drilling contracts are recognized as work progresses.  Progress is measured and revenues are recognized based upon agreed day-rate charges and/or other additional charges.  For certain contracts, the Company may receive additional lump-sum payments for the mobilization of rigs and other drilling equipment.  Consistent with the drilling contract day-rate revenues and charges, revenues and related direct costs incurred for the mobilization are recognized when earned.  Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred.  The Company recognizes revenue under service contracts as services are performed and collection is reasonably assured.  36





Note 2 Significant Accounting Policies  (contd)  n) Recently Issued Accounting Pronouncements  In February 2007, the FASS issued SFAS No. 159, "The Fair Value Option for Financial Assets and Liabilities" ("SFAS No. 159"). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new guidance is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the potential impact of the adoption of SFAS No. 159 on its financial position and results of operations.  In December 2006, the FASS approved FASS Staff Position (FSP) No. EITF 00-19-2, "Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2"), which specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No.5, "Accounting for Contingencies". FSP EITF 00- I9-2 also requires additional disclosure regarding the nature of any registration payment arrangements, alternative settlement methods, the maximum potential amount of consideration and the current carrying amount of the liability, if any. The guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting for Derivative Instruments and Hedging Activities", and No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", and FASS Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others", to include scope exceptions for registration payment arrangements. The adoption of this pronouncement did not have an impact on the company's financial position, results or operations or cash flows.  In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, "Fair Value Measurements." This statement defines fair value, establishes a fair value hierarchy to be used in generally accepted accounting principles and expands disclosures about fair value measurements. Although this statement does not require any new fair value measurements, the application could change current practice. The statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of this statement to its financial position and results of operations.  In September 2006, the staff of the Securities and Exchange Commission issued SAB No. 108 which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAS 108 becomes effective in fiscal 2007. The adoption of this pronouncement is not expected to have an impact on the Company's financial position, results of operation or cash flows.  In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASS Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities a minimum threshold for financial statement recognition of the benefit of tax positions, and requires certain expanded disclosures.  The  Interpretation  is  effective  for  fiscal years beginning  37





Note 2 Significant Accounting Policies  (contd)  n) Recently Issued Accounting Pronouncements  contd  after December 31, 2006, and is to be applied to all open tax years as of the date of effectiveness. The Company is in the process of evaluating the impact of the application of the Interpretation to its financial statements.  In March 2006, the FASS issued SFAS 156 - "Accounting for Servicing of Financial Assets - an amendment of FASS Statement No. 140" ("SFAS 156"). SFAS 156 is effective for the first fiscal year beginning after September 15, 2006. SFAS 156 changes the way entities account for servicing assets and obligations associated with financial assets acquired or disposed of. The Company has not yet completed its evaluation of the impact of adopting SFAS 156 on its results of operations or financial position, but does not expect that the adoption of SFAS 156 will have a material impact.  In February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140" ("FAS 155"). FAS 155 addresses the following: a) permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133; c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid  financial  instruments  that  contain an embedded  derivative requiring bifurcation; d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and e) amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company has not yet completed its evaluation of the impact of adopting SFAS 155 on its results of operations or financial position, but does not expect that the adoption of SFAS 155 will have a material impact.  The Company recognizes revenue when it is realized and earned.  Revenue and costs on drilling contracts are recognized as work progresses.  Progress is measured and revenues are recognized based upon agreed day-rate charges and/or other additional charges.  For certain contracts, the Company may receive additional lump-sum payments for the mobilization of rigs and other drilling equipment.  Consistent with the drilling contract day-rate revenues and charges, revenues and related direct costs incurred for the mobilization are recognized when earned.  Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred.  The Company recognizes revenue under service contracts as services are performed and collection is reasonably assured.    38





Note 3 Equipment  November 30, 2007AccumulatedCostDepreciationNetComputer and equipment$
32,424$
14,625$
17,799Office equipment8,8782,9675,911Furniture18,2516,73011,520Software23,3848,38814,996Tools and equipment24,8576,08218,775Equipment/Machinery3,909,324324,6253,584,699Vehicle equipment75,00414,37760,627Equipment under construction76,760-76,7604,168,882377,7953,791,087Equipment under capital leaseEquipment/machinery3,635,212424,6683,210,544$
7,804,094$
802,462$
7,001,631   November 30, 2006AccumulatedCostDepreciationNetComputer and equipment$
27,450$
6,009$
21,441Office equipment6,2791,4194,860Furniture26,9663,58423,382Software10,3528639,489Tools and equipment6,0251,0045,021Leasehold improvements28,2202,50825,712Machinery under construction3,159,874-3,159,874$
3,265,166$
15,387$
3,249,779  Equipment/machinery under capital leases are depreciated on a straight-line basis on a four year basis.  Note 4 Related Party Transactions  During the year ended November 30, 2007:  The Company incurred $58,785 (2006: $122,735) for management fees to the former President and CEO of the Company.  At November 30, 2007, $10,432 (November 30, 2006: $30,657) was due from the former President and CEO.  Included in accounts payable at November 30, 2006, was $50,000 owing to the former President and CEO.  The Company incurred $66,497 (2006: $82,050 and $20,162 for consulting fees) for management fees to the other former President, Secretary and Treasurer of the Company.  39





Note 4 Related Party Transactions - (Contd)  At November 30, 2007, $581,797 was due to the other former President, Secretary and Treasurer of the Company and $ Nil was due from the other former President (November 30, 2006: $6,873) of the Company.  Included in accounts payable at November 30, 2006, was $50,000 owing to the other former President and CEO.  The Company incurred $3,099 (2006: $ Nil) for management fees to the CFO of the Company.  The Company incurred $291,243 for management fees to the Vice President of Operations of the Companys subsidiary.  The Company incurred $180,325 for management fees to the Senior Vice President of the Companys subsidiary.  At November 30, 2007, accounts payable includes $46,452 due to the officer of the subsidiary.  The Company issued 325,000 common shares as compensation to a director of the Company valued at $263,250.  At November 30, 2007, the director advanced $100,000 to the Company.  The amount is unsecured, non-interest bearing and due on demand.  Note 5 Capital Stock  Note 13  Stock options  The following table summarizes the continuity of the Companys stock options:  20072006WeightedWeightedNumber ofAverageNumber ofAverageCommonExerciseCommonExerciseSharesPriceSharesPriceOutstanding, beginning3,470,000$0.44875,000$0.10Granted3,370,000$0.462,720,000$0.58Exercised(238,860)$0.47-$     -Cancelled(1,556,140)$0.46(125,000)$0.10Outstanding, ending5,045,000$0.473,470,000$0.48  The fair value of the stock options granted during the periods ended November 30, 2007 and 2006 was determined using the Black-Scholes option value model with the following assumptions:  20072006Expected dividend yield0.0%0.0%Risk-free interest rate3.82%2.183.18%Expected volatility118.83%0%Expected option life (in years)1.68 years2 years   40





Note 5 Capital Stock  Note 13  (Contd)  Stock options (Contd)  Expected volatility was based on the companys historical share price.  The compensation charge associated with stock options in the amount of $861,800 (2006: $56,400) is included in the statement of operations for the year ended November 30, 2007.  Additional information regarding stock options outstanding as at November 30, 2007, is as follows:  Number ofCommon SharesExercise PricesExpiry Date150,000$0.20December 30, 2007320,000$0.50March 13, 2008740,000$0.50April 5, 2008520,000$0.50May 17, 2008400,000$0.85August 1, 200810,000$0.85October 3, 200865,000$0.85October 13, 200820,000$0.85October 16, 200825,000$0.85November 15, 2008150,000$0.85April 11, 2009675,000$0.50May 15, 2009150,000$0.65May 24, 2009250,000$0.50July 31, 20091,420,000$0.25September 28, 200950,000$0.50October 19, 2008100,000$0.25October 31, 20085,045,000  During the year ended November 30, 2007, 500,000 stock options expired unexercised.  On December 30, 2007, 150,000 stock options expired unexercised.  Share purchase warrants  During the year ended November 30, 2007, 1,553,000 share purchase warrants were outstanding as follows:  Number of WarrantsExercise PriceExpiry Date300,000$0.60July 11, 2009150,000$0.85May 11, 20111,103,000$0.60October 24, 20091,553,000   41





Note 5 Share Capital Note 13  (contd)  Share purchase warrants  (contd)  The fair value of the share purchase warrants issued during the period ended November 30, 2007, was in the amount of $103,500, which was determined using the Black-Scholes option value model with the following assumptions:  2007Expected dividend yield0.0%Risk-free interest rate3.16%Expected volatility101.63%Expected option life (in years)2.08 years  Expected volatility was based on the Companys historical share price.  On October 24, 2007 the Company entered into private placement agreements totaling $551,500.  Each unit purchased entitled the holder to one common share and one share purchase warrant exercisable at $0.60 per share. A total of 1,103,000 share purchase warrants were provided.  Note 6 Convertible Debentures  The Company entered into two Secured Convertible Debenture Purchase Agreements dated November 6, 2006 and November 7, 2006, totaling $1,000,000.  Both convertible debentures were converted on November 23, 2006 at $0.85 per share and the Company issued 1,176,470 common shares.  Attached to each Secured Convertible Debenture was a Warrant Agreement.  Each Warrant Agreement entitles the holder the right to purchase 250,000 common shares of the Company at $0.85 per share.  At February 28, 2007, all 500,000 warrants were exercised.  In accordance with Accounting Principles Board Opinion No. 14, Accounting for Convertible debt and Debt Issued with Stock Purchase Warrants, the proceeds received from the issuance of the convertible debentures were allocated between the convertible debentures and warrants on a basis of their relative fair values.  At the date of issuance, $25,000 of the proceeds was allocated to the warrants.      42





Note 7 Non-Cash Transactions  Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows.  During the year ended November 30, 2007:  - The Company issued 256,340 common shares pursuant to the exercise of stock options at $0.40-0.75 per share for payment of legal fees totaling $116,213.  - The Company issued 875,498 common shares for payment of wages and consulting fees totaling $795,200.  - The Company entered into four capital lease agreements for machinery and equipment totaling $3,356,239.  These transactions have been excluded from the statements of cash flows.  Note 8 Commitments  Note 4  a) The Company entered into an employment agreement dated June 1, 2006 with the other former President, Secretary, Treasurer and Senior Vice President of Operations of the Company for $5,400 per month and the option to buy 250,000 common shares of the Company at $0.50 per share.  Either party can terminate the agreement at any time with 14 days notice.  The employment agreement was terminated January 15, 2008 when he resigned.  b) During the year ended November 30, 2007, the Company received cash proceeds totaling $551,500 in respect to a private placement of 1,103,000 units at $0.50 per unit whereby each unit provides for 1 common share and 1 share purchase warrant.  Each warrant entitles the holder to purchase 1 common share of the Companys stock at $0.60 per share.  The expiration of the warrants is 2 years from the date of issuance.  c) The Company entered into an investor relations agreement on May 11, 2007 and was terminated after phase 1.  The agreement is structured over three phases with the following terms:  Phase I Upon execution of this agreement issue 100,000 common shares (issued) of the Company and 150,000 share purchase warrants exercisable at $0.85 per warrant expiring on May 11, 2012;  Phase II Upon commencement of phase II issue 200,000 common shares of the Company and 300,000 share purchase warrants exercisable at $1.00 per warrant expiring five years from issuance;     43





Note 8 Commitments  Note 4  Contd  c) Phase III Upon commencement of phase III, issue 200,000 common shares of the Company and 300,000 share purchase warrants exercisable at $1.00 per warrant expiring five years from issuance.  d) The Company entered into an office lease agreement effective July 1, 2006 to July 31, 2010 for basic rent of $13,600 per month.  This lease was terminated as of July 31, 2007.  e) The Company entered into a $773,195 (CAD $750,000) loan agreement effective October 16, 2007 for a period of one year.  The agreement requires the Company to keep the loan for a minimum of 4 months.  The loan is repayable with blended monthly interest and principal payments of CAD $30,000 with a balloon payment of all remaining outstanding amounts at the end of the one year period, estimated at $549,000.  Note 9 Contingencies  a) An officer of a subsidiary of the Company has claimed that he has been constructively dismissed at the end of December 2006 and seeks one years salary as compensation, which amounts to $238,176 (CDN$230,000).  The Company contends that the Vice-President voluntarily resigned.  There has been no liability recorded in the financial statements related to this contingency and any unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved. The Companys subsidiary received a Garnishee Order and paid $216,584 into court pending resolution of the claim.  Subsequent to the yearend, a settlement agreement was reached and resolved out of court.  b) A vendor of a subsidiary of the Company has alleged that the subsidiary owes $240,719 for breach of contract.  The subsidiary disputes this claim and contends that services by the vendor were not completed in accordance to the terms of the service agreement. The liability has been recorded in the financial statements related to this contingency and any favourable or unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.  Management of the subsidiary has filed its statement of defense.  c) A former director and CFO of the Company filed a Writ of Summons and Statement of Claim with the Supreme Court of British Columbia alleges that the Company breached a settlement agreement entered into on March 31, 2006 by failing to deliver 250,000 common shares of the Company free of a restrictive legend in April 2007.  The Company states that it is not obligated to deliver shares without a restrictive legend and that the plaintiff could only sell the shares in accordance with rule 144 of the Securities Act.  In August 2007 the Company delivered 250,000 common shares which are subject to rule 144 of the Securities Act.  Management of the Company has filed its statement of defense.   44





Note 9 Contingencies - Contd  d) The Company has been named in a counterclaim brought by the former President, Secretary and Treasurer of the Company through association.  Management of the Company believes the claim will not materially affect the Company.  The matter is between the former President, Secretary and Treasurer of the Company and the other party.  There has been no liability recorded in the financial statements relating to this contingency and any unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.  e) A consultant of the Company has alleged that the Company owes a total of $34,112 for a consulting agreement entered into on March 8, 2007 by the former President and director of the Company.  The Company is currently investigating the issue.  Part of the liability has been recorded in the financial statements related to this contingency and any favourable or unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.  f) A vendor of the Company has alleged that the Company owes a total of $34,779 and $32,665 for services rendered. The Company is currently investigating the issue.  The liabilities have been recorded in the financial statements related to this contingency and any favourable or unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.   Note 10 Obligations Under Capital Leases  The Company has obligations under capital leases for machinery and equipment to August 31, 2011.  Future minimum lease payments as at November 30, 2007, are as follows:  20072008$
869,6542009869,6542010869,65420111,190,1813,799,143Less:
Imputed interest(722,361)3,026,782Less:
Current portion(869,654)Obligations under capital leases$
2,157,128  45





Note 10 Obligations Under Capital Lease  (contd)  During the year ended November 30, 2007, the Company paid $172,410 in interest payments.   Note 11 Promissory Notes Payable  The promissory notes payable are due to a director of the Company or a Company with a common director, are unsecured, bear interest at 10% per annum and are payable on demand including interest payable of $4,212.  The promissory notes payable and interest payable were repaid in full.   Note 12 Subsequent Events  Subsequent to November 30, 2007:  a) Brent Nimeck resigned as officer and director of the Company as well as from all the Companys wholly owned subsidiaries.  b) The Company issued 397,092 common shares at $0.23 per share for payment of services.  c) The Company issued 350,000 common shares at $0.20 per share for payment of services.  d) One of the Companys wholly owned subsidiaries entered into a factor facility in December 2007 for factoring up to a maximum of CAD $500,000 of undisputed accounts receivable.   Note 13 Economic Dependence  During the year ended November 30, 2007, the Company was economically dependent on three customers which accounts for 62%, 21% and 17% of total revenue, respectively.     46





Note 14 Income Taxes   Potential benefits of income tax losses are not recognized in the accounts until realization is more likely-than-not.  The Company has accumulated net operating losses totaling $7,578,761 for US tax purposes which expire starting in 2025.  Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward.  The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely-than-not it will utilize the net operating losses carried forward in future years.  The components of the net deferred tax asset at November 30, 2007 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are scheduled below:   20072006Net Operating Loss Carryforward$ 7,578,761$
2,048,560Statutory tax rate35%35%Effective tax rate--Deferred tax asset$ 2,652,566$
716,996Valuation allowance(2,652,566)(716,996)Net deferred tax asset$               -$
-         47