UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 FORM 10-QSB [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2007 [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ To ______________________ Commission file number 333-134175 LEXINGTON ENERGY SERVICES INC.(Exact name of registrant as specified in its charter) NevadaN/A(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)736 Second Avenue East, Brooks, Alberta, CanadaT1R 0B8(Address of principal executive offices)(Zip Code) 403-279-4550(Registrants telephone number, including area code)  234125 Wrangler Road SE, RR #5 Calgary, Alberta, Canada T2P 2G6 _____________________________________________________
(Former name, former address and former fiscal year, if changed since last report)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [ x ] Yes [   ] No Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [   ] Yes [ x ] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  [    ] Yes [    ] No APPLICABLE ONLY TO CORPORATE ISSUERS As of October 12, 2007, the registrants outstanding common stock consisted of 23,983,577 shares.  i


[f01310qsbaug312007v4001.jpg] Table of Contents  PART I  FINANCIAL INFORMATION 3 ITEM 1.  FINANCIAL STATEMENTS 3 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3 ITEM 2.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION/ PLAN OF OPERATIONS  13 ITEM 3.  CONTROL AND PROCEDURES 22 PART II  OTHER INFORMATION 22 ITEM 1.  LEGAL PROCEEDINGS: 22 ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES: 22 ITEM 3.  DEFAULTS UPON SENIOR SECURITIES: 22 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE SECURITY HOLDERS: 22 ITEM 5.  OTHER INFORMATION: 22 ITEM 6.  EXHIBITS 23


2


PART I  FINANCIAL INFORMATION  ITEM 1.  FINANCIAL STATEMENTS The unaudited interim consolidated financial statements of Lexington Energy Services Inc. (the Company, Lexington, we, our, us) follow.  All currency references in this report are in US dollars unless otherwise noted.                  LEXINGTON ENERGY SERVICES INC.  INTERIM CONSOLIDATED FINANCIAL STATEMENTS August 31, 2007 (Stated in US Dollars) (Unaudited)


3


LEXINGTON ENERGY SERVICES INC. INTERIM CONSOLIDATED BALANCE SHEETS August 31, 2007 and November 30, 2006 (Stated in US Dollars) (Unaudited)  August 31November 30ASSETS20072006CurrentCash and cash equivalents$
179,200$
639,499GST receivable37,565241,764Accounts receivable41,405-Prepaid expenses80,18336,193Other deposit  Note 10216,584-554,937917,456Due from related parties  Note 510,80838,218Equipment  Note 47,232,8263,249,779Deposits on equipment-1,360,459Deposit on land  Note 9230,406175,438$
8,028,977$
5,741,350LIABILITIESCurrentAccounts payable and accrued liabilities  Notes 5 and 10$
927,956$
1,246,921Due to related party  Note 5516,223-Current portion of obligations under capital leases  Note 11530,672-1,974,8511,246,921Obligations under capital leases  Note 112,661,742-4,636,5931,246,921STOCKHOLDERS EQUITYCapital stock  Notes 6, 7, 9 and 13Authorized:20,000,000 preferred shares with a par value of $0.0001100,000,000 common shares with a par value of $0.0001Issued:23,955,006 common shares (November 30, 2006: 20,802,230 common shares)2,3952,080Additional paid-in capital9,306,9786,294,047Stock subscriptions received  Note 9481,500279,317Accumulated other comprehensive loss(180,457)(32,455)Deficit accumulated(6,218,032)(2,048,560)3,392,3844,494,429$
8,028,977$
5,741,350   SEE ACCOMPANYING NOTES    LEXINGTON ENERGY SERVICES INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS for the three and nine months ended August 31, 2007 and 2006 (Stated in US Dollars) (Unaudited)   Three months endedNine months endedAugust 31,August 31,2007200620072006RevenueRevenue$
129,528$
-$
1,912,778$
-Direct costs(229,573)-(1,226,088)-(100,045)-686,690-ExpensesConsulting fees329,98910,500422,61638,271Depreciation329,4173,148639,0834,439Director fees  Note 5--263,250-General and administrative387,675189,6021,771,966294,286Investor relations21,000-155,000-Loss on disposal of equipment308,731-334,272-Management fees  Note 5111,70187,667516,248148,574Professional fees82,63166,769315,624139,697Promo and marketing (recovery)(9,047)-172,765-Rent42,99935,531161,73639,732Travel4,971119,848109,324186,8031,610,067513,0654,861,884851,802Loss before other item(1,710,112)(513,065)(4,175,194)(851,802)Other item:Interest income3,2402,7105,7225,123Net loss for the period(1,706,872)(510,355)(4,169,472)(846,679)Foreign currency translation adjustment(25,988)-(148,002)-Comprehensive loss for the period$
(1,732,860)$
(510,355)$
(4,317,474)$
(846,679)Basic and diluted loss per share$
(0.07)$
(0.03)$
(0.19)$
(0.06)Weighted average number of shares outstanding23,643,00015,765,00022,729,00014,333,000   SEE ACCOMPANYING NOTES    LEXINGTON ENERGY SERVICES INC. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended August 31, 2007 and 2006 (Stated in US Dollars) (Unaudited)  20072006Operating ActivitiesNet loss for the period$
(4,169,472)$
(846,679)Adjustments to reconcile loss to cash used by operating activities:Depreciation639,0834,439Warrants issued for investor relations103,500-Shares issued for professional fees106,213-Shares issued for wages and consulting fees715,200-Stock based compensation543,80077,000Loss on sale of equipment334,272-Changes in non-cash working capital items:GST receivable204,199(36,291)Inventory-(64,590)Accounts receivable(41,405)-Prepaid expenses(43,990)(19,728)Accounts payable and accrued liabilities(318,965)101,956Due to/from related parties27,410(34,034)Cash flows used in operating activities(1,900,155)(817,927)Investing ActivitiesOther deposit(216,584)-Purchase of equipment(1,039,984)(125,552)Deposits on equipment-(1,341,483)Proceeds on disposal of equipment1,126,761-Deposit on land(54,968)(178,571)Cash flows used in investing activities(184,775)(1,645,606)Financing ActivitiesCapital lease payments(490,306)-Loan from related party516,223-Notes payable113,705-Repayment of notes payable(113,705)-Common stock issued for cash1,544,5333,556,077Common stock subscription received202,183(217,700)Cash flows provided by financing activities1,772,6333,338,377Effect of exchange rate changes on cash(148,002)-Increase (decrease) in cash and cash equivalents during the period(460,299)874,844Cash and cash equivalents, beginning of the period639,49971,850Cash and cash equivalents, end of the period$
179,200$
946,694 /contd  SEE ACCOMPANYING NOTES    LEXINGTON ENERGY SERVICES INC. Continued INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended August 31, 2007 and 2006 (Stated in US Dollars) (Unaudited)   20072006Supplementary disclosure of cash flow informationCash paid forInterest$
74,740$
-Cash and cash equivalents consist of:Cash$
120,418$
900,489Term deposits58,78246,205$
179,200$
946,694 Non-cash Transactions  Note 8  SEE ACCOMPANYING NOTES


LEXINGTON ENERGY SERVICES INC. INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to August 31, 2007 (Stated in US Dollars) (Unaudited)  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


SEE ACCOMPANYING NOTES


LEXINGTON ENERGY SERVICES INC. Continued INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to August 31, 2007 (Stated in US Dollars) (Unaudited)  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 $0.50 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


SEE ACCOMPANYING NOTES





LEXINGTON ENERGY SERVICES INC Continued INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to August 31, 2007 (Stated in US Dollars) (Unaudited)   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   SEE ACCOMPANYING NOTES





LEXINGTON ENERGY SERVICES INC Continued INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY for the period March 30, 2005 (Date of Inception) to August 31, 2007 (Stated in US Dollars) (Unaudited)   Common StockAccumulatedStockAdditionalOtherNumber ofSubscriptionsPaid-inComprehensiveDeficitSharesAmountReceivedCapitalLossAccumulatedTotalSubtotal23,955,0062,395-8,659,678(32,455)(2,048,560)6,581,058Stock based compensation---543,800--543,800Stock subscriptions received--481,500---481,500Fair value of detachable warrants issued---103,500--103,500Foreign currency translation adjustment----(148,002)-(148,002)Net loss for the period-----(4,169,472)(4,169,472)Balance, August 31, 200723,955,006$
2,395$
481,500$
9,306,978$
(180,457)$
(6,218,032)$
3,392,384   SEE ACCOMPANYING NOTES


LEXINGTON ENERGY SERVICES INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS August 31, 2007 (Stated in US Dollars) (Unaudited)  Note 1 Interim Reporting  While the information presented in the accompanying interim nine months financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America.  These interim financial statements follow the same accounting policies and methods of their application as the Companys November 30, 2006 annual financial statements.  All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Companys November 30, 2006 annual financial statements.  Operating results for the nine months ended August 31, 2007 are not necessarily indicative of the results that can be expected for the year ended November 30, 2007.  During the nine months ended August 31, 2007, the Company generated revenue totaling $1,912,778.  The Company was in the development stage prior to the nine months ended August 31, 2007.  Note 2 Continuance of Operations  These interim 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 twelve months.  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 August 31, 2007, the Company had not yet achieved profitable operations, has accumulated losses of $6,218,032 since its inception, has a working capital deficiency of $1,419,914 and 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.    4     Note 3 Significant Accounting Policies  Consolidation  The consolidated financial statements include the account 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.  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.  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.  Note 4 Equipment  August 31, 2007AccumulatedCostDepreciationNetComputer and equipment$
32,424$
11,923$
20,501Office equipment8,8782,2276,651Furniture33,00610,89622,110Software23,3846,43916,945Tools and equipment17,9024,03513,867Equipment/Machinery3,916,659302,5853,614,074Vehicle equipment65,2018,58256,6194,097,454346,6873,750,767Equipment under capital leaseEquipment/machinery3,682,720200,6613,482,059$
7,780,174$
547,348$
7,232,826   5     Note 4 Equipment  (contd)  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 lease are depreciated on a straight-line basis on a four year basis.  Note 5 Related Party Transactions  During the nine months ended August 31, 2007:  The Company incurred $58,785 (2006: $51,430) for management fees to the former President and CEO of the Company.  At August 31, 2007, $10,808 (November 30, 2006: $30,657) was due from the former President and CEO.  Included in accounts payable at November 30, 2006, is $50,000 owing to the former President and CEO.  The Company incurred $48,275 (2006: $36,234) for management fees to the President, Secretary and Treasurer of the Company.  At August 31, 2007, $516,223 was due to the President, Secretary and Treasurer of the Company and $ Nil was due from the President (November 30, 2006: $6,873) of the Company.  Included in accounts payable at November 30, 2006, is $50,000 owing to the former President and CEO.  The Company incurred $228,864 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 August 31, 2007, accounts payable includes $46,243 due to the officers of the subsidiary.  The Company issued 325,000 common shares as compensation to a director of the Company valued at $263,250.    6     Note 6 Capital Stock  Note 13  Stock options  The following table summarizes the continuity of the Companys stock options:  Nine months endedNine months endedAugust 31, 2007August 31, 2006WeightedWeightedNumber ofAverageNumber ofAverageCommonExerciseCommonExerciseSharesPriceSharesPriceOutstanding, beginning3,470,000$0.44875,000$0.10Granted1,745,000$0.652,600,000$0.56Exercised(183,860)$0.54-$     -Cancelled(956,140)$0.65(125,000)$0.10Outstanding, ending4,075,000$0.503,350,000$0.46  The fair value of the stock options granted during the periods ended August 31, 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 rate4.62%2.183.18%Expected volatility101.62%0%Expected option life (in years)1.50 years2 years  Expected volatility was based on the companys historical share price.  The compensation charge associated with stock options in the amount of $543,800 (2006: $77,000) is included in the statement of operations for the nine months ended August 31, 2007.   7     Note 6 Share Capital Note 13  (contd)  Stock options (contd)  Additional information regarding stock options outstanding as at August 31, 2007, is as follows:  Number ofCommon SharesExercise PricesExpiry Date250,000$0.10October 1, 2007250,000$0.10October 20, 2007150,000$0.20December 30, 2007320,000$0.50March 13, 2008840,000$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, 20094,075,000  On October 1, 2007, 250,000 stock options expired unexercised.  Share purchase warrants  During the nine month period ended August 31, 2007, 450,000 share purchase warrants were outstanding as follows:  Number of WarrantsExercise PriceExpiry Date300,000$0.60July 11, 2009150,000$0.85May 11, 2011450,000  The fair value of the share purchase warrants issued during the period ended August 31, 2007, was in the amount of $103,500, which was determined using the Black-Scholes option value model with the following assumptions:   8     Note 6 Share Capital Note 13  (contd)  Share purchase warrants  (contd)  2007Expected dividend yield0.0%Risk-free interest rate4.74%Expected volatility101.63%Expected option life (in years)4.43 years  Expected volatility was based on the Companys historical share price.  Note 7 Convertible Debentures  The Company entered into two Secured Convertible Debenture Purchase Agreements dated November 6, 2006 and November 7, 2006, totalling $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.  Note 8 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 nine months ended August 31, 2007:  - The Company issued 227,768 common shares pursuant to the exercise of stock options at $0.40-0.75 per share for payment of legal fees totalling $106,213.  - The Company issued 625,498 common shares for payment of wages and consulting fees totalling $715,200.  - The Company entered into four capital lease agreements for machinery and equipment totalling $3,682,720.  These transactions have been excluded from the statements of cash flows.   9      Note 9 Commitments  Note 6  a) The Company entered into an employment agreement dated June 1, 2006 with the 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.  b) During the nine months ended August 31, 2007, the Company received cash proceeds totalling $481,500 in respect to a private placement of 963,000 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.  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;  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 investor relations marketing agreement on May 25, 2007 for a term of one year commencing on June 1, 2007 and expiring on June 1, 2008 with the Company having the option to renew for another twelve month period.  The Company will pay a monthly compensation of $2,000 per month plus 135,000 share purchase options which will vest at 25% every three month period and will expire on June 1, 2010.  e) 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.   10     Note 10 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 $216,584 (CDN$229,000).  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.  b) A vendor of a subsidiary of the Company has alleged that the subsidiary owes $240,719 for breach of contract.  The subsidiary disputes this claim and contends that services by the vendor were not completed in accordance to the terms of the service agreement. The liability has been recorded in the financial statements related to this contingency and any favourable or unfavourable settlement of this matter will be recorded in the period in which the contingency is resolved.  Management of the subsidiary has filed its statement of defence.  c) A former director and CFO of the Company filed a Writ of Summons and Statement of Claim with the Supreme Court of British Columbia alleges that the Company breached a settlement agreement entered into on March 31, 2006 by failing to deliver 250,000 common shares of the Company free of a restrictive legend in April 2007.  The company states that it is not obligated to deliver shares without a restrictive legend and that the plaintiff could only sell the shares in accordance with rule 144 of the Securities Act.  In August 2007 the Company delivered 250,000 common shares which are subject to rule 144 of the Securities Act.  Management of the Company has filed its statement of defence.  Note 11 Obligations Under Capital Leases  The Company has obligations under capital leases for machinery and equipment to August 31, 2011.   11     Note 11 Obligations Under Capital Lease  (contd)  Future minimum lease payments as at August 31, 2007, are as follows:  20072008$
881,4282009881,4282010881,42820111,471,0664,115,349Less:
Imputed interest(922,935)3,192,414Less:
Current portion(530,672)Obligations under capital leases$
2,661,742  During the nine month period ended August 31, 2007, the Company paid $70,017 in interest payments.  Note 12 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 13 Subsequent Events  Subsequent to August 31, 2007:  a) the Company issued 28,571 common shares at $0.35 per share for payment of legal fees.  b) the Company granted 1,475,000 stock options at $0.25 per share to employees and consultants of the Company.  c) The Company received cash proceeds of $70,000 in respect to a private placement for 140,000 units whereby each unit consists of one common share and one share purchase warrant.  Each warrant entitles the holder to purchase one common share of the Companys stock at $0.60 per share expiring two years from the date of issuance.    12     Note 14 Economic Dependence  During the nine month period ended August 31, 2007, the Company was economically dependent on two customers which accounts for 76% and 21% of total revenue, respectively.   ITEM 2.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION/ PLAN OF OPERATIONS Forward Looking Statements This report on Form 10-QSB contains certain forward-looking statements.  All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements. Overview We were incorporated in the State of Nevada on March 30, 2005 and extra-provincially registered in the Province of British Columbia and Alberta, Canada. We have three wholly-owned subsidiaries.  They are Lexcore Services Inc. (Lexcore), which was incorporated in the State of Nevada on April 28, 2006, and extra-provincially registered in the Province of Alberta, Canada; Lexcoil Inc. (Lexcoil), which was incorporated in the State of Nevada on October 3, 2006 and extra-provincially registered in the Province of Alberta, Canada; and Nitro-Gen Technologies Inc. (Nitro-Gen), which was incorporated in the Province of Alberta, Canada on May 30, 2007.  LXN2 LLC was dissolved in the State of Michigan on July 3, 2007. We are an oil field and gas service company providing oilfield service equipment and services to oil and gas companies. Through Lexcore, we operate our activities relating to our coring units, providing oil and gas companies drilling services. Through Lexcoil, we operate two coiled tubing units. Through Nitro-Gen, we operate our nitrogen generation unit. Each of Lexcore, Lexcoil and Nitro-Gen is now generating revenues. In April 2007, our Board of Directors appointed Elston Johnston as a director. Brent Nimeck, director and Chief Operating Officer, replaced Larry Kristof as President, CEO and CFO. On May 1, 2007 Larry Kristof resigned as our director. Description of Property In August 2007 we closed our Calgary office and moved our principal office to Brooks, Alberta.  Our properties are described as follows:   13     Brooks, Alberta Our head office is located at 736 Second Avenue East, Brooks, Alberta T1R 0B8. On February 23, 2006 we entered into an agreement to purchase a property in Brooks, Alberta for a purchase price of approximately $221,818.  The property is comprised of raw land and is approximately 8.2 acres.  We have paid approximately $222,000 for the property and formally took over possession and received title to the land in September 2007. Results of Operations for the Nine Months ended August 31, 2007 compared to August 31, 2006 During nine months ended August 31, 2007, we realized total revenues of $1,912,778 compared to no revenues for the nine months ended August 31, 2006. The revenues during the nine months ended August 31, 2007 were generated pursuant to the Lexcores provision of coring units and crew to two customers, which respectively account for 76% and 21% of total revenues. During nine months ended August 31, 2007, we incurred direct costs of $1,226,088 resulting in gross profits of $686,690, compared to no direct costs for the nine months ended August 31, 2006.  Our direct costs include all costs associated with the job such as labor costs, consulting fees on the job, materials used, and inspection fees. We incurred a net loss for the nine months ended August 31, 2007 of $4,169,472, compared to a net loss of $846,679 for the same period in 2006.  The increase of $3,322,793 in net loss was a result of increased operational activities during the nine months ended August 31, 2007.  Our net loss per share was $0.19 for the nine months ended August 31, 2007 compared to $0.06 for the same period in 2006. Our total expenses increased $4,010,082 to $4,861,884 for the nine months ended August 31, 2007 from $851,802 for the same period in 2006. The significant increase in total expenses was mainly due to increases in our day to day operating costs from our expansion and growth, promotion and marketing activities. Our professional fees of $315,624 for the nine months ended August 31, 2007 consisted primarily of legal, accounting and auditing fees.  During the nine months ended August 31, 2006, our professional fees were $139,697. The increase of $175,927 in professional fees was due to additional legal and auditing services we required as a public company and from our expansion and growth.   14    Our management fees of $516,248 for the nine months ended August 31, 2007 consisted mainly of amounts paid to our current and former officers.  During the nine months ended August 31, 2006, our management fees were $148,574. The significant increase of $367,674 in management fees was due to increased salaries of our officers and additional management personnel hired in the nine months ended August 31, 2007. Our consulting fees for the nine months ended August 31, 2007 increased by $384,345 to $422,616 as compared to $38,271 for the same period in 2006, because of increased payments to consultants during the nine months ended August 31, 2007. We incurred director fees of $263,250 for the nine months ended August 31, 2007, compared to none for the same period in 2006, because of the issuance of 325,000 common shares as compensation for one year of a directors services. We spent $172,765 in promotion and marketing for the nine months ended August 31, 2007 compared to none for the same period in 2006, in order to promote and market our company and services. Our other operational expenses increased $2,646,121 from $525,260 for the nine months ended August 31, 2006 to $3,171,381 for the nine months ended August 31, 2007. The increased was mostly due to our increased day to day operating costs, salaries and benefits, rent, depreciation, general office expenses and from our stock based compensation. Results of Operations for the Three Months ended August 31, 2007 compared to August 31, 2006 During three months ended August 31, 2007, we realized total revenues of $129,528 compared to no revenues for the three months ended August 31, 2006. The revenues during the three months ended August 31, 2007 were generated pursuant to  provision of coring units and crew to two customers. During three months ended August 31, 2007, we incurred direct costs of $229,573 resulting in gross loss of $100,045, compared to no direct costs for the three months ended August 31, 2006.  Our direct costs include all costs associated with the job such as labor costs, consulting fees on the job, materials used, and inspection fees. We incurred a net loss for the three months ended August 31, 2007 of $1,706,872, compared to a net loss of $510,355 for the same period in 2006.  The increase of $1,196,517 in net loss was as a result of increased operational activities during the three months ended August 31, 2007.  Our net loss per share was $0.07 for the three months ended August 31, 2007 compared to $0.03 for the same period in 2006. Our total expenses increased $1,097,002 to $1,610,067 for the three months ended August 31, 2007 as compared to $513,065 for the same period in 2006. The significant increase in total expenses was mainly due to increases in our day to day operating costs and consulting fees, depreciation and loss on disposal of equipment.   15    Our professional fees of $82,631 for the three months ended August 31, 2007 consisted primarily of legal, accounting and auditing fees.  During the three months ended August 31, 2006, our professional fees totaled $66,769. Our management fees of $111,701 for the three months ended August 31, 2007 consisted mainly of amounts paid to our current and former officers.  During the three months ended August 31, 2006, our management expenses were $87,667. The increase of $24,034 in management fees was due to increased salaries of our officers and additional management personnel worked during the three months ended August 31, 2007. Our consulting fees for the three months ended August 31, 2007 increased from $10,500 from the same period in 2006 to $329,989.  The reason for the significant increase was the issuance of stock compensation for our consultants. We incurred no director fees for the three months ended August 31, 2007, and none for the same period in 2006, because of previous pre-payments to our current directors. We have registered a refund of $9,047 in promotion and marketing expenses for the three months ended August 31, 2007 due to reaching a settlement on a marketing contract we decided to cancel.  For the same period in 2006, we had no expenses related to promoting and marketing our company and services. Our other operational expenses increased $746,664 from $348,129 for the three months ended August 31, 2006 to $1,094,793 for the three months ended August 31, 2007.  The increase was mostly due to our stock based compensation, increased day to day operating costs, salaries and benefits, depreciation, loss on disposal of equipment, and general office expenses.    Plan of Operation  We plan to expand 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 restoration of work sites.  Our plan for the next 12 months (beginning December 2007) is to do the following: - build a manufacturing, warehouse and office facility in Brooks, Alberta; - add five nitrogen generation units; - 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, including a new division through Lexcoil.    16    Mobile Well Production Testing Units We completed the construction on two mobile well production testing units. We sold both units in 2006 for approximately $628,000 and made a capital gain of $75,459 on the sales. 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. Our mobile production testing units consist of all the equipment necessary to test a well attached to a tractor, along with a mini mobile office with satellite 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 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 our p-tank business through acquisition. Currently we do not have any p-tanks available for lease or in production. Nitrogen Generation Unit We incorporated a wholly owned subsidiary, Nitro-Gen, in the Province of Alberta, Canada on May 30, 2007 to operate our nitrogen generation unit. Currently, it is generating revenues. We provide our equipment, along with a crew to operate the equipment, to companies engaged in oil and gas exploration activities.  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 98-99.5%. Our nitrogen generation system generates a continuous supply of nitrogen without any of the additional costs associated with liquid systems. We anticipate that we will report revenues from our nitrogen generation in our next quarter.  Over the next 12 months beginning December 2007, if we are successful in raising sufficient capital, we intend to build additional five nitrogen generation units at an estimated cost of $1,730,000 per unit for total costs of approximately $8,650,000. Coring Units Through Lexcore, we operate our activities relating to our coring units. Currently we have two coring units which we have provided, along with a crew to operate the units, to two customers.  The coring units we have designed and built are suitable for use in a variety of drilling operations, including coring, geothermal applications, coal-bed methane and shallow natural gas. Coiled Tubing Units We launched Lexcoil to operate two coiled tubing units in Calgary, Alberta.  On May 24, 2007, Lexcoil entered into two vehicle finance lease agreements with Rocket Leasing to lease two coiled tubing units at a rental price of approximately $22,000 per month each for a term of 48 months.    17    Both units are operational and they are generating revenues now. Coil tubing involves a truck mounted system that uses a continuous string of pipe, which is inserted into a drill hole, to facilitate the use of specialized tools, stimulation fluids, and nitrogen pumping into a well or drill holes. The coiled tubing units are primary used for well cleanouts to enhance or initiate production in oil or gas wells.  Currently, we provide coiled tubing units and services to oil and gas companies in Alberta.  We intend to provide customers with the option of contracting the coiled tubing units in tandem with our nitrogen generation unit. Both units are available to clients on a day-rate contract basis, which shall include operators to support the services. We anticipate that we will report revenues from our coiled tubing units in our next quarter. New Facility We intend to move our headquarters to Brooks, Alberta by July 2008. Brooks is a small town located one and a half hours south of Calgary, Alberta, Canada. 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 intend to build a 10,000 square foot manufacturing and plant 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. We intend to design the facility to be used for in-house engineering and design staff, human resources, accounting and an in-house employee office and development centre. This combination of manufacturing space, warehouse, repair, in-house design facility and office may enable us to have direct feedback from clients, employees and engineers to facilitate a fast reaction to the changing needs of clients and the market. Our intention is to complete design of our facility in Brooks, Alberta and obtain building permits in late 2007, and to begin construction in early 2008.  We anticipate that the construction will take approximately five months. We estimate the costs for the construction of the facility to be approximately $1,100,000, including design. Shallow Gas Drilling On October 2, 2007 we announced that our subsidiary, Lexcore Services has signed a shallow gas drilling contract. Lexcore's rigs has commenced its drilling contract which includes drilling a minimum of 25 wells.  Liquidity and Capital Resources  As of August 31, 2007, we had cash and cash equivalents of $179,200 and a working capital deficiency of $1,419,914. Our accumulated deficit was $6,218,032 at August 31, 2007.  Our net loss of $4,169,472 for the nine months ended August 31, 2007 was mostly funded by our equity financing.  During the nine months ended August 31, 2007, we raised $1,544,533 in equity finance.  The decrease in cash during the nine months ended August 31, 2007 was $460,299.  The decrease was mainly due to the purchase of equipment and increased operational costs.   18    We used net cash of $1,900,155 in operating activities for the nine months ended August 31, 2007 and we used net cash of $184,775 in investing activities.  We received net cash of $1,772,633 from financing activities for the nine months ended August 31, 2007. During the nine months ended August 31, 2007 our monthly cash requirement was approximately $231,659, including $211,128 monthly in operating activities and $20,539 in investment activities.  At the end of the period as at August 31, 2007, we had cash and cash equivalents of $179,200.   We expect to require a total of approximately $11,852,000 to fully carry out our business plan over the next twelve months beginning December 2007. If we are successful in raising significant capital, we intend to build five more nitrogen generation units, complete the purchase of the Brooks property, and build a new manufacturing facility in Brooks, Alberta. Total cash requirements to complete those steps will be approximately $10,150,000 set out as follows: ExpenseAmount ($)Complete the purchase of the Brooks property40,000New Manufacturing Facility in Brooks, Alberta1,100,000Lease down payments for coil tubing inventory180,000Build five Truck Mounted Nitrogen Generation Units8,650,000Costs associated with potential acquisitions and launch of Lexcoil180,000Total10,150,000 For the next twelve months (beginning December 2007) our anticipated operational costs are summarized as follows: ExpenseAmount ($)Current Accounts payable927,000Rent165,000Consulting Fees100,000Management Fees100,000Professional Fees130,000Research and Development50,000Marketing Expenses90,000Travel Expenses50,000Other Administrative Expenses90,000Total1,702,000 Any future revenues we receive we plan to use towards covering our administrative and operating expenses. We require an additional $11,672,800 (total requirements of $11,852,000 less cash and cash equivalents of $179,200) to carry out our planned business operations and expansion over the next 12 months.   19    We registered, on a Form SB-2, declared effective on September 14, 2007, a total of 2,745,365 common shares, of which 600,000 were underlying warrants and options. We intend to try to obtain this financing through internal and external sources, revenues we will generate over the next 12 months and 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. As of October 12, 2007 we are in the final stages of negotiating a loan for $750,000. 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. 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. We have no assurance that future financing will be available to us on acceptable terms.  Obtaining additional financing will be subject to a number of factors including 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.  If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.  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.  If we raise funds through equity or convertible securities, our existing stockholders may experience dilution and our stock price may decline. We have incurred operating losses from our inception and we are dependent upon our ability to raise capital from stockholders or other outside sources to sustain operations.  These factors raise substantial doubt about our ability to continue as a going concern.  Known Material Trends and Uncertainties As of August 31, 2007, 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.   20    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, or changes in 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 note 2 or 3 of the notes to our financial statements for the year ended November 30, 2006 and the nine months ended August 31, 2007. Revenue Recognition We recognize 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, we 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.  We recognize revenue under service contracts as services are performed and collection is reasonably assured.    21    ITEM 3.  CONTROL AND PROCEDURES (a) Evaluation of disclosure controls and procedures Our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures (as defined in Rule 13a-14 (c) of the Securities Exchange Act of 1934 (the Exchange Act) as of a date within 90 days before the filing date of this report and has concluded that as of the evaluation date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit 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. (b) Changes in internal controls Subsequent to the date of their evaluation, there were no significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls.  There were no significant deficiencies or material weaknesses in our internal controls so no corrective actions were taken.   PART II  OTHER INFORMATION  ITEM 1.  LEGAL PROCEEDINGS: 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 2.  UNREGISTERED SALES OF EQUITY SECURITIES: None.  ITEM 3.  DEFAULTS UPON SENIOR SECURITIES: None.  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE SECURITY HOLDERS: None.  ITEM 5.  OTHER INFORMATION: None.     22    ITEM 6.  EXHIBITS Exhibit 
NumberExhibit Description31.1Certification of the Chief Executive Officer and 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 and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Lexington Energy Services Inc.(Registrant)/s/ Brent NimeckDate: October 17, 2007Brent NimeckDirector , President, Chief Executive Officer,Chief Financial Officer    23