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UNITED STATESSECURITIES 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, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGEACT 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)

|Nevada                                           | N/A                                 
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|207 West Hastings Street, Suite 1209, Vancouver, | V6B 1H7                             
|British Columbia, Canada                         |                                     
|(Address of principal executive offices)         | (Zip Code)                          

604-899-4550(Registrants telephone number,
including area code)

______________________________________________________(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 November 2, 2006, the registrants outstanding common
stock consisted of 19,625,760shares.

i

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PART I  FINANICAL INFORMATION

ITEM 1. FINANICAL STATEMENTS

The unaudited 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.(A Development Stage Company) 
  August 31, 2006 
  (unaudited)

Index

|Consolidated Balance Sheets                          | F1
|---------------------------------------------------- | ---
|                                                     |    
|Consolidated Statements of Operations                | F2
|                                                     |    
|Consolidated Statements of Cash Flows                | F3
|                                                     |    
|Consolidated Statement of Stockholders'
      Equity | F4
|                                                     |    
|Notes to the Consolidated Financial Statements       | F5

1

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LEXINGTON ENERGY SERVICES INC.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2006

(Stated in US Dollars)

(Unaudited)

---

LEXINGTON ENERGY SERVICES INC.
  (A Development Stage Company) 
  INTERIM CONSOLIDATED BALANCE SHEETS 
  August 31, 2006 and November 30, 2005 
  (Stated in US Dollars) 
  (Unaudited)

|                                                        |                                              |           | August 31, |   |         | November 30, | 
|------------------------------------------------------- | -------------------------------------------- | --------- | ---------- | - | ------- | ------------ | 
|                                                        |                                              |           | 2006       |   |         | 2005         | 
|**ASSETS**                                              |                                              |           |            |   |         |             
|Current                                                 |                                              |           |            |   |         |              | 
|Cash                                                    |                                              | $         | 946,694    |   | $       | 71,850       | 
|Amount receivable                                       |                                              | 36,291    |            |   | -       |             
|Inventory                                               |                                              |           | 64,590     |   |         | -            | 
|Prepaid expenses and refundable
      deposits  Note 5 |                                              | 23,770    |            |   | 4,042   |             
|Stock subscriptions
      receivable                    |                                              | -         |            |   | 10,000  |             
|                                                        |                                              |           |            |   |         |              | 
|                                                        |                                              |           | 1,071,345  |   |         | 85,892       | 
|Due from related parties  Note 5                       |                                              | 23,125    |            |   | -       |             
|Equipment  Note 4                                      |                                              | 124,420   |            |   | 3,307   |             
|Deposits on equipment  Note 7                          |                                              | 1,341,483 |            |   | -       |             
|Deposit on land  Note 7                                |                                              | 178,571   |            |   | -       |             
|                                                        |                                              |           |            |   |         |              | 
|                                                        |                                              | $         | 2,738,944  |   | $       | 89,199       | 
|                                                        |                                              |           |            |   |         |              | 
|LIABILITIES                                             |                                              |           |            |   |         |             
|                                                        |                                              |           |            |   |         |              | 
|Current                                                 |                                              |           |            |   |         |              | 
|Accounts payable and accrued
      liabilities          | $                                            | 110,360   |            | $ | 8,404   |             
|Due to related
      parties  Note 5                   |                                              | -         |            |   | 10,909  |             
|                                                        |                                              |           |            |   |         |              | 
|                                                        |                                              |           | 110,360    |   |         | 19,313       | 
|                                                        |                                              |           |            |   |         |              | 
|STOCKHOLDERS
      EQUITY                              |                                              |           |            |   |         |             
|                                                        |                                              |           |            |   |         |              | 
|Capital stock  Notes 6 and
      8                     |                                              |           |            |   |         |             
|Authorized:                                             |                                              |           |            |   |         |              | 
|20,000,000                                              | preferred shares with a par value of $0.0001 |           |            |   |         |              | 
|100,000,000                                             | common shares with a par value of $0.0001    |           |            |   |         |              | 
|Issued:                                                 |                                              |           |            |   |         |              | 
|17,835,578                                              | common shares (November 30, 2005: 12,365,000 |           |            |   |         |              | 
|                                                        | common shares)                               |           | 1,783      |   |         | 1,237        | 
|Additional paid-in capital                              |                                              | 3,768,294 |            |   | 155,763 |             
|Stock subscriptions receivable                          |                                              | (217,700  | )          |   | (10,000 | )           
|Deficit accumulated during the development stage        |                                              | (923,793  | )          |   | (77,114 | )           
|                                                        |                                              |           |            |   |         |              | 
|                                                        |                                              |           | 2,628,584  |   |         | 69,886       | 
|                                                        |                                              |           |            |   |         |              | 
|                                                        |                                              | $         | 2,738,944  |   | $       | 89,199       | 

SEE ACCOMPANYING NOTES

---

LEXINGTON ENERGY SERVICES INC.
  (A Development Stage Company) 
  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 
  for the three and nine months ended August 31, 2006 and 
  for the period March 30, 2005 (Date of Inception) to August 31, 2006 
  (Stated in US Dollars) 
  (Unaudited)

|                                              |   |              |   |   |             |   |   | March 30,     |  
|--------------------------------------------- | - | ------------ | - | - | ----------- | - | - | ------------- | -
|                                              |   |              |   |   |             |   |   | 2005          |  
|                                              |   | Three months |   |   | Nine months |   |   | (Date of      |  
|                                              |   | ended        |   |   | ended       |   |   | Inception) to |  
|                                              |   | August 31,   |   |   | August 31,  |   |   | August 31,    |  
|                                              |   | 2006         |   |   | 2006        |   |   | 2006          |  
|                                              |   |              |   |   |             |   |   |               |  
|Interest income                               | $ | 2,710        |   | $ | 5,123       |   | $ | 5,123         |  
|                                              |   |              |   |   |             |   |   |               |  
|Expenses                                      |   |              |   |   |             |   |   |               |  
|Professional fees                             |   | 66,769       |   |   | 139,697     |   |   | 176,633       |  
|Management fees 
      Note 5                |   | 87,667       |   |   | 148,574     |   |   | 175,348       |  
|Consulting fees  Note 5                      |   | 10,500       |   |   | 38,271      |   |   | 38,271        |  
|General and administrative                    |   | 348,129      |   |   | 525,260     |   |   | 538,664       |  
|                                              |   |              |   |   |             |   |   |               |  
|                                              |   | (513,065     | ) |   | (851,802    | ) |   | (928,916      | )
|                                              |   |              |   |   |             |   |   |               |  
|Net loss for the period                       | $ | (510,355     | ) | $ | (846,679    | ) | $ | (923,793      | )
|                                              |   |              |   |   |             |   |   |               |  
|Net loss per share, basic and diluted         | $ | (0.03        | ) | $ | (0.06       | ) |   |               |  
|                                              |   |              |   |   |             |   |   |               |  
|Weighted average number of shares outstanding |   | 15,765,000   |   |   | 14,333,000  |   |   |               |  

SEE ACCOMPANYING NOTES

---

LEXINGTON ENERGY SERVICES INC.
  (A Development Stage Company) 
  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 
  for the nine months ended August 31, 2006 and
  for the period March 30, 2005 (Date of Inception) to August 31, 2006 
  (Stated in US Dollars) 
  (Unaudited)

|                                                    |   |             |   |   | March 30,     |  
|--------------------------------------------------- | - | ----------- | - | - | ------------- | -
|                                                    |   | Nine months |   |   | 2005 (Date of |  
|                                                    |   | ended       |   |   | Inception) to |  
|                                                    |   | August 31,  |   |   | August 31,    |  
|                                                    |   | 2006        |   |   | 2006          |  
|                                                    |   |             |   |   |               |  
|Operating Activities                                |   |             |   |   |               |  
|Net loss                                            | $ | (846,679    | ) | $ | (923,793      | )
|Adjustments to reconcile
      loss to cash used by |   |             |   |   |               |  
|operating activities                                |   |             |   |   |               |  
|Amortization                                        |   | 4,439       |   |   | 6,092         |  
|Stock-based compensation                            |   | 77,000      |   |   | 77,000        |  
|Changes in non-cash working
      capital:          |   |             |   |   |               |  
|Amount receivable                                   |   | (36,291     | ) |   | (36,291       | )
|Inventory                                           |   | (64,590     | ) |   | (64,590       | )
|Prepaid expenses and
      refundable deposits      |   | (19,728     | ) |   | (23,770       | )
|Accounts
      payable and accrued liabilities      |   | 101,956     |   |   | 110,360       |  
|Due to/from related
      parties                   |   | (34,034     | ) |   | (23,125       | )
|                                                    |   |             |   |   |               |  
|Cash flows used in operating activities             |   | (817,927    | ) |   | (878,117      | )
|                                                    |   |             |   |   |               |  
|Investing Activities                                |   |             |   |   |               |  
|Purchase of equipment                               |   | (125,552    | ) |   | (130,512      | )
|Deposits on equipment                               |   | (1,341,483  | ) |   | (1,341,483    | )
|Deposit on land                                     |   | (178,571    | ) |   | (178,571      | )
|                                                    |   |             |   |   |               |  
|Cash flows used in investing activities             |   | (1,645,606  | ) |   | (1,650,566    | )
|                                                    |   |             |   |   |               |  
|Financing Activities                                |   |             |   |   |               |  
|Common stock issued for cash                        |   | 3,556,077   |   |   | 3,693,077     |  
|Common stock subscription
      receivable          |   | (217,700    | ) |   | (217,700      | )
|                                                    |   |             |   |   |               |  
|Cash flows provided by financing activities         |   | 3,338,377   |   |   | 3,475,377     |  
|                                                    |   |             |   |   |               |  
|Increase in cash during the period                  |   | 874,844     |   |   | 946,694       |  
|                                                    |   |             |   |   |               |  
|Cash, beginning of the period                       |   | 71,850      |   |   | -             |  
|                                                    |   |             |   |   |               |  
|Cash, end of period                                 | $ | 946,694     |   | $ | 946,694       |  

SEE ACCOMPANYING NOTES

---

LEXINGTONENERGYSERVICESINC.
  (A Development Stage Company) 
  INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY 
  for the period March 30, 2005 (Date of Inception) to August 31, 2006 
  (Stated in US Dollars) 
  (Unaudited )

|                                          |  |              |  |   |        |  |   |              |   |   |            |  |   | Deficit     |   |   |         |  
|----------------------------------------- |  | ------------ |  | - | ------ |  | - | ------------ | - | - | ---------- |  | - | ----------- | - | - | ------- | -
|                                          |  |              |  |   |        |  |   |              |   |   |            |  |   | Accumulated |   |   |         |  
|                                          |  | Common Stock |  |   | Share  |  |   | Additional   |   |   | During the |  |   |             |  
|                                          |  | Number of    |  |   |        |  |   | Subscription |   |   | Paid in    |  |   | Development |   |   |         |  
|                                          |  | Shares       |  |   | Amount |  |   | Received     |   |   | Capital    |  |   | Stage       |   |   | Total   |  
|                                          |  |              |  |   |        |  |   |              |   |   |            |  |   |             |   |   |         |  
|Issuance of common shares for cash        |  |              |  |   |        |  |   |              |   |   |            |  |   |             |   |   |         |  
|- at $0.0001 per share at June 1, 2005    |  | 10,000,000   |  | $ | 1,000  |  | $ | -            |   | $ | -          |  | $ | -           |   | $ | 1,000   |  
|Issuance of common shares for cash        |  |              |  |   |        |  |   |              |   |   |            |  |   |             |   |   |         |  
|- at $0.03 per share at November 2, 2005  |  | 1,150,000    |  |   | 115    |  |   | -            |   |   | 34,385     |  |   | -           |   |   | 34,500  |  
|Issuance of commons shares for cash       |  |              |  |   |        |  |   |              |   |   |            |  |   |             |   |   |         |  
|- at $0.10 per share at November 16, 2005 |  | 1,215,000    |  |   | 122    |  |   | (10,000      | ) |   | 121,378    |  |   | -           |   |   | 111,500 |  
|Net loss for the period                   |  | -            |  |   | -      |  |   | -            |   |   | -          |  |   | (77,114     | ) |   | (77,114 | )
|                                          |  |              |  |   |        |  |   |              |   |   |            |  |   |             |   |   |         |  
|Balance, November 30, 2005                |  | 12,365,000   |  |   | 1,237  |  |   | (10,000      | ) |   | 155,763    |  |   | (77,114     | ) |   | 69,886  |  

/contd

SEE ACCOMPANYING NOTES

---

Continued

LEXINGTONENERGYSERVICESINC.
  (A Development Stage Company) 
  INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY 
  for the period March 30, 2005 (Date of Inception) to August 31, 2006 
  (Stated in US Dollars) 
  (Unaudited )

|                                                |  |              |   |   |        |   |   |              |   |   |            |   |   | Deficit     |   |   |           |  
|----------------------------------------------- |  | ------------ | - | - | ------ | - | - | ------------ | - | - | ---------- | - | - | ----------- | - | - | --------- | -
|                                                |  |              |   |   |        |   |   |              |   |   |            |   |   | Accumulated |   |   |           |  
|                                                |  | Common Stock |   |   | Share  |   |   | Additional   |   |   | During the |   |   |             |  
|                                                |  | Number of    |   |   |        |   |   | Subscription |   |   | Paid in    |   |   | Development |   |   |           |  
|                                                |  | Shares       |   |   | Amount |   |   | Received     |   |   | Capital    |   |   | Stage       |   |   | Total     |  
|                                                |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|Balance, November 30, 2005                      |  | 12,365,000   |   |   | 1,237  |   |   | (10,000      | ) |   | 155,763    |   |   | (77,114     | ) |   | 69,886    |  
|Common shares cancelled                         |  | (100,000     | ) |   | (10    | ) |   | -            |   |   | (9,990     | ) |   | -           |   |   | (10,000   | )
|Share subscriptions received                    |  | -            |   |   | -      |   |   | 10,000       |   |   | -          |   |   | -           |   |   | 10,000    |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.20 per share at
      December 12, 2005 |  | 260,000      |   |   | 26     |   |   | -            |   |   | 51,974     |   |   | -           |   |   | 52,000    |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.20 per share at
      December 21, 2005 |  | 200,000      |   |   | 20     |   |   | -            |   |   | 39,980     |   |   | -           |   |   | 40,000    |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.50 per share at
      February 17, 2006 |  | 516,000      |   |   | 51     |   |   | -            |   |   | 257,949    |   |   | -           |   |   | 258,000   |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.50 per share at
      March 8, 2006     |  | 225,000      |   |   | 22     |   |   | -            |   |   | 112,478    |   |   | -           |   |   | 112,500   |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.50 per share at
      March 24, 2006    |  | 930,930      |   |   | 93     |   |   | -            |   |   | 465,372    |   |   | -           |   |   | 465,465   |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.50 per share at
      April 18, 2006    |  | 866,696      |   |   | 87     |   |   | -            |   |   | 433,261    |   |   | -           |   |   | 433,348   |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $0.50 per share at
      April 25, 2006    |  | 4,000        |   |   | 1      |   |   | -            |   |   | 1,999      |   |   | -           |   |   | 2,000     |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $ 0.85 per share at
      August 1, 2006   |  | 431,618      |   |   | 43     |   |   | -            |   |   | 366,832    |   |   | -           |   |   | 366,875   |  
|Issuance of common shares for cash              |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|- at $ 0.85 per share at
      August 28, 2006  |  | 2,136,334    |   |   | 213    |   |   | (217,700     | ) |   | 1,815,676  |   |   |             |   |   | 1,598,189 |  
|Stock-based compensation                        |  | -            |   |   | -      |   |   | -            |   |   | 77,000     |   |   | -           |   |   | 77,000    |  
|Net loss for the period                         |  | -            |   |   | -      |   |   | -            |   |   | -          |   |   | (846,679    | ) |   | (846,679  | )
|                                                |  |              |   |   |        |   |   |              |   |   |            |   |   |             |   |   |           |  
|Balance, August 31, 2006                        |  | 17,835,578   |   | $ | 1,783  |   | $ | (217,700     | ) | $ | 3,768,294  |   | $ | (923,793    | ) | $ | 2,628,584 |  

SEE ACCOMPANYING NOTES

---

LEXINGTON ENERGY SERVICES INC.
  (A Development Stage Company) 
  NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 
  August 31, 2006
  (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, 2005 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, 2005 annual financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Operating results for the nine months ended August 31,
        2006 are not necessarily indicative of the results that can be expected
        for the year ended November 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Note 2 | Continuance of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | 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 August 31, 2006,
        the Company had not yet achieved profitable operations, has accumulated
        losses of $923,793 since its inception 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.

---

Lexington Energy Services Inc. 
  (A Development Stage Company) 
  Notes to the Interim Consolidated Financial Statements 
  August 31, 2006 
  (Stated in US Dollars)
  (Unaudited)  Page 2

|Note 3 | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | These consolidated financial statements have been prepared
        in accordance with generally accepted accounting principles in the United
        States of America. 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 judgement. Actual results may differ from
        these estimates.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The financial statements, in managements opinion,
        have been properly prepared within the framework of the significant accounting
        policies summarized below:                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | These consolidated financial statements include the
        accounts of the Company and its wholly-owned subsidiary, Lexcore Services
        Inc. All inter-company transactions and account balances have been eliminated.                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Inventory, which is comprised of parts for machinery
        currently under construction by the Company for resale to customers in
        the oil and gas industry, is valued at the lower of cost and net realizable
        value. Cost is determined using the specific cost method.                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Note 4 | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |  |                              |   | August 31, 2006   | 
| |  | ---------------------------- | - | ----------------- | 
| |  |                              |   |                   | 
| |  |                              |   | Cost              | 
| |  |                              |   |                   | 
| |  | Computer and equipment       | $ | 14,723            | 
| |  | Office equipment             |   | 6,279             | 
| |  | Furniture                    |   | 14,948            | 
| |  | Tools & equipment            |   | 6,024             | 
| |  | Leasehold improvements       |   | 1,875             | 
| |  | Machinery under construction |   | 86,663            | 
| |  |                              |   |                   | 
| |  |                              |   | 130,512           | 
| |  |                              |   |                   | 
| |  |                              |   | November 30, 2005 | 
| |  |                              |   |                   | 
| |  |                              |   | Cost              | 
| |  |                              |   |                   | 
| |  | Computer equipment           | $ | 4,961             | 

---

Lexington Energy Services Inc. 
  (A Development Stage Company) 
  Notes to the Interim Consolidated Financial Statements 
  August 31, 2006 
  (Stated in US Dollars)
  (Unaudited)  Page 3

|Note 5 | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | During the period ended August 31, 2006:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Note 6 | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company has 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 its stock options on options granted to employees and
        directors. Under APB 25, compensation expense is only recorded to the
        extent that the exercise price is less 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.

---

Lexington Energy Services Inc. 
  (A Development Stage Company) 
  Notes to the Interim Consolidated Financial Statements 
  August 31, 2006 
  (Stated in US Dollars)
  (Unaudited)  Page 4

|Note 6 | Stock Options (contd)                                                              
|------ | -------------------------------------------------------------------------------------
|       |                                                                                      
|       | The following table summarizes the continuity of the
        Companys stock options:

| |  |                                |  |           |   | Weighted       | 
| |  | ------------------------------ |  | --------- | - | -------------- | 
| |  |                                |  | Number of |   | Average        | 
| |  |                                |  | Shares    |   | Exercise Price | 
| |  |                                |  |           |   |                | 
| |  | Outstanding, November 30, 2005 |  | 875,000   |   | $0.10          | 
| |  | Granted                        |  | 2,600,000 |   | $0.56          | 
| |  | Cancelled                      |  | (125,000  | ) | $0.10          | 
| |  |                                |  |           |   |                | 
| |  | Outstanding, August 31, 2006   |  | 3,350,000 |   |                | 

The fair value of the stock options granted during the nine months
  ended August 31, 2006 of $77,000 was determined using the Black-Scholes option
  pricing model with the following assumptions:

| |  | Expected dividend yield         |  | 0%            | 
| |  | ------------------------------- |  | ------------- | 
| |  | Risk-free interest rate         |  | 2.18% - 3.18% | 
| |  | Expected volatility             |  | 0%            | 
| |  | Expected option life (in years) |  | 2 years       | 

Additional information regarding options outstanding as at August
  31, 2006 is as follows:

| |  |          |  | Outstanding |  |  | Exercisable  | 
| |  | -------- |  | ----------- |  |  | ------------ | 
| |  |          |  |             |  |  | Weighted     | 
| |  |          |  |             |  |  | Average      | 
| |  |          |  |             |  |  | Remaining    | 
| |  | Exercise |  | Number of   |  |  | Contractual  | 
| |  | Prices   |  | Shares      |  |  | Life (years) | 
| |  |          |  |             |  |  |              | 
| |  | $0.10    |  | 750,000     |  |  | 1.17         | 
| |  | $0.20    |  | 150,000     |  |  | 1.33         | 
| |  | $0.50    |  | 370,000     |  |  | 1.50         | 
| |  | $0.50    |  | 860,000     |  |  | 1.42         | 
| |  | $0.50    |  | 620,000     |  |  | 1.75         | 
| |  | $0.85    |  | 200,000     |  |  | 1.75         | 
| |  | $0.85    |  | 400,000     |  |  | 2.00         | 
| |  |          |  |             |  |  |              | 
| |  |          |  | 3,350,000   |  |  |              | 

---

Lexington Energy Services Inc. 
  (A Development Stage Company) 
  Notes to the Interim Consolidated Financial Statements 
  August 31, 2006 
  (Stated in US Dollars)
  (Unaudited)  Page 5

|Note 7 | Commitments Note 6           
|------ | ------------------------------
|       |                               
|       | a)                            
|       |                               
|       | b)                            
|       |                               
|       | c)                            
|       |                               
|       | d)                            
|       |                               
|       | e)                            
|Note 8 | Subsequent Events             
|       |                               
|       | Subsequent to August 31, 2006:
|       |                               
|       | a)                            
|       |                               
|       | b)                            
|       |                               
|       | c)                            
|       |                               
|       | d)                            

---

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

Lexington was incorporated as a Nevada company on March 30,
2005. We are a development stage company. We have only recently begun our
current operations. As of August 31, 2006, we have not yet earned any revenues,
have had operational losses to date and we have an accumulated deficit. As of
August 31, 2006, we had net losses since inception in the amount of $923,793.

We have two wholly-owned subsidiaries, Lexcore Services Inc.,
incorporated as a Nevada company on April 28, 2006, and Lexcoil Inc.,
incorporated in the State of Nevada on October 3, 2006.

We are an oil field service company in the business of building
and leasing oilfield service equipment to oil and gas companies and other oil
field service companies in Western Canada. We design, build, lease and in some
cases operate the following mobile equipment for use in oil and gas fields:

- drilling units primarily for use in core sampling for tar sands and coal
  bed methane gas;
- nitrogen generation units for providing nitrogen in drilling operations;
  and
- well testing units to test oil well capabilities and size.

Description of Property

Our principal executive offices are located at Suite 1209  207
West Hastings Street, Vancouver, British Columbia, Canada. The office is
approximately 463 square feet.

We also intend to build a 10,000 square foot manufacturing and
repair facility with a connected 2,000 square foot office space in Brooks,
Alberta, Canada. On February 23, 2006 we entered into an agreement with Jackson
Cattle Co. Ltd. to purchase approximately 8.2 acres of raw land in Brooks for a
total purchase price of $221,528. As of August 31, 2006, we have paid $178,571
towards the purchase price and we expect to close the purchase within the next
30 days.

2

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We have entered into an agreement to lease a facility in Calgary, Alberta for our wholly owned subsidiary, Lexcore. The agreement with First Truck Centre (Edmonton) Inc., effective as of July 1, 2006, is a sublease granting us lease of premises at
234125 Wrangler Road SE, RR #5, Calgary, Alberta T2P 2G6 for a term of four years from July 1, 2006 and ending July 31, 2010, for an annual rent of approximately $165,000, for monthly installments of approximately $13,600, plus taxes and
utilities.

Results of Operations for the Three Months and Nine Months ended August 31, 2006 and for the Period from March 30, 2005 (Date of Inception) to August 31, 2006

Since our inception on March 30, 2005 to August 31, 2006, we did not generate any revenues, although we received interest income of $5,123 for the nine months ended August 31, 2006. For the nine months ended August 31, 2006 we incurred a net
loss of ($846,679), compared to a net loss of ($510,355) for the three months ended August 31, 2006. From March 30, 2005 (date of inception) to August 31, 2006, we incurred a net loss of ($923,793). Our net loss per share was ($0.03)
for the three months ended August 31, 2006 and ($0.06) for the nine months ended August 31, 2006.

Our total expenses were $513,065 for the three months ended
  August 31, 2006, including $66,769 in professional fees, $87,667 in management
  fees, $10,500 in consulting fees, and $348,129 in general and administrative
  fees. Our administrative expenses consist of salaries, marketing and promotion,
  tradeshow costs, travel, meals and entertainment, rent, office maintenance,
  communication expenses (cellular, internet, fax, telephone), office supplies,
  courier and postage costs and office supplies. Our expenses for the nine months
  ended August 31, 2006 were $851,802. From March 30, 2005 (date of inception)
  to August 31, 2006, our general and administrative fees were $538,664.

Our professional fees of $66,769 for the three months ended August 31, 2006 consisted primarily of legal, accounting and auditing fees. From March 30, 2005 (date of inception) to August 31, 2006, our legal and accounting costs totaled
$176,633.

Our management fees of $87,667 for the three months ended August 31, 2006 consisted mainly of amounts paid to the former CFO, and fees paid to our current officers. From March 30, 2005 (date of inception) to August 31, 2006, our management
expenses were $175,348.

Our consulting fees for the three months ended August 31, 2006 were $10,500. From March 31, 2005 (date of inception) to August 31, 2006, we incurred consulting expenses of $38,271.

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 the winter 2006) includes the following:

3

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- complete purchase of land and build a manufacturing, warehouse and office facility;
- build oilfield service equipment and continue developing long term contracts with service companies;
- 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.

Mobile Well Production Testing Units

We completed the construction on one of two mobile well production
  testing units that we had been working on. We sold one of the units subsequent
  to August 31, 2006 for approximately $260,000. We expect the remaining mobile
  well production testing unit to be completed within the month. The units consist
  of three major components, a pressure vessel (p-tank) mounted on a trailer,
  a flare stack and a dog house. There are many suppliers of parts for these components.
  Brent Nimeck, our VP, Operations, through his company Southern Well Testing
  Ltd., has many established relationships with suppliers for the parts to build
  these components. The major components include all the equipment necessary to
  test a well, a tractor, along with parts to construct a mini mobile office.

We entered into two agreements to lease out our p-tanks, but
  one of those agreements was terminated by mutual agreement. These agreements
  are for the lease of only one of the components of the well testing unit, the
  mobile p-tanks.

Southern Well Testing Ltd., a company controlled by our director
  and VP, Brent Nimeck, entered into an agreement with us on January 5, 2006 whereby
  it agreed to lease a p-tank vessel for 48 months for approximately $6,105 per
  month commencing on June 1, 2006, or later if the p-tank is not ready. The agreement
  states that if the p-tank is not ready by June 1, 2006, commencement of the
  lease payments will be delayed until the first of the month following the month
  in which the p-tank is made available by us for lease. On November 1, 2006,
  both parties agreed to terminate the agreement, effective immediately, with
  no penalty or costs to be paid by either party. We sold our first mobile well
  production testing unit without the dog house for approximately $260,000. Our
  management decided to sell the unit and put the money towards our coring division,
  which we anticipate will have a much higher profit margin.

Southern Well Testing (2005) Ltd., also controlled by our director
  Brent Nimeck, entered into an agreement with us on February 3, 2006 to lease
  a p-tank vesselon 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
  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. This agreement continues to be in effect, and we anticipate that
  we will be able to deliver the product to the customer by December, 2006. If
  all of our cash requirements to develop all of our divisions are not met, we
  may negotiate the cancellation of this agreement and sell the unit.

4

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If we fail to complete the p-tank within a reasonable time, we
may not be able to generate revenues pursuant to the leases we have already
entered into, which could prevent us from becoming profitable. It is our
intention to lease the p-tank vessel as a complete package and we are currently
negotiating leasing the other components of the package to Southern Well Testing
Inc., a company controlled by our Director and Senior VP, Operations, Brent
Nimeck.

Nitrogen Generation Unit

The following table provides details of the payments we have
made and are obligated to make for the nitrogen generation unit we have already
ordered.

Part
      Supplier
      Paid to Date ($)
      Amount Due ($)
      Date of Anticipated
      PaymentNitrogen 
        Generation Unit
      Innovative Nitrogen 
        Systems
      1,273,734
      141,525
      Due now


If we fail to make the above described payment, we may lose our
deposit, or we may be required to pay higher costs and wait a longer period for
delivery of the nitrogen unit. After the nitrogen unit has been completed, we
expect to spend another $200,000 per year for modification and maintenance of
the unit. We are not dependent on any raw materials for the operation of the
unit. The unit has been designed to convert oxygen from the atmosphere into
nitrogen. The design of the unit relies on common processes to convert the
oxygen.

Coring Units

Our total cost of building each coring unit will be approximately
  $1,213,910, including a cost of approximately $606,955 for a drilling rig for
  each unit. Subsequent to August 31, 2006, we paid our supplier, Laibe Corp.,
  our supplier, for both rigs in full. The rigs are now at our facility in Calgary,
  Alberta for additional assembly and construction.

Liquidity and Capital Resources

As of August 31, 2006, we had a working capital surplus of
$960,985. Our accumulated deficit was $923,793 at August 31, 2006. Our net loss
of $923,793 from March 31, 2005 (inception) to August 31, 2006 was mostly funded
by our equity financing. During the nine months ended August 31, 2006, we raised
$3,338,377 in equity finance. The increase in cash during the nine months ended
August 31, 2006 was $874,844. The increase was due to our equity financing
activities.

5

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Net cash used in operations for the nine months ended August
31, 2006 was $817,927 and net cash used in investing activities was $1,645,606.
Investing activities during the nine months ended August 31, 2006 included
$1,467,035 for equipment purchase and deposit and $178,571 for deposit on land.
During the nine months ended August 31, 2006 our monthly cash requirement was
approximately $274,000, including $91,000 monthly in operating activities and
$183,000 in equipment and land purchases. At the end of the period as at August
31, 2006, we had cash of $946,694, which we anticipate will cover our costs for
approximately 3.5 months according to our current monthly burn rate.

We anticipate that after four months our monthly expenses will
increase to $350,000, which includes $150,000 monthly for general and
administrative expenses. We are anticipating an increase of $15,000 per month in
expenses with the addition of consultants or employees.

We anticipate that we will incur substantial losses over the
  next two years. We estimate that we will purchase parts for well testing equipment
  and two drilling rigs, construct nitrogen generation unit, complete property
  purchase in Brooks, and design and build operating facility over the next 12
  months beginning the winter 2006. Total cash requirements to complete those
  steps will be approximately $4,125,435 set out as follows:

Expense
    AmountConstruction of
      nitrogen generation unit
      141,525Purchase of remaining parts for our coring units
      1,213,910Complete property
      purchase in Brooks
    36,000Design and build
      operating facility
    740,000Administrative
      expenses
    1,994,000Total
      4,125,435


Of the $4,125,435 we need for the next 12 months, we had $946,694
  in cash or cash equivalents as of August 31, 2006, and since August 31, 2006,
  we raised $1,521,655 pursuant to a registered public offering on Form SB-2.
  The balance of our cash requirements for the next 12 months (approximately $1,657,086)
  we intend to raise from private placements and possibly a registered public
  offering (either self-underwritten or through a broker-dealer) within the next
  few months. At this time we do not have any commitments from any broker-dealer
  to provide us with financing.

If we are unsuccessful in raising enough money through future
  capital raising efforts, we may review other financing possibilities such as
  bank loans. If we cannot raise at least $1,657,086, we will not be able to carry
  out our full business plan and we may not be able to become profitable and we
  may have to cease operations.

On September 22, 2006, we registered 8,963,626 common shares
  to be sold by existing shareholders and up to 5,000,000 common shares by a direct
  offering. We closed the direct offering on October 24, 2006, after raising a
  total of $1,521,655 through the sale of 1,790,183 shares. We intend to deregister
  the remaining 3,209,818 shares that were registered on Form SB-2 pursuant to
  our direct offering.

6

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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 are a development stage company and have generated no revenues. 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 sources to sustain operations. These factors raise substantial doubt about our ability to continue as a going
concern.

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 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 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.

Certain Relationships and Related Party Transactions

We have entered into two agreements to lease out part of our
  mobile p-tanks, once we have completed building them. Southern Well Testing
  Ltd., a company controlled by our director and VP, Brent Nimeck, entered into
  an agreement with us on January 5, 2006 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 is not ready. If the p-tank is not ready by June 1, 2006, commencement
  of the lease payments will be delayed until the first of the month following
  the month in which the p-tank is made available by us for lease. On November
  1, 2006, both parties agreed to terminate the agreement, effective immediately,
  with no penalty or costs to be paid by either party.

7

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Southern Well Testing (2005) Ltd., also controlled by our director
  Brent Nimeck, entered into an agreement with us on February 3, 2006 to lease
  a p-tank 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 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.

We pay Brent Nimeck, our senior Vice-President of Operations,
  approximately $65,000 annually and 250,000 stock options for his services according
  to his employment agreement. We pay Larry Kristof, our President, CEO and CFO,
  approximately $87,000 annually and 250,000 stock options for his services based
  on his employment agreement. We are currently negotiating increases in salary
  for both Mr. Kristof and Mr. Nimeck.

Other than these agreements and employment agreements described above, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family
members of these persons wherein the amount involved in the transaction or a series of similar transactions exceeded $60,000.

Known Material Trends and Uncertainties

As of August 31, 2006, 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, or changes in general economic conditions.

8

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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 3 of the notes to our historical financial
statements. We have identified below the accounting policy that is 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.

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 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.

9

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PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS:

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party 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. Management is not aware of any other legal proceedings that have been threatened against us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES:

On May 17, 2006, we issued our officer of one subsidiary options to purchase 200,000 common shares at a price of $0.85 each. The options may be exercised until the date of termination of his employment agreement or until May 17, 2008, expiration
date, whichever occurs earlier.

On May 17, 2006, we issued our officers and legal counsel options to purchase a total of 600,000 common shares at a price of $0.50 each until May 17, 2008.

On May 17, 2006, we issued our consultant options to purchase 20,000 common shares at a price of $0.50. The options may be exercised until the date of termination of the consulting agreement or until May 17, 2008, whichever occurs earlier.

On August 1, we issued two persons options to purchase a total of 400,000 common shares at a price of $0.85 each until August 1, 2008.

In August 2006, we issued 2,567,952 common shares to investors at $0.85 per share, for cash proceeds of approximately $2,182,759.

In October 2006, we issued five consultants options to purchase a total of 95,000 common shares at a price of $0.85 each until October 2008.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

None

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

None

ITEM 5. OTHER INFORMATION:

Southern Well entered into an agreement with us on January
  5, 2006 whereby it agreed to lease a p-tank mobile testing unit for 48 months
  for $6,105 per month commencing on June 1, 2006, or later if the p-tank is not
  ready. If the p-tank is not ready by June 1, 2006, commencement of the lease
  payments will be delayed until the first of the month following the month in
  which the p-tank is made available by us for lease.

On November 1, 2006, Southern Well Testing Ltd., a company
  controlled by our director and VP, Brent Nimeck agreed with us to terminate
  the agreement we entered into with Southern Well Testing on January 5, 2006
  for the lease of a p-tank. The agreement was terminated as of November 1, 2006,
  with no penalty or costs to be paid by either party.

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ITEM 6. EXHIBITS

|Exhibit 
      Number | Exhibit 
      Description                                                                                                                                                                                      
|--------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |                                                                                                                                                                                                                 
|10.1                  | P-tank Lease Agreement between Lexington
        and Southern Well Testing Ltd. dated January 5, 2006 (1)                                                                                                       
|                      |                                                                                                                                                                                                                 
|10.2                  | P-tank Lease Agreement between Lexington
        and Southern Well Testing (2005) Ltd. dated February 3, 2006 (1)                                                                                               
|                      |                                                                                                                                                                                                                 
|10.3                  | Real Estate Purchase Contract between
        Lexington and Jackson Cattle Co. Ltd. dated February 3, 2006 (1)                                                                                                  
|                      |                                                                                                                                                                                                                 
|10.4                  | Douglas Blackman Management Agreement
        dated November 17, 2005 (1)                                                                                                                                       
|                      |                                                                                                                                                                                                                 
|10.5                  | Larry Kristof Employment Agreement (2)                                                                                                                                                                          
|                      |                                                                                                                                                                                                                 
|10.6                  | Brent Nimeck Employment Agreement (2)                                                                                                                                                                           
|                      |                                                                                                                                                                                                                 
|10.7                  | Nitrogen Generation Unit Invoice dated
        June 23, 2006 (2)                                                                                                                                                
|                      |                                                                                                                                                                                                                 
|10.8                  | Drilling Rig 1 Invoice (2)                                                                                                                                                                                      
|                      |                                                                                                                                                                                                                 
|10.9                  | Drilling Rig 2 Invoice (2)                                                                                                                                                                                      
|                      |                                                                                                                                                                                                                 
|10.10                 | Addendum to Real Estate Purchase Agreement
        with Jackson Cattle Co. Ltd. (2)                                                                                                                             
|                      |                                                                                                                                                                                                                 
|10.11                 | Agreement to purchase Horizontal Separator
        from Bromley Mechanical Services (2)                                                                                                                         
|                      |                                                                                                                                                                                                                 
|10.12                 | Amendment dated August 2, 2006 to Real
        Estate Purchase Agreement with Jackson Cattle Co. Ltd. (3)                                                                                                       
|                      |                                                                                                                                                                                                                 
|10.13                 | Letter of Intent dated August 2, 2006
        with Laricina Energy Ltd. (4)                                                                                                                                     
|                      |                                                                                                                                                                                                                 
|10.14                 | Sub-lease Agreement with First Truck
        Centre (Edmonton) Inc. (3)                                                                                                                                         
|                      |                                                                                                                                                                                                                 
|10.15                 | Amendment to Real Estate Purchase Agreement
        with Jackson Cattle Co. dated August 31, 2006 (4)                                                                                                           
|                      |                                                                                                                                                                                                                 
|10.16                 | Doug Chernesky Employment Agreement
        (4)                                                                                                                                                                 
|                      |                                                                                                                                                                                                                 
|10.17                 | Virgil Cuerrier Employment Agreement
        (4)                                                                                                                                                                
|                      |                                                                                                                                                                                                                 
|10.18                 | Denis Desrosiers Employment Agreement
        (4)                                                                                                                                                               
|                      |                                                                                                                                                                                                                 
|31.1                  | Certification
        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 2002
|                      |                                                                                                                                                                                                                 
|32.1                  | Certification
        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        

|1. | Included as exhibits on our Form SB-2 filed May 16,
      2006.       
|-- | ----------------------------------------------------------------------
|   |                                                                       
|2. | Included as exhibits on our Form SB-2/A filed July 7,
      2006.     
|   |                                                                       
|3. | Included as exhibits on our Form SB-2/A filed August 9,
      2006.   
|   |                                                                       
|4. | Included as exhibits on our Form SB-2/A filed September
      1, 2006.

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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/ Larry Kristof                            
|Date: November 6, 2006 | Larry Kristof                                
|                       | Director , President, Chief Executive Officer
|                       | Chief Financial Officer, Principal Accounting
|                       | Officer                                      

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