SB-2 1 formsb2.htm REGISTRATION STATEMENT Filed by Automated Filing Services Inc. (604) 609-0244 - Lexington Energy Services Inc. - Form SB2

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2

Registration Statement under the Securities Act of 1933

LEXINGTON ENERGY SERVICES INC.
(Name of Small Business Issuer in its Charter)

NEVADA 1389 N/A
(State or Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)

207 West Hastings Street, Suite 1209
Vancouver, British Columbia, Canada, V6B 1H7
(604) 899 4550
(Address and telephone number of principal executive offices)

Larry Kristof, President
207 West Hastings Street, Suite 1209
Vancouver, British Columbia, Canada, V6B 1H7
(604) 899 4550
(Name, address and telephone number of agent for service)

With a copy to:
Penny Green
Bacchus Law Group
1511 West 40th Avenue, Vancouver, BC V6M 1V7
Tel (604) 732 4804 Fax (604) 408 5177

Approximate Date of Proposed Sale to the Public: As soon as practicable after this Registration Statement is declared effective.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [               ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [               ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [               ]

If delivery of the Registration Statement is expected to be made pursuant to Rule 434, check the following box. [               ]


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Title of Each Class of
Securities to be
Registered


Amount to be
Registered
(1)

Proposed
Maximum
Offering Price
per Unit (2) ($)
Proposed
Maximum
Aggregate Offering
Price (2)
($)


Amount of
Registration Fee
($)
Shares of Common
Stock, par value
$0.0001

9,093,626


0.85


$7,729,582.10


$827.07

Shares of Common
Stock, par value
$0.0001

5,000,000


0.85


$4,250,000.00


$454.75

Total Fee Due       $1,281.82

1

Of the 14,093,626 shares registered pursuant to this registration statement, 5,000,000 are being offered by direct offering and 9,093,626 are offered by selling shareholders.

   
2

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457 of the Securities Act.



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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

14,093,626 SHARES
COMMON STOCK

Before this offering there has been no public market for our common stock.

We are offering up to 5,000,000 in a direct public offering, without any involvement of underwriters or broker-dealers. There is no minimum offering. The offering price is $0.85 per share. In the event the shares are not sold within 180 days, at our sole discretion, we may extend the offering for an additional 90 days. Stock sold through our direct offering will be sold by our directors and officers.

In addition to our direct offering, we are registering 9,093,626 shares held by 190 selling shareholders, and 4,000,000 of the shares are controlled by our directors. The selling shareholders will sell at a price of $0.85 per share until our shares are quoted on the Over the Counter Bulletin Board and thereafter at prevailing market prices or privately negotiated prices.

There are no arrangements to place the funds we raise in an escrow, trust or similar account.

Our common stock is presently not traded on any national securities exchange or the NASDAQ Stock Market. We do not intend to apply for listing on any national securities exchange or the NASDAQ stock market.

An investment in our common stock involves risks. See "Risk Factors" starting at page 10 of this Prospectus.

    Offering Price     Expenses     Proceeds to Us  
                   
Per Share – if 50% of our direct offering sold $  0.85   $  0.02   $  0.83  
Per Share – if 100% of our direct offering sold $  0.85   $  0.01   $  0.84  
If 50% are sold $  2,125,000   $  40,000   $  2,085,000  
If 100% are sold $  4,250,000   $  40,000   $  4,210,000  


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The difference between the Offering Price and the Proceeds to Us is $40,000. The $40,000 reflects the expenses of the offering. The expenses per share would be adjusted according to the offering amounts depending on how many shares we sell. The $40,000 has been paid to unaffiliated third parties for expenses connected with this offering.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

The Date of this Prospectus is ________________.

Dealer Prospectus Delivery Obligation

Until 90 days after the effective date of this Prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to the dealers' obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


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Table of Contents

PART I – INFORMATION REQUIRED IN PROSPECTUS  
Prospectus Summary 7
Our Business 7
The Offering 7
Financial Summary Information 8
Income Statement Data 9
Balance Sheet Data 9
Risk Factors 9
  1. Volatility of oil and gas prices  
  2. We may discontinue operations  
  3. Competition  
  4. Reliance on Several Customers  
  5. No operating history  
  6. Dependence on funds from this offering  
  7. We may not complete construction of p-tanks  
  8. Changes in legislation  
  9. Seasonal Influences  
  10. Currency exchange risk  
  11. Failure to attract personnel  
  12. No minimum  
  13. No public market for our stock  
  14. Penny stock rules  
  15. No dividends  
  16. Our officers control us  
  17. Indemnity policy  
Use of Proceeds 15
Determination of Offering Price 17
Dilution of the Price you Pay for Your Shares 17
Plan of Distribution; Terms of the Offering 20
Section 15(g) of the Exchange Act 21
Offering Period and Expiration Date 22
Selling Shareholders 23
Legal Proceedings 35
Directors, Executive Officers, Promoters, And Control Persons 35
Audit Committee 37
Security Ownership of Certain Beneficial Owners and Management 37
Changes In Control 38
Description of Securities 38
  Common Stock 38


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  Voting Rights 39
  Dividend Policy 39
  Preferred Stock 39
Stock Transfer Agent 39
Shares Eligible for Future Sale 39
Interest of Named Experts and Counsel 40
Reports to Security Holders 40
Indemnification 41
Description of Business 41
Growth 44
The Oil and Gas Services Industry 44
Our Distribution Method 44
New Products and Services 44
Competition 44
Marketing 45
Research and Development 45
Intellectual Property 45
Legislation and Government Regulation 45
Environmental Law Compliance 46
Employees 46
Management's Discussion and Analysis or Plan of Operation 46
Results of Operations 47
Plan of Operation 47
Limited operating history; need for additional capital 50
Liquidity and Capital Resources 50
Known Material Trends and Uncertainties 51
Critical Accounting Policies 51
Description of Property 51
Certain Relationships and Related Transactions 52
Market For Common Equity and Related Stockholder Matters 52
Executive Compensation 53
Management Agreements 54
Compensation of Directors 54
Compensation Committee 55
Financial Statements 55
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 57
PART II — INFORMATION NOT REQUIRED IN THE PROSPECTUS 57
Indemnification of Officers and Directors 57
Other Expenses of Issuance and Distribution 57
Recent Sales of Unregistered Securities 57
Exhibits 58
Undertakings 59
Signatures 60


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PART I — INFORMATION REQUIRED IN PROSPECTUS

PROSPECTUS SUMMARY

Our Business

Lexington Energy Services Inc. (“Lexington”, “we”) is a start-up stage company. We have had no revenues as of the end of our most recent fiscal year and we have only recently begun operations. We provide services to companies that find and develop oil and gas resources.

Our principal offices are located at Suite 1209 – 207 West Hastings Street, Vancouver, British Columbia, Canada, V6B 1H7, and our telephone number is (604) 899 4550. Our fiscal year end is November 30.

The Offering

Assuming 100% of our direct offering is sold, the 14,093,626 common shares registered under this Prospectus will represent 69.4% of our issued common stock. Both before and after the offering, our current directors and officers will control Lexington. As of May 10, 2006 our directors Brent Nimeck and Larry Kristof together own 10,750,000 shares (including shares they have the right to acquire), representing 70.3% of our issued common stock.

After the offering, assuming he sells all of his 2,000,000 shares registered in this Prospectus, our President and Chief Executive Officer Larry Kristof will own 3,300,000 shares (including shares he has the rights to acquire) and if 50% of our direct offering is sold, he will own 18.1% of our issued common stock.

After the offering, our director Brent Nimeck, assuming that he sells all 2,000,000 shares under his control and registered in this Prospectus, will have investment control over 3,450,000 shares (if all his options are exercised). On this basis, if 50% of our direct offering is sold, Mr. Nimeck will own 19% of our issued common stock.

The following is a brief summary of our offering:

Securities Offered
  • through a direct public offering, 5,000,000 shares
  • 9,093,626 common shares held by 190 selling shareholders (including 4,000,000 shares controlled by our directors)
  • there is no minimum offering
  • Offering Price per Share

    We are offering the shares at a price of $0.85. This price was determined by our Board of Directors based on several factors including our capital structure and the amount we sought to raise through our offering.

    The selling shareholders can sell the shares at an initial price of $0.85 and thereafter at any price.




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    Offering Period The shares are being offered for a period not to exceed 180 days, unless extended by our Board of Directors for an additional 90 days.
    Net Proceeds to us

    Approximately $2,085,000, assuming half of our direct offering is sold.

    Approximately $4,210,000, assuming we sell all 5,000,000 shares through our direct offering.

    We will not receive any proceeds from the sale of shares by the selling shareholders.

    Use of Proceeds: We will use the proceeds to purchase land, build a operating facility, purchase equipment, administrative expenses and for general working capital.
    Number of Shares Outstanding Before the Offering There are 15,293,626 shares outstanding as of May 10, 2006. However, if all outstanding options granted as of May 10, 2006 were exercised, there would be 17,423,626 shares outstanding.
    Number of Shares Outstanding After the Offering

    Assuming that all outstanding options are exercised, we will have the following number of shares issued and outstanding after this offering:

  • 16,543,626 if we sell 25% of our direct offering
  • 19,923,626 if we sell 50% of our direct offering
  • 22,423,626 if we sell 100% of our direct offering
  • Financial Summary Information

    All of the references to currency in this Prospectus are to US Dollars, unless otherwise noted.

    The following table sets forth selected financial information, which should be read in conjunction with the information set forth under "Management’s Discussion and Analysis" at page 47 and the accompanying consolidated Financial Statements of Lexington and related notes included elsewhere in this Prospectus.


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    Income Statement Data




    Accumulated from March
    30, 2005 (inception) to
    November 30, 2005
    ($)

    Revenue

    -

    Expenses

    77,114

    Net Loss

    (77,114)

    Balance Sheet Data


    November 30, 2005
    ($)
    Working Capital 66,579
    Total Assets 89,199
    Total Liabilities 19,313

    Risk Factors

    Please consider the following risk factors before deciding to invest in our common stock.

    This offering and any investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this Prospectus before deciding whether to purchase our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be harmed. The trading price of our common stock could decline, and you may lose all or part of your investment in our common stock.


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    Lexington Risks

    1. A decline in or substantial volatility of oil and gas prices could adversely affect the demand for our services, which could mean a decrease in our revenues.

    We anticipate that the demand for our services will be primarily determined by oil and gas prices and the related general production spending and level of drilling activity in Western Canada. Volatility or weakness in oil and gas prices (or the perception that oil and gas prices will decrease) will likely affect the spending patterns of our possible customers and may result in the drilling of fewer new wells or lower production spending on existing wells. This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment. A decline in oil and gas prices or a reduction in drilling activities could materially and adversely affect the demand for our services and could seriously decrease our revenues or prevent us from generating any revenues.

    2. There is substantial uncertainty as to whether we will continue operations. If we discontinue operations, you could lose your investment.

    Our auditors have discussed their uncertainty in their audit report dated April 20, 2006. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your entire investment.

    3. Competition within the well services industry may prevent us from becoming profitable.

    The oil well services industry is highly competitive and fragmented and includes numerous small companies capable of competing effectively in our markets on a local basis as well as several large companies that possess substantially greater financial and other resources than we do. Our larger competitors' greater resources could allow those competitors to compete more effectively than we can. The amount of equipment available may exceed demand, which could result in active price competition. Many contracts are awarded on a bid basis, which may further increase competition based primarily on price. In addition, recent market conditions have stimulated the reactivation of well servicing rigs and construction of new equipment, which could result in excess equipment and lower utilization rates in future periods. This could decrease our revenues or prevent us from becoming profitable.

    4. We expect to depend on several significant customers, and a loss of one or more significant customers could prevent us from generating revenues.

    Our only customers so far are Southern Well Testing Ltd., and Southern Well Testing (2005) Ltd., which are both controlled by our director, and VP, Operations, Brent Nimeck. Both of these companies have signed agreements to lease equipment from us once we have completed the assembly of the equipment. As these are the only customers with which we have agreements with, we anticipate that all or a majority of our initial revenues will come from these


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    two companies. The loss of either of these customers could result in a substantial loss of revenues or could prevent us from generating revenues.

    5. We lack an operating history and there is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.

    We were incorporated on March 30, 2005 and we have only recently started our business operations and we have not yet realized any revenues. We have very little operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

    • completion of this offering;
    • completion of future offerings of our stock;
    • our ability to develop and build mobile oil well testing equipment; and
    • our ability to attract customers who will lease our equipment.

    Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.

    6. We are solely dependent upon the funds to be raised in this offering to advance our business, the proceeds of which may be insufficient to achieve adequate revenues to remain in business. We may need to obtain additional financing which may not be available, which could cause us to cease operations.

    We need the proceeds from this offering to execute our business plan. If we raise 25% of our direct offering, we will receive $1,022,500 in net proceeds. This will enable us to complete the purchase of our nitrogen generation unit, complete payment for one coring unit, and put $380,000 towards general and administrative costs and $80,000 towards general working capital. We will need additional funds to complete further development of our business plan to achieve a sustainable revenue level where ongoing operations can be funded out of revenues. There is no assurance that any additional financing will be available or if available, on terms that will be acceptable to us. If we are not able to obtain needed financing we may have to cease operations.

    7. We may not complete construction of our p-tanks which could prevent us from generating revenues and becoming profitable.

    We have only signed two agreements for the lease of our equipment. Our agreement with Southern Well Testing Ltd. is contingent on us completing the Lexington Unit 2000, a mobile oil well testing unit (p-tank). Our agreement with Southern Well Testing (2005) Ltd. is contingent on us completing a p-tank unit called the Lexington Unit 3000. The two p-tanks we intend to build have slightly different designs. The Lexington Unit 2000 will cost approximately $390,000 to build and we have so far only paid $10,000 towards purchasing the parts to build it. The Lexington Unit 3000 will cost us approximately $300,000 to build. We will complete the purchase of parts to build the Lexington Unit 2000 if we raise 50% of our direct offering and we


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    will complete the purchase of parts for both p-tanks if we raise 100% of our direct offering. It is therefore possible that we may not have enough capital to complete the construction of the p-tanks after this financing is complete. Also, other factors could prevent us from completing the construction of the p-tanks, such as a failure of management to devote adequate time to their construction. The lease agreements are not enforceable by either party until we have completed the construction of the p-tanks. If we fail to complete the p-tanks 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.

    8. Our business is subject to environmental legislation and any changes in such legislation could negatively affect our results of operations.

    The oil and gas industry is subject to many laws and regulations which govern the protection of the environment, health and safety and the management, transportation and disposal of hazardous substances. These laws and regulations may require removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation and abandonment orders. The costs arising from compliance with environmental and natural resource laws and regulations may increase operating costs for both us and our potential customers. Any regulatory changes that impose additional environmental restrictions or requirements on us or on our potential customers could adversely affect us through increased operating costs and potential decreased demand for our services, which could have a material adverse effect on our results of operations.

    9. Our business may be seasonal and influenced by weather patterns which could lower demand for our services and result in a decrease in revenues.

    In Canada, the amount of oil and gas exploration and production activity is influenced by seasonal weather patterns. In spring, wet weather can make the ground unstable, and result in road closures that restrict the movement of rigs and other heavy equipment, thereby decreasing activity levels. Also, some oil and gas producing areas are located in sections of the Western Canadian Sedimentary Basin that are inaccessible, other than during the winter, because the ground surrounding or containing the drilling sites in these areas consists of terrain known as muskeg. Until the muskeg freezes, the terrain cannot be crossed to reach the drilling site. Also, once rigs and other equipment have been moved to a drilling site, they may become stranded if the muskeg thaws unexpectedly. We believe that a severe change in weather patterns in western Canada could lower the demand for our services which could result in a decrease in revenues.

    10. We are exposed to currency exchange risk which could cause our reported earnings or losses to fluctuate.

    Although we intend to report our financial results in US dollars, a portion of our sales and operating costs may be denominated in Canadian dollars. In addition, we are exposed to currency exchange risk on any of our assets that we denominate in Canadian dollars. Since we


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    present our financial statements in US dollars, any change in the value of the Canadian dollar relative to the US dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of our Canadian dollar assets into US dollars. Consequently, our reported earnings or losses could fluctuate materially as a result of foreign exchange translation gains or losses.

    11. Success depends in part on our ability to attract and retain additional personnel, which we may or may not be able to do. Our failure to do so could cause us to go out of business.

    We anticipate that in 2006 we will need to hire a facility manager, a new Chief Financial Officer, and a customer service representative, all of whom we believe will be important components of our success. Recently we experienced problems retaining our Chief Financial Officer who resigned on March 28, 2006. Our President Larry Kristof has been appointed as Chief Financial Officer. We are searching for a new Chief Financial Officer and so far we have been unsuccessful in identifying a suitable candidate. Our inability to attract additional personnel, including a new Chief Financial Officer, could have a material adverse effect on our ability to conduct our business. If we are unable to retain personnel, we may not be able to provide adequate customer service to develop and maintain a good reputation with customers, which could prevent us from generating sufficient revenues to become profitable, or, we may not have the expertise required to raise sufficient capital to continue operating.

    Risks Associated with this Offering

    12. There is no minimum offering and therefore your investment may be used even though such investment will not satisfy our capital requirements to complete any project.

    Our directors have not specified a minimum offering amount and there in no escrow account in operation. Our current assets are insufficient to pursue our business plan and we are entirely dependent on the outcome of this capital raising effort. Because there is no escrow account and no minimum offering amount, investors could be in a position where they have invested in Lexington, but we are unable to fulfill our objectives or proceed with our operations due to a lack of interest in this offering. If this were to occur, we might be forced to curtail or abandon our operations with a loss to investors who purchase stock under this Prospectus.

    13. Because there is no public trading market for our common stock, you may not be able to resell your stock.

    There is currently no public trading market for our common stock. Therefore there is no central place, such as stock exchange or electronic trading system, to resell your shares. If you do want to resell your shares, you will have to locate a buyer and negotiate your own sale. As a result, you may be unable to sell your shares, or you may be forced to sell them at a loss.


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    14. Because the Commission imposes additional sales practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty reselling your shares and this may cause the price of the shares to decline.

    Our shares would be classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which impose additional sales practice requirements on brokers-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, the broker-dealer must make a special suitability determination and receive from you a written agreement prior to making a sale for you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the price of the shares to decline.

    There is no established market for the common stock being registered. We intend to apply to the OTC Bulletin Board for the trading of our common stock. This process takes at least three months and the application must be made on our behalf by a market maker, but we have not yet engaged a market maker to make the application on our behalf. If our common stock becomes listed and a market for the stock develops, the actual price of the shares will be determined by prevailing market prices at the time of sale. Trading of securities on the OTC Bulletin Board is often sporadic and investors may have difficulty buying and selling or obtaining market quotations, which may have a depressive effect on the market price for our common stock. Accordingly, you may have difficulty reselling any shares your purchase from Lexington.

    15. We do not intend to pay dividends and there will be less ways in which you can make a gain on any investment in Lexington.

    We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in Lexington will need to come through appreciation of the stock’s price.

    16. Because our officers and directors, who are also our promoters, may own more than 50% of the outstanding shares after this offering, they will retain control of us and be able to decide who will be directors and you may not be able to remove them as directors which could prevent us from becoming profitable.

    As of May 10, 2006 our directors Brent Nimeck, a director and Senior Vice President of Operations, and Larry Kristof, a director, Chief Executive Officer and Chief Financial Officer, together own 10,750,000 shares (including shares they have the right to acquire), representing 70.3% of our issued common stock. Depending on how many shares they sell of the 4,000,000 shares they are registering for sale in this Prospectus, and depending on how many shares we sell in their direct offering, they may continue to own more than 50% of the outstanding shares after our direct offering. For example, if they don't sell any of their shares, and we sell no shares through the direct offering, they will continue to own 70.3% of our issued common stock.


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    After the offering, assuming he sells all of his 2,000,000 shares registered in this Prospectus, our President and Chief Executive Officer Larry Kristof will own 3,300,000 shares (including shares he has the rights to acquire) and if 50% of our direct offering is sold, he will own 18.1% of our issued common stock.

    After the offering, our director Brent Nimeck, assuming that he sells all 2,000,000 shares under his control registered in this Prospectus, will have investment control over 3,450,000 shares (if all his options are exercised). On this basis, if 50% of our direct offering is sold, Mr. Nimeck will own 19% of our issued common stock.

    If Larry Kristof and Brent Nimeck continue to own more than 50% of our issued common stock, they will be able to elect all of our directors and control our operations. Mr. Kristof or Mr. Nimeck may have an interest in pursuing acquisitions, divestitures and other transactions that involve risks. For example, they could cause us to make acquisitions that increase our indebtedness or to sell revenue generating assets. They may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Mr. Nimeck is also the majority shareholder of Southern Well Testing Ltd., a company that competes with us by providing oil field services. If the directors fail to act in our best interests or fail to perform adequately to manage us, you may have difficulty in removing them as directors, which could prevent us from becoming profitable.

    17. We indemnify our directors against liability to Lexington and our stockholders, and the costs of this indemnification could negatively affect our operating results.

    Our bylaws allow for the indemnification of company officers and directors in regard to their carrying out the duties of their offices. The bylaws also allow for reimbursement of certain legal defenses.

    As to indemnification for liabilities arising under the Securities Act of 1933 for directors, officers or persons controlling Lexington, we have been informed that in the opinion of the Commission such indemnification is against public policy and unenforceable.

    Since our directors and officers are aware that they may be indemnified for carrying out the duties of their offices, they may be less motivated to ensure that meet the standards required by law to properly carry out their duties, which could have a negative impact on our operating results. Also, if any director or officer claims against Lexington for indemnification, the costs could have a negative effect on our operating results.

    Use of Proceeds

    Our offering is being made on a self underwritten basis - with no minimum and a maximum of $4,250,000. The table below sets forth the use of proceeds if 25%, 50%, 75% or 100% is sold.

      25% 50% 75% 100%
    Gross proceeds $ 1,062,500 $ 2,125,000 $ 3,187,500 $ 4,250,000
    Offering expenses 40,000 40,000 40,000 40,000
    Net proceeds 1,022,500 2,085,000 3,147,500 4,210,000


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    The net proceeds will be used approximately as follows:

      25% 50% 75% 100%
    Purchase of parts for
    well testing equipment
    (p-tanks)

    $ 0

    $ 380,000

    $ 380,000

    $ 680,000
    Construction of nitrogen
    generation unit
    500,000
    700,000
    700,000
    1,700,000
    Purchase of parts to
    build coring units
    100,000
    500,000
    500,000
    500,000
    Design and build
    operating facility
    0
    0
    40,000
    740,000
    Administrative expenses 380,000 380,000 480,000 480,000
    General working capital 42,500 125,000 347,500 110,000

    Total offering expenses are estimated to be $40,000, consisting of the following: : $25,000 for legal fees; $13,500 for accounting fees, $1,300 filing fee, $100 printing and marketing expenses and $100 for miscellaneous unforeseen expenses relating to the offering.

    The costs related to building an operating facility relate to our plans to build a facility on the property in Brooks, Alberta, Canada in which we will assemble and maintain our equipment. We currently have enough in our bank account to complete the purchase of the land in Brooks, Alberta. The nitrogen generation unit, coring unit and p-tank are various types of equipment which we are building and which we intend to lease to oil and gas companies to use in oil and gas well testing and drilling.

    If we raise 25% of the direct offering, we will complete payment to the supplier for our nitrogen generation unit, complete payment for one coring unit, and put $380,000 towards general and administrative costs and $42,500 towards general working capital.

    If we raise 50% of the direct offering, we will pay for a nitrogen generation unit and use $200,000 for some specific modifications to the nitrogen generation unit, pay for two coring units and build a p-tank, and put $380,000 towards general and administrative expenses and $125,000 towards general working capital.

    If we raise 75% of the offering, we will also build and construct the operating facility on the property we are acquiring in Brooks, Alberta, Canada, and put $480,000 towards general and administrative expenses and $347,500 towards general working capital.


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    If we raise 100% of the offering, we will also build a second p-tank unit and another nitrogen generation unit, and put $480,000 towards general and administrative expenses and $110,000 towards general working capital.

    General and administrative costs include costs related to operating our office, payment of management and administrative assistants, legal and accounting expenses, travel and attendance at trade shows..

    General working capital includes costs for customer service and unforeseen expenses.

    Determination of Offering Price

    The price of the shares we are offering was arbitrarily determined in order for us to raise up to net proceeds of $4,210,000 in this direct offering. The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. Among the factors considered were:

    • our lack of operating history;
    • the proceeds to be raised by the offering;
    • the amount of capital to be contributed by purchasers in this offering in proportion to the amount of stock to be retained by our existing shareholders;
    • our cash requirements, and
    • prices of shares we have issued in the past.

    Dilution of the Price you Pay for Your Shares

    Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets.

    As of November 30, 2005, the net tangible book value of our shares of common stock was $69,886 or approximately $0.01 per share based upon shares outstanding. Subsequent to November 30, 2005, we issued 460,000 shares of common stock at $0.20 per share for cash proceeds of $92,000 and 2,568,626 shares of common stock at $0.50 per share for cash proceeds of $1,284,313. On January 4, 2006, we cancelled 100,000 shares of common stock that were originally issued at $0.10 per share. The effect of these transactions was to increase the net tangible book value of our shares of common stock from $69,886 or approximately $0.01 per share, to $1,436,199 or approximately $0.09 per share.

    If 100% of the shares are sold:

    Upon completion of our direct offering, in the event all of the shares are sold, the net tangible book value of the 20,293,626 shares to be outstanding will be $5,646,199, or approximately $0.28 per share. The amount of dilution you will incur will be $0.57 per share. The net tangible book value of the shares held by our existing shareholder will be increased by $0.18 per share without any additional investment on their part. You will incur an immediate dilution from $0.85 per share to $0.278 per share. After completion of this offering, if 5,000,000 shares are sold,


    — 18 —

    you will own approximately 24.64% of the total number of shares then outstanding shares for which you will have made a cash investment of $4,250,000, or $0.85 per share. Our existing shareholders (assuming they don’t sell any shares) will own approximately 75.37% of the total number of shares then outstanding, for which they have made contributions of cash, totaling $1,523,313, or $0.10 per share.

    If 75% of the shares are sold:

    Upon completion of our direct offering, in the event 75% of the shares are sold, the net tangible book value of the 19,043,626 shares to be outstanding will be $4,583,699, or approximately $0.24 per share. The amount of dilution you will incur will be $0.61 per share. The net tangible book value of the shares held by our existing stockholders will be increased by $0.15 per share without any additional investment on their part. You will incur an immediate dilution from $0.85 per share to $0.24 per share.

    After completion of this offering, if 3,750,000 shares are sold, you will own approximately 19.69% of the total number of shares then outstanding shares for which you will have made a cash investment of $3,187,500, or $0.85 per share. Our existing shareholders (assuming they don’t sell any shares) will own approximately 80.31% of the total number of shares then outstanding, for which they have made contributions of cash, totaling $,1,523,313 or $0.10 per share.

    If 50% of the shares are sold:

    Upon completion of our direct offering, in the event 50% of the shares are sold, the net tangible book value of the 17,793,636 shares to be outstanding will be $3,521,199 or approximately $0.20 per share. The amount of dilution you will incur will be $0.65 per share. The net tangible book value of the shares held by our existing stockholders will be increased by $0.10 per share without any additional investment on their part. You will incur an immediate dilution from $0.85 per share to $0.20 per share.

    After completion of this offering, if 2,500,000 shares are sold, you will own approximately 14.05% of the total number of shares then outstanding shares for which you will have made a cash investment of $2,125,000, or $0.85 per share. Our existing stockholders (assuming they don’t sell any shares) will own approximately 85.95% of the total number of shares then outstanding, for which they have made contributions of cash, totaling $1,523,313, or $0.10 per share.

    If 25% of the shares are sold:

    Upon completion of our direct offering, in the event 25% of the shares are sold, the net tangible book value of the 16,543,626 shares to be outstanding will be $2,458,699 or approximately $0.15 per share. The amount of dilution you will incur will be $0.70 per share. The net tangible book value of the shares held by our existing stockholders will be increased by $0.05 per share without any additional investment on their part. You will incur an immediate dilution from $0.85 per share to $0.15 per share.


    — 19 —

    After completion of this offering, if 1,250,000 shares are sold, you will own approximately 7.55% of the total number of shares then outstanding shares for which you will have made a cash investment of $1,062,500, or $0.85 per share. Our existing stockholders (assuming they don’t sell any shares) will own approximately 92.5% of the total number of shares then outstanding, for which they have made contributions of cash, totaling $1,523,313, or $0.10 per share.

    The following table compares the differences of your investment in our shares with the investment of our existing stockholders.

    Existing stockholders if all of the shares are sold:

    Price per share $0.10
    Net tangible book value per share before offering $0.09
    Potential gain to existing shareholders per share $0.18
    Net tangible book value per share after offering $0.28
    Increase to present stockholders in net tangible  
    book value per share after offering $0.19
    Capital contributions $1,523,313
    Number of shares outstanding before the offering 15,293,626
    Number of shares after offering held by existing stockholders 15,293,626
    Percentage of ownership after offering 75.36%
       
    Purchasers of shares in this offering if all shares sold  
    Price per share $0.85
    Dilution per share $0.57
    Capital contributions $4,250,000
    Number of shares after offering held by public investors 5,000,000
    Percentage of ownership after offering 24.64%
       
    Purchasers of shares in this offering if 75% of shares sold  
    Price per share $0.85
    Dilution per share $0.61
    Capital contributions $3,187,500
    Number of shares after offering held by public investors 3,750,000
    Percentage of ownership after offering 19.69%


    — 20 —

    Purchasers of shares in this offering if 50% of shares sold  
    Price per share $0.85
    Dilution per share $0.65
    Capital contributions $2,125,000
    Number of shares after offering held by public investors 2,500,000
    Percentage of ownership after offering 14.05%
       
    Purchasers of shares in this offering if 25% of the shares sold  
    Price per share $0.85
    Dilution per share $0.70
    Capital contributions $1,062,500
    Number of shares after offering held by public investors 1,250,000
    Percentage of ownership after offering 7.56%

    Plan of Distribution; Terms of the Offering

    We are offering up to 5,000,000 shares of common stock on a direct public offering, without any involvement of underwriters or broker-dealers, no minimum. The offering price is $0.85 per share. The shares are being offered for a period not to exceed 180 days, unless extended by our Board of Directors for an additional 90 days.

    We will sell the shares in this offering through our officers and directors. They will receive no commission from the sale of the shares. They will not register as broker-dealers under Section 15 of the Exchange Act in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer's securities and not be deemed to be a broker-dealer. The conditions are that:

    1. The person is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Exchange Act, at the time of his participation; and,

    2. The person is not compensated in connection with her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;

    3. The person is not at the time of their participation, an associated person of a broker-dealer; and,

    4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that she (A) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; and (B) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding 12 months; and (C) does not participate in selling and offering of securities for any issuer more than once every 12 months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).

    Our officers and directors are not statutorily disqualified, are not being compensated, and are not associated with a broker-dealer. They are and will continue to be our officers and directors


    — 21 —

    at the end of the offering and has not been during the last twelve months and are currently not broker-dealers or associated with a broker-dealers. They have not during the last twelve months and will not in the next twelve months offer or sell securities for another corporation.

    Only after our Prospectus is declared effective by the Securities and Exchange Commission (the “Commission”), do we intend to distribute this Prospectus to potential investors at meetings and to our friends, business associates and relatives who are interested in us and a possible investment in the offering. We will not utilize the Internet to advertise our offering.

    Section 15(g) of the Exchange Act

    Our shares are covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).

    Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.

    Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.

    Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.

    Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.

    Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.

    Rule 15g-6 requires broker-dealers selling penny stocks to provide their customers with monthly account statements.

    Rule 15g-9 requires broker-dealers to approved the transaction for the customer's account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the NASD’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker-dealers and their associated persons.

    The application of the penny stock rules may affect your ability to resell your shares.


    — 22 —

    Offering Period and Expiration Date

    This offering will start on the date this prospectus is declared effective and continue for a period of up to 180 days, and an additional 90 days, if so elected by our Board of Directors.

    Procedures for Subscribing

    If you decide to subscribe for any shares in this offering, you must

    1. execute and deliver a share subscription agreement; and
    2. deliver a check or certified funds to us for acceptance or rejection.

    All checks for subscriptions must be made payable to Lexington Energy Services Inc.

    Right to Reject Subscriptions

    We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions.

    Sales by Selling Shareholders

    The selling shareholders may sell some or all of their common stock in one or more transactions, including block transactions:

    • on such public markets as the common stock may be trading;
    • in privately negotiated transactions;
    • through the writing of options of the common stock;
    • in short sales; or
    • in any combination of these methods of distribution.

    The sales price to the public may be:

    • the market price prevailing at the time of sale;
    • a price related to such prevailing market price; or
    • such other price as the selling shareholders determine.

    We are bearing all costs relating to the registration of the common stock. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.

    The selling shareholders must comply with the requirements of the Securities Act and the Exchange Act in the offer and sale of the common stock. In particular, during such times as the


    — 23 —

    selling shareholders may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, they must comply with applicable laws and may, among other things:

    • not engage in any stabilization activities in connection with our common stock;
    • furnish each broker or dealer through which common stock may be offered, such copies of this Prospectus, as amended from time to time, as may be required by such broker or dealer; and
    • not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act.

    None of the selling shareholders will engage in any electronic offer, sale or distribution of the shares. Further, neither Lexington nor any of the selling shareholders have any arrangements with a third party to host or access our Prospectus on the Internet.

    The selling shareholders and any underwriters, dealers or agents that participate in the distribution of our common stock may be deemed to be underwriters, and any commissions or concessions received by any such underwriters, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Shares may be sold from time to time by the selling shareholders in one or more transactions at a fixed offering price, which may be changed, or at any varying prices determined at the time of sale or at negotiated prices. We may indemnify any underwriter against specific civil liabilities, including liabilities under the Securities Act.

    Selling Shareholders

    The 190 selling shareholders are offering 9,093,626 shares of common stock already issued. The shares include the following:

    • On June 1, 2005, we issued 5,000,000 common shares to our director Tannisah Kruse and 5,000,000 shares to our director Larry Kristof at a price of $0.0001 per share for total proceeds of $1,000.
    • From October 24 to November 2, 2005, we issued 1,150,000 shares of common stock to 7 shareholders at $0.03 per share for total proceeds of $34,500.
    • From November 4 to November 16, 2005, we issued 1,115,000 shares of common stock to 19 investors at $0.10 per share, for total proceeds of $111,500 (this number has been adjusted to account for the cancellation of 100,000 shares on January 4, 2006 pursuant to a rescinded share subscription agreement).
    • In December 2005 we issued 460,000 shares of common stock to 14 investors at $0.20 per share for cash proceeds of $92,000.
    • In February 2006 we issued 516,000 shares of common stock to 23 investors at $0.50 per share for cash proceeds of $258,000. We relied on Regulation S and Section 4(2) of the Securities Act as exemptions from registration for this issuance.

    — 24 —

    • In March 2006, we issued 1,155,930 shares of common stock to 84 investors at $0.50 per share for cash proceeds of $577,965.
    • On March 29, 2006, Tannisah Kruse (who resigned as our director on March 28, 2006) sold 4,750,000 shares of her common shares to Greystone Holdings Ltd., a company controlled by Brent Nimeck, another Lexington director, at $0.0001 per share for proceeds of $475.
    • On March 29, 2006, our director Larry Kristof sold 100,000 shares of his common stock to Elston Johnson at a price of $0.25 per share, for proceeds of $25,000.
    • In April 2006, we issued 896,696 shares of common stock to 55 investors at $0.50 per share for cash proceeds of $448,348.

    Except as otherwise noted, all of the above issuances were exempt from registration under Regulation S of the Securities Act.

    The following table provides as of May 10, 2006 information regarding the beneficial ownership of our common stock held by each of the selling shareholders, including:

    • the number of shares owned by each prior to this offering;
    • the total number of shares that are to be offered for each;
    • the total number of shares that will be owned by each upon completion of the offering; assuming all shares are sold that are being registered;
    • the percentage owned by each; and
    • the identity of the beneficial holder of any entity that owns the shares.





    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    0719746 BC Ltd. (3) 4,000 (4) 4,000 0 0
    689719 BC Ltd. (5) 160,000 (4) 160,000 0 0
    Jessie Acton 160,000 (6) (4) 10,000 0 0
    Joel Acton 20,000 (4) 20,000 0 0
    Joshua Acton 20,000 (4) 20,000 0 0
    Rachael Acton 2,000 (4) 2,000 0 0
    Sibylle Acton 30,000 (4) 30,000 0 0
    Alder Investments Ltd. (7) 10,000 (4) 10,000 0 0


    — 25 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Guy J. Aldridge 120,000 (8) (4) 100,000 0 0
    Van Allen 40,000 (4) 40,000 0 0
    James Anderson 20,000 (4) 20,000 0 0
    Mike Arnott 10,000 (4) 10,000 0 0
    Talwinder Singh Aujla 8,621 (4) 8,621 0 0
    Trinity Ayres 10,000 (4) 10,000 0 0
    Sheri Barton 10,000 (4) 10,000 0 0
    Angela Bearman 10,000 (4) 10,000 0 0
    Albert B. Benson 20,000 (4) 20,000 0 0
    Connie Bettenson 10,000 (4) 10,000 0 0
    Gary Bishop 100,000 (4) 100,000 0 0
    Mary C. Blue 20,000 (4) 20,000 0 0
    Mike Bonvino 15,000 (4) 15,000 0 0
    John Boots 20,000 (4) 20,000 0 0
    Kyle Bowers 65,000 (4) 65,000 0 0
    Sam Boychuk 6,000 (4) 6,000 0 0
    Norman D. Bradshaw 10,000 (4) 10,000 0 0
    Govinder K. Brar 10,000 (4) 10,000 0 0
    Jefferey Joseph Brown 2,000 (4) 2,000 0 0
    Laurence Brealey 50,000 (4) 50,000 0 0
    Mike Brealey 50,000 (4) 50,000 0 0


    — 26 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Nathan Brown 2,000 (4) 2,000 0 0
    Trevor Brown 17,241 (4) 17,241 0 0
    Scott Burkett 5,000 (4) 5,000 0 0
    Don L. Byers 50,000 (4) 50,000 0 0
    Barry Caithcart 1,707 (4) 1,707 0 0
    Mark Calvelo 2,000 (4) 2,000 0 0
    Katie Caswell 10,000 (4) 10,000 0 0
    John Chan 40,000 (4) 40,000 0 0
    Natalia Chernencoff 4,000 (4) 4,000 0 0
    Shih-Yi Chuang 100,000 (4) 100,000 0 0
    Guy Clemens 5,000 (4) 5,000 0 0
    Ken Corbett 100,000 (4) 100,000 0 0
    Brad Cote 6,000 (4) 6,000 0 0
    Larry Cote 2,400 (4) 2,400 0 0
    Dave Cousins 10,000 (4) 10,000 0 0
    Timothy Crottey 4,000 (4) 4,000 0 0
    Jim Cumming 50,000 (4) 50,000 0 0
    Roger Cumming 50,000 (4) 50,000 0 0
    Andrew Davis 5,000 (4) 5,000 0 0
    Greg Davis 95,000 (4) 95,000 0 0
    Shawn Drummond 2,000 (4) 2,000 0 0


    — 27 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Joe M Dumontel 25,000 (4) 25,000 0 0
    Jason Finiak 2,000 (4) 2,000 0 0
    Kelly Finiak 2,000 (4) 2,000 0 0
    Stan Fitzpatrick 2,000 (4) 2,000 0 0
    Brad Fraser 10,000 (4) 10,000 0 0
    Kim Gilbert 12,000 (4) 12,000 0 0
    Michael Graham 40,000 (4) 40,000 0 0
    Jagpal Singh Grewal 10,000 (4) 10,000 0 0
    Greystone Holdings Ltd. (9) 4,750,000 27.3% 1,700,000 3,050,000 15.0%
    Nicole Grimm 2,000 (4) 2,000 0 0
    Royce Hackworth 20,000 (4) 20,000 0 0
    Chylow Hall 4,000 (4) 4,000 0 0
    Brent Henry 20,000 (4) 20,000 0 0
    Sidney Henry 25,000 (4) 25,000 0 0
    Sam Hirji 10,000 (4) 10,000 0 0
    John Hull 8,000 (4) 8,000 0 0
    Tamara Ichoutkina 2,000 (4) 2,000 0 0
    Nargis Jamal 20,000 (4) 20,000 0 0
    Margo Jarva 4,000 (4) 4,000 0 0
    Brian Johnston 10,000 (4) 10,000 0 0
    Elston Johnston 350,000 (10) 2.0% 200,000 0 0


    — 28 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Pam Johnston 30,000 (4) 30,000 0 0
    Richard Jordan 10,000 (4) 10,000 0 0
    Kory Kempin 2,000 (4) 2,000 0 0
    Willie Kempin 10,000 (4) 10,000 0 0
    Christine Kennedy 100,000 (4) 100,000 0 0
    Deborah Kennedy 55,000 (4) 55,000 0 0
    Robert Kennedy 100,000 (4) 100,000 0 0
    Kershaw Enterprises Ltd. (11) 10,000 (4) 10,000 0 0
    Dan Koyich 250,000 (12) 1.4% 100,000 0 0
    Kelly Kristof (13) 100,000 (4) 100,000 0 0
    Larry Kristof (14) 5,300,000(15) 30.4% 2,000,000 3,300,000 16.3%
    Koah Kruse (16) 50,000 (4) 50,000 0 0
    Tannisah Kruse (17) 750,000 (18) 4.3% 250,000 500,000 2.5%
    KV3 Ltd. (19) 17,241 (4) 17,241 0 0
    Mike Labadie 30,000 (4) 30,000 0 0
    Bernice LaValley 10,000 (4) 10,000 0 0
    Dusty LaValley 14,000 (4) 14,000 0 0
    Mark M. LaValley 10,000 (4) 10,000 0 0
    Tanner LaValley 10,000 (4) 10,000 0 0
    Lucas Lawson 20,000 (4) 20,000 0 0
    Avtar Lehal 10,000 (4) 10,000 0 0


    — 29 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Harpal S. Lehal 10,000 (4) 10,000 0 0
    Braeden Lichti 2,000 (4) 2,000 0 0
    Scott Lower 4,000 (4) 4,000 0 0
    Mike Lyster 18,000 (4) 18,000 0 0
    Malcolm & Elizabeth Lower (20) 4,000 (4) 4,000 0 0
    Nicky Maawia 1,896 (4) 1,896 0 0
    Fern MacDonald (21) 150,000 (4) 150,000 0 0
    Robert Maclachlan 2,500 (4) 2,500 0 0
    Gavin MacLean 2,000 (4) 2,000 0 0
    Barbara McCaslin 25,000 (4) 25,000 0 0
    Gordon McCaslin 25,000 (4) 25,000 0 0
    Bruce McDiarmid 50,000 (4) 50,000 0 0
    Steve McGuire 10,000 (4) 10,000 0 0
    Neil McKen 10,000 (4) 10,000 0 0
    Michael McKinnon 35,000 (22) (4) 10,000 0 0
    Shawna McLaren 30,000 (23) (4) 5,000 0 0
    Merger Contracting Ltd. (24) 40,000 (4) 40,000 0 0
    Dianne Mikus 20,000 (4) 20,000 0 0
    Maria Mikus 10,000 (4) 10,000 0 0
    Francis Lum Min 50,000 (4) 50,000 0 0
    Jasbir Singh Minhas 10,000 (4) 10,000 0 0


    — 30 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    John Morse 10,000 (4) 10,000 0 0
    Jamie Mullan 227,500 (25) 1.3% 187,500 0 0
    Guy Murray 10,000 (4) 10,000 0 0
    Shannon Murray 7,400 (4) 7,400 0 0
    Bruce Nesbiti 2,000 (4) 2,000 0 0
    Brent Nimeck (26) 700,000 (27) 4.0% 300,000 0 0
    Ian Nimeck (28) 20,000 (4) 20,000 0 0
    Randall Olafson 40,000 (4) 40,000 0 0
    Patricia O'Neil 100,000 (4) 100,000 0 0
    Harold V. Pedersen 20,000 (4) 20,000 0 0
    Kurt Pedersen 20,000 (4) 20,000 0 0
    Kent Pierson 100,000 (4) 100,000 0 0
    Pink Holdings Inc. (29) 10,000 (4) 10,000 0 0
    Vern Porter 15,000 (4) 15,000 0 0
    Mark Procknow 35,000 (4) 35,000 0 0
    Walter Radzichowsky 20,000 (4) 20,000 0 0
    Leonard Raymond De Melt 20,000 (4) 20,000 0 0
    Grant Reeves 10,000 (4) 10,000 0 0
    David Reichert 2,000 (4) 2,000 0 0
    Joan Remillard 16,000 (4) 16,000 0 0
    R. James Renwick 5,000 (4) 5,000 0 0


    — 31 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Gerald H. & Julia Rhodes (30) 20,000 (4) 20,000 0 0
    G. Scott Rhodes 20,000 (4) 20,000 0 0
    Judy Riddell 10,000 (4) 10,000 0 0
    Tom Ringoir 10,000 (4) 10,000 0 0
    Chris Ritter 10,000 (4) 10,000 0 0
    Roderick Anderson Law Corp. 10,000 (4) 10,000 0 0
    (31)          
    David Riddell 20,000 (4) 20,000 0 0
    Tyler David Riddell 100,000 (4) 100,000 0 0
    Charles D. Roberts 30,000 (4) 30,000 0 0
    Lavern Rosenboom 125,000 (4) 125,000 0 0
    Tracy Russell 20,000 (4) 20,000 0 0
    Hardip Sangha 20,000 (4) 20,000 0 0
    Harjit Sangha 10,000 (4) 10,000 0 0
    Sarah Satow 20,000 (4) 20,000 0 0
    Tom Sawyer 27,500 (4) 27,500 0 0
    Richard Sebastion 20,000 (4) 20,000 0 0
    Robert Sidley 2,000 (4) 2,000 0 0
    James Sikora 50,000 (4) 50,000 0 0
    Richard Simon 10,000 (4) 10,000 0 0
    Stan Smith 20,000 (4) 20,000 0 0
    George Spencer 95,000 (4) 95,000 0 0


    — 32 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Gary Squires 6,000 (4) 6,000 0 0
    Darren Troy Steptoe 5,000 (4) 5,000 0 0
    Michael Stewart 70,000 (4) 70,000 0 0
    Jiri Svec 10,000 (4) 10,000 0 0
    Rudolf Tahotny 10,000 (4) 10,000 0 0
    Barb Taylor 10,000 (4) 10,000 0 0
    Brad Thiessen 1,000 (4) 1,000 0 0
    Chris Thiessen 4,000 (4) 4,000 0 0
    Myron Thiessen 5,000 (4) 5,000 0 0
    Melinda Thorburn 20,000 (4) 20,000 0 0
    Gill Toews 20,000 (4) 20,000 0 0
    Ralph Toews 28,000 (4) 28,000 0 0
    Jean-Paul Tone 15,000 (4) 15,000 0 0
    John Topliss 20,000 (4) 20,000 0 0
    Kim Tran 10,000 (4) 10,000 0 0
    Peter Tredger 20,000 (4) 20,000 0 0
    Adam Vanderboon 8,620 (4) 8,620 0 0
    Vanguard Resources Ltd. (32) 10,000 (4) 10,000 0 0
    D’Arcy Viksush 20,000 (4) 20,000 0 0
    Dennis Vu 40,000 (4) 40,000 0 0
    Brad Wait 10,000 (4) 10,000 0 0


    — 33 —






    Name of Selling Shareholder


    Shares
    Owned Prior
    to this
    Offering (1)





    Percent

    Maximum
    Number of
    Shares
    Being
    Offered


    Beneficial
    Ownership
    After
    Offering
    Percentage
    Owned upon
    Completion
    of
    the Offering
    (2)
    Tyron Wagner 10,000 (4) 10,000 0 0
    Gordon C. Wallace 45,000 (4) 45,000 0 0
    Gary Walters 20,000 (4) 20,000 0 0
    Robert Ward & Rita Brown (33) 4,000 (4) 4,000 0 0
    Kelly Warrack 10,000 (4) 10,000 0 0
    Christopher Warren 20,000 (4) 20,000 0 0
    Shawn Webb 14,000 (4) 14,000 0 0
    Jordan Welsh 20,000 (4) 20,000 0 0
    Robin Westie 10,000 (4) 10,000 0 0
    Jason Wilson 10,000 (4) 10,000 0 0
    Scott Wray 3,000 (4) 3,000 0 0
    Mark A. Wright 6,000 (4) 6,000 0 0
    Christopher Yee 10,000 (4) 10,000 0 0
    Jeremy Zimmerman 40,000 (4) 40,000 0 0

    (1)

    The number and percentage of shares beneficially owned is determined in accordance with the Rules of the Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the selling stockholder has sole or shared voting power or investment power and also any shares which the selling stockholder has the right to acquire within 60 days.

       
    (2)

    Percentages calculated to include shares which the selling stockholder can sell within 60 days and assume we sell all 5,000,000 shares offered in our direct offering.

       
    (3)

    Nish Jamani has voting and investment control over securities held by 0719746 BC Ltd.

       
    (4)

    Less than 1%

       
    (5)

    Robert Jarva has voting and investment control over securities held by 689719 B.C. Ltd.



    — 34 —

    (6)

    Includes 50,000 options to purchase shares at $0.50 until March 13, 2008 and 100,000 options to purchase shares at $0.50 until April 5, 2008

      
    (7)

    Brian Findlay has voting and investment control over securities held by Alder Investments Ltd.

      
    (8)

    Includes 20,000 options to purchase shares at $0.50 until March 13, 2008

      
    (9)

    Brent Nimeck, a director of Lexington, has voting and investment control over securities held by Greystone Holdings Ltd.

      
    (10)

    Includes 150,000 options to purchase shares at $0.20 until December 30, 2007 and 150,000 options to purchase shares at $0.50 until April 5, 2008

      
    (11)

    David Kershaw has voting and investment control over securities held by Kershaw Enterprises Ltd.

      
    (12)

    Includes 150,000 options to purchase shares at $0.50 until March 13, 2008

      
    (13)

    Kelly Kristof is the wife of Larry Kristof, a director of Lexington

      
    (14)

    Larry Kristof is a director, CEO and CFO of Lexington

      
    (15)

    Includes 250,000 options to purchase shares at $0.10 until October 1, 2007 and 150,000 options to purchase shares at $0.50 until April 5, 2008

      
    (16)

    Koah Kruse is the brother of Tannisah Kruse, who was a director of Lexington until March 28, 2006

      
    (17)

    Tannisah Kruse was CFO and a director of Lexington until March 28, 2006

      
    (18)

    Includes 250,000 options to purchase shares at $0.10 until October 1, 2007

      
    (19)

    Kevin Viney has voting and investment control over securities held by KV3 Ltd.

      
    (20)

    held jointly

      
    (21)

    Fern MacDonald is the mother of Cameron MacDonald, who was a Senior VP with Lexington until April 4, 2006

      
    (22)

    Includes 25,000 options to purchase shares at $0.50 until April 5, 2008

      
    (23)

    Includes 25,000 options to purchase shares at $0.50 until April 5, 2008

      
    (24)

    Doug Shaw has voting and investment control over Merger Contracting Ltd.

      
    (25)

    Includes 40,000 options to purchase shares at $0.50 until April 5, 2008

      
    (26)

    Brent Nimeck is a director of Lexington

      
    (27)

    Includes 250,000 options to purchase shares at $0.10 until October 20, 2007 and 150,000 options to purchase shares at $0.50 until April 5, 2008. In addition to the 300,000 shares and 400,000 options in his name, Brent Nimeck also has investment control over 4,750,000 shares held by Greystone Holdings Ltd.



    — 35 —

    (28)

    Ian Nimeck is the brother of Brent Nimeck, a director of Lexington

       
    (29)

    Derek Pink has investment and voting control over Pink Holdings Inc.

       
    (30)

    held jointly

       
    (31)

    Roderick Anderson has voting and investment control over securities held by Roderick Anderson Law Corp.

       
    (32)

    Bill Chan has investment and voting control over Vanguard Resources Ltd.

       
    (33)

    held jointly

    The percentages are based on the 15,293,626 shares of common stock outstanding on May 10, 2006 and all shares sold by selling shareholders.

    Other than as described above, none of the selling shareholders or their beneficial owners has had a material relationship with us other than as a shareholder at any time within the past three years, or has ever been one of our officers or directors or an officer or director of our predecessors or affiliates.

    None of the selling shareholders are NASD registered broker-dealers or affiliates of NASD registered broker-dealers.

    Legal Proceedings

    We are not aware of any pending or threatened legal proceedings which involve Lexington or any of its properties or subsidiaries.

    Directors, Executive Officers, Promoters, And Control Persons

    Directors and Officers

    Our bylaws allow the number of directors to be fixed by the Board of Directors. Lexington’s Board of Directors has fixed the number of directors at two.

    Our current directors and officers are as follows:

    Name Age Position
    Larry Kristof

    35

    Director, President, Chief Executive Officer, Chief
    Financial Officer, Secretary, Treasurer, Principal
    Accounting Officer
    Brent Nimeck 28 Director, Senior Vice President of Operations
    Douglas Blackman 55 Vice President of Business Development

    The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors. There are no arrangements,


    — 36 —

    agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Lexington's affairs.

    Larry Kristof, President and CEO, CFO, Secretary, Treasurer, Principal Accounting Officer

    Larry Kristof has acted as our President and Chief Executive Officer since October 1, 2005, and on March 31, 2006 was appointed as our Chief Financial Officer, Secretary, Treasurer and Principal Accounting Officer. From 2003 to 2005, Mr. Kristof co-founded Lexington

    Communications Ltd., a company in the business of providing investor and corporate communications expertise to public companies. From 1998 to 2001 Larry Kristof was the founder and President of Westec Venture Group Inc., a company which provided business development and venture capital services.

    Brent Nimeck, Senior Vice President of Operations

    Brent Nimeck was appointed as our Senior Vice President of Operations on October 20, 2005. From 2002 to the present, Mr. Nimeck has been the general manager of Southern Well Testing Ltd., a company whose main focus is production testing of oil and gas wells. Southern Well Testing also designs and fabricates oil well testing packages. Mr. Nimeck has been personally involved in every aspect of building all six of the mobile oil well testing units currently owned by Southern Well Testing, from negotiating with suppliers to physically assembling the equipment. From 1997 to 2002, Mr. Nimeck worked as a supervisor and equipment operator with Schlumberger International, a supplier of services and technology to the international petroleum industry, and was responsible for crew supervision offshore and on land.

    Douglas Blackman, Vice President of Business Development

    We appointed Douglas Blackman as our Vice President of Business Development on November 17, 2005. He graduated from Trent University, Peterborough, Ontario in 1972 and obtained his law degree from the University of Ottawa in 1975. He moved to Calgary in 1975 and began his career in the oil and gas industry from 1977 to 1980 working for BP Exploration Canada. From 1980 until 1987, Mr. Blackman worked for the Suncor Inc. legal department specializing in land sales and contracts. From 1987 to 1989, Mr. Blackman worked for the Petrocorp Wellington New Zealand legal department and from 1989 to 1995, Mr. Blackman operated his own business called Canzea Trading Company Limited. From 1995 to 1997 he worked for the New Zealand Contracts Department as Secretary of the Tenders Committee. From 1997 to 2002, Mr. Blackman was an associate with the law firm Martin & Associates. Mr. Blackman currently serves as a director of one other reporting issuer, Medallion Healthy Homes Ltd. (MEDA.TX), a company in the business of purification of indoor environments. He is a member of the Law Society of Alberta, the Canadian Bar Association and the Canadian Association of Professional Landmen.

    Other than as described above, none of our directors currently serve on the boards of other public companies.


    — 37 —

    Significant Employees

    Other than the officers described above, we do not expect any other individuals to make a significant contribution to our business.

    Family Relationships

    There are no family relationships among our officers, directors, or persons nominated for such positions.

    No Legal Proceedings

    None of our directors, executive officers, promoters or control persons have been involved in any of the following events during the past five years:

    • any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
    • any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
    • being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
    • being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

    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.

    Security Ownership of Certain Beneficial Owners and Management

    The following table sets forth the ownership, as of May 10, 2006, of our common stock by each of our directors, and by all executive officers and directors as a group, and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of May 10, 2006, there were 15,293,626 common shares issued and outstanding. All persons named have sole voting and investment power with respect to the shares, except as otherwise noted. The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this Prospectus.


    — 38 —

    Title of Class
    Name and Address of
    Beneficial Owner
    Amount and
    Nature of
    Beneficial
    Ownership

    Percent of
    Class
    (%)
    Common

    Larry Kristof (1)
    Suite 1209 – 207 West Hastings Street
    Vancouver, BC V6B 1H7
    5,300,000
    (2)
    34.7%

    Common

    Brent Nimeck (3)
    Suite 1209 – 207 West Hastings Street
    Vancouver, BC V6B 1H7
    5,450,000
    (4)
    35.6%

    Common

    Douglas Blackman (5)
    Suite 1209 – 207 West Hastings Street
    Vancouver, BC V6B 1H7
    0

    0

      All Officers and Directors as a Group 10,750,000 70.3%

      (1)

    Larry Kristof is a director, President, CEO and CFO of Lexington.

         
      (2)

    Includes 250,000 options to purchase shares at $0.10 until October 1, 2007 and 150,000 options to purchase shares at $0.50 until April 5, 2008

         
      (3)

    Brent Nimeck is a director and Senior VP, Operations of Lexington.

         
      (4)

    Includes 250,000 options to purchase shares at $0.10 until October 20, 2007 and 150,000 options to purchase shares at $0.50 until April 5, 2008.

         
      (5)

    Douglas Blackman is Lexington's Vice President of Business Development.

    Changes In Control

    There are currently no arrangements which would result in a change in control of Lexington.

    Description of Securities

    Common Stock

    Our authorized capital stock consists of 100,000,000 common shares, $0.0001 par value and 20,000,000 preferred shares, par value $0.0001. Holders of the common stock have no preemptive rights to purchase additional shares of common stock or other subscription rights. The common stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions. All shares of common stock are entitled to share equally in dividends from sources legally available, therefore, when, as and if declared by our Board of Directors, and upon liquidation or dissolution of Lexington, whether voluntary or involuntary, to share equally in the assets of Lexington available for distribution to our stockholders.


    — 39 —

    Our Board of Directors is authorized to issue additional shares of common stock not to exceed the amount authorized byour Articles of Incorporation, on such terms and conditions and for such consideration as our Board may deem appropriate without further stockholder action.

    Voting Rights

    Each holder of common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Since the shares of common stock do not have cumulative voting rights, the holders of more than 50% of the shares voting for the election of directors can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to our Board of Directors.

    Dividend Policy

    Holders of our common stock are entitled to dividends if declared by the Board of Directors out of funds legally available therefore. We do not anticipate the declaration or payment of any dividends in the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be subject to the discretion of our Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Therefore, there can be no assurance that any dividends of any kind will ever be paid.

    Preferred Stock

    We are authorized to issue up to 20,000,000 shares of $0.0001 par value preferred stock. We have no shares of preferred stock outstanding. Under our Articles of Incorporation, our Board of Directors has the power, without further action by the holders of the common stock, to determine the relative rights, preferences, privileges and restrictions of the preferred stock, and to issue the preferred stock in one or more series as determined by the Board of Directors. The designation of rights, preferences, privileges and restrictions could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of the common stock.

    Stock Transfer Agent

    Nevada Agency and Trust Company has been appointed by us to serve as our stock transfer agent.

    Shares Eligible for Future Sale

    The 14,093,626 shares of common stock registered in this offering will be freely tradable without restrictions under the Securities Act. A total of 4,0250,000 shares are being registered by our "affiliates" (officers, directors or 10% shareholders currently or during the past 90 days); 2,000,000 shares owned by Larry Kristof, our President and CEO; and, 2,000,000 shares controlled (300,000 in his own name, and 1,700,000 in the name of Greystone Holdings Ltd.) by Brent Nimeck, our director and Senior VP, Operations, are being registered hereunder. Also, 250,000 shares in the name of Tannisah Kruse, who was our director and Chief Financial Officer until March 28, 2006, are being registered in this Prospectus.

    Of the 6,200,000 of our issued common stock that is not being registered in this Prospectus:


    — 40 —

    • 3,050,000 shares have been held by Greystone Holdings Ltd., a company controlled by Brent Nimeck, our director and Senior VP, for less than a year
    • 250,000 shares have been held by Tannisah Kruse, our previous director and CFO, for less than a year; and
    • 2,900,000 shares have been held by Larry Kristof, our director, President, CEO and CFO for less than a year.

    In general, under Rule 144 as currently in effect, any of our affiliates and any person or persons whose sales are aggregated who has beneficially owned his or her restricted shares for at least one year, may be entitled to sell in the open market within any three-month period a number of shares of common stock that does not exceed the greater of (i) 1% of the then outstanding shares of our common stock, or (ii) the average weekly trading volume in the common stock during the four calendar weeks preceding any sale. Sales under Rule 144 are also affected by limitations on manner of sale, notice requirements and availability of current public information about us. Non-affiliates who have held their restricted shares for two years may be entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding any sale.

    The 6,200,000 outstanding restricted securities held by the directors of Lexington that are not registered in this Prospectus are subject to the sale limitations imposed by Rule 144. The availability for sale of substantial amounts of common stock under Rule 144 could adversely affect prevailing market prices for our securities.

    Interest of Named Experts and Counsel

    Accountants

    Our Audited Financial Statements as of November 30, 2005 have been included in this Prospectus in reliance upon Amisano Hanson, Chartered Accountants, as experts in accounting and auditing.

    Legal Matters

    The validity of the common stock offered hereby will be passed upon for us by Penny Green of Bacchus Law Group.

    Reports to Security Holders

    Upon effectiveness of this Prospectus, we will be subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholders annual reports containing financial statements audited by our independent auditors and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year.

    The public may read and copy any materials that we file with the Securities and Exchange Commission at the Commission's Public Reference Room at 100 F Street, NE, Washington,


    — 41 —

    D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-Commission-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. The address of that site is www.sec.gov.

    Indemnification

    Under our Articles of Incorporation and bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.

    Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

    Description of Business

    Lexington Energy Services Inc. was incorporated as a Nevada company on March 30, 2005. We have one wholly-owned subsidiary, LexCore Services Inc., incorporated as a Nevada company on April 28, 2006.

    We have only recently begun our current operations and we have not yet earned any revenues and have had operational losses to date, as well as an accumulated shareholder deficit. As of February 28, 2006, we had net losses in the amount of $(85,250) and an accumulated shareholder deficit of $(162,364).

    We are an oil field service company providing construction and leasing of custom oilfield service equipment to oil and gas and other oil field service companies in Western Canada. We design and build a range of products for use in oil and gas fields.

    Our Products and Services

    Nitrogen Generation Unit

    We have designed a nitrogen generation unit and we have put a deposit towards the purchase of our first unit. We plan to build and lease the unit to oil companies . Nitrogen generation is a process which extracts the nitrogen content from atmospheric air and purifies it from its original content of 79% up to a purity of 99.5% . The oil industry uses nitrogen in various applications. Nitrogen is an inert gas which does not allow corrosion and displaces oxygen from wells and other hydrocarbon based environments. Removing the oxygen from these environments and wells eliminates the risk of causing a fire in a well or causing a surface explosion. In the case of “sour wells” which contain Hydrogen sulfide gas, nitrogen is used to displace oxygen. Removing


    — 42 —

    oxygen from sour wells prevents corrosion of the well bore and downhole equipment. Without nitrogen, sour wells can rapidly eat through steel in a couple of days, which can result in a major loss of assets to an oil company.

    In Western Canada drilling operations, nitrogen is often used daily and is in short supply. Most nitrogen generation plants are located over 500 kilometers from the markets where they are sold. The gas is compressed, liquefied and stored under pressure so it can be transported to location and converted from a liquid back to a gas and then sold to the customer. The remote location and vast distance between point of manufacture and point of sale poses a serious logistical problem to many oil companies. The liquid nitrogen systems require trucking of thousands of gallons of product from the point of production to a transfer station and then a field pumping unit. The liquid is handled three times and thousands of kilometers are driven to get the product to location.

    Our planned nitrogen generation system generates a continuous supply of nitrogen without any of the additional costs associated with liquid systems. Our system draws in a large volume of air at low pressures, super heats the air to remove any contaminates such as oil, moisture and dirt. From there the air is forced under pressure into a nitrogen membrane module. There modules contain thousands of hair like fibers which only allow nitrogen molecules to pass through. As the nitrogen is allowed to pass into the membrane, the waste gas oxygen is dumped from the system back into the atmosphere. We believe this system of nitrogen production will allow us to produce a constant uninterrupted supply of nitrogen at the point of sale with low operating costs and no costs or hazards associated with liquid units.

    Our nitrogen generation system will require two people to operate and will have a ten hour supply of fuel on board which is complemented with an auxiliary supply truck. Also, it will be a diesel electric system which will give it the flexibility to operate off of an auxiliary power supply, thus eliminating any cost of generating the nitrogen except for labour costs. The nitrogen generation unit will be mobile (mounted on a 50 foot trailer) and will have an operator/control air-conditioned cabin with one room with a desk and one room for resting and storage.

    Mobile Well Testing Units

    Oil and gas wells need to be tested for various lengths of time depending on the well performance and repair times. This is done so that the oil companies can estimate reservoir capabilities and size. Typically, the oil and well testing procedure is cumbersome and difficult because of the size and volume of the equipment required, which must be moved by large trucks into locations. We have designed and we intend to build two mobile well testing units (p-tanks) which will be able to perform these tests.

    Our mobile p-tank test units will consist of all the equipment necessary to test a well attached to a tractor, along with a mini mobile office with satellite internet access in our proprietary packaging which allows us to eliminate the need for third party trucking in the testing of oil and gas wells.

    We have designed our p-tanks to complete pressure testing, and to collect reservoir fluid samples. Pressure-testing means to demonstrate the pressure integrity of a system without actuating its components. It is essentially a test of the well’s producing potential usually done


    — 43 —

    during the initial completion phase. The purpose of pressure testing is to determine the effects of different flow rates on the pressure within the producing zone of the well to establish physical characteristics of the reservoir and to determine the maximum potential rate of flow.

    A reservoir is a subsurface, porous, permeable or naturally fractured rock body in which oil or gas are stored. An oil reservoir generally contains three fluids—gas, oil, and water—with oil the dominant product. In the typical oil reservoir, these fluids become vertically segregated because of their different densities. Gas, the lightest, occupies the upper part of the reservoir rocks; water, the lower part; and oil, the intermediate section. In addition to its occurrence as a cap or in solution, gas may accumulate independently of the oil; if so, the reservoir is called a gas reservoir.

    The primary functions of a p-tank testing unit is to collect multiple reservoir fluid samples to evaluate potentially productive reservoir units. The determination of accurate produced fluid behavior and composition is fundamental in determining production quality and quantity of the reservoir.

    We have entered into two agreements to lease out our 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 mobile testing unit for 48 months for approximately $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.

    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 mobile testing unit on similar terms. The agreement, which will become effective once we have completed and insured the p-tank, provides for the lease of a p-tank mobile testing unit for 48 months for $6,105 per month commencing on July 1, 2006 or the first of the month following the month in which the p-tank is made available by us to the customer. Both agreements are attached as exhibits to this Prospectus.

    Coring Units

    On April 28, 2006, we incorporated a wholly-owned subsidiary, LexCore Services Inc., as a Nevada company, through which we intend to operate our activities relating to leasing coring units. We intend to purchase and lease coring units which will allow the drilling of holes into oil sands. We intend to lease these units to oil and gas companies. Coring is the process of cutting a vertical, cylindrical sample of the formations encountered as a well is drilled to allow geological analysis. The geological analysis of a core sample may determine porosity, permeability, physical characteristics, fluid content, geological age, and probable productivity of the formation. We intend to hire a VP, Operations to run our coring division through LexCore Services Inc. We have identified a candidate and we are currently negotiating terms of a management agreement.


    — 44 —

    Growth

    We expect our business strategy will continue to include growth through selective acquisitions. Our continued rate of growth will depend on our ability to identify attractive acquisition opportunities and to acquire identified targets at commercially reasonable prices. We plan to integrate future acquisitions into our existing operations. We have extra space in our facility in which we can house the development of new products or businesses that we acquire.

    The Oil and Gas Services Industry

    We intend to provide products and services to onshore oil and natural gas exploration and production companies and other oil service companies in Western Canada for use in the drilling and production of oil and natural gas. The main factor influencing demand for well services in our industry is the level of drilling activity by oil and natural gas companies, which, in turn, depends largely on current and anticipated future crude oil and natural gas prices and depletion rates. Current market indicators suggest an increasing demand for oil and natural gas coupled with a flat or declining production curve, which we believe should result in the continuation of historically high crude oil and natural gas commodity prices. For example, the Energy Information Agency of the U.S. Department of Energy, or EIA, forecasts that U.S. oil and natural gas consumption will increase at an average annual rate of 1.5% through 2025. Conversely, the EIA estimates that U.S. oil production will decline at an average annual rate of 0.5% and natural gas production will increase at an average annual rate of 0.6% .

    Our Distribution Method

    Our plan is to require our customers to pick up any equipment they lease from us from our facility we intend to build in Brooks, Alberta. We chose the location of Brooks, Alberta because we believe it is well situated in a region with substantial oil and gas exploration and production activity.

    New Products and Services

    All of our products and services, once available, will be new, as we have only recently begun operations. We intend to actively seek new products and services currently offered by other companies and attempt to acquire them by payment of cash or shares or by purchasing a company.

    Competition

    Our competition includes small and mid-size independent contractors as well as major oilfield services companies with international operations. We compete with over 100 testing companies that provide services to oil and gas companies in Western Canada. We believe that the principal competitive factors in the market areas that we serve are price, product and service quality, efficiency and availability of equipment and technical proficiency.

    We differentiate ourselves from our major competition by our unique equipment. Much of our proposed equipment, including our mobile well testing equipment (p-tanks) and our nitrogen generation units have been designed by us. Our target market is independent oil and gas


    — 45 —

    companies. Based on the experience of our directors, these independents typically are relationship driven and make decisions at the local level. We believe this business model will enable us to grow our business. However, we are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.

    Marketing

    We are a new company and we have little market presence at this time. So far, we have only two customers, Southern Well Testing Inc., and Southern Well Testing (2005) Inc., which are both owned and managed by Brent Nimeck, a director and VP, Operations of Lexington. As we complete assembly of our equipment, we intend to seek new clients through personal contact established by our officers Brent Nimeck and Douglas Blackman, both who have worked in the Western Canadian oil and gas industry for many years. We intend to supplement this with attendance at several oil and gas trade shows in North America each year and with advertisements in magazines. We are in the process of building a website to feature our intended products and services.

    Research and Development

    Since our inception, we have not spent any money on research or development.

    Intellectual Property

    We have not filed for any protection of our trademarks. We do not believe we could obtain a patent on the assembly design for any of our equipment.

    Legislation and Government Regulation

    Canada has regulatory provisions relating to permits for the drilling of wells, the spacing of wells, the prevention of oil and natural gas waste, allowable rates of production and other matters. The amount of oil and natural gas produced is subject to control by regulatory agencies in each province that periodically assign allowable rates of production. The Province of Alberta and Government of Canada also monitor and regulate the volume of natural gas that may be removed from the province and the conditions of removal.

    The right to explore for and develop oil and natural gas on lands in Alberta, Saskatchewan and British Columbia is controlled by the governments of each of those provinces. Changes in royalties and other terms of provincial leases, permits and reservations may have a substantial effect on the operations of our customers, which in turn could effect the demand for our products and services and have a substantial effect on our operations. In addition to the foregoing, in the future, our Canadian operations may be affected from time to time by political developments in Canada and by Canadian Federal, provincial and local laws and regulations, such as restrictions on production and export, oil and natural gas allocation and rationing, price controls, tax increases, expropriation of property, modification or cancellation of contract rights, and environmental protection controls. Furthermore, operations may also be affected by United States import fees and restrictions.


    — 46 —

    We are also subject to safety policies of the Alberta Workers Compensation Board that regulates the protection of the health and safety of workers.

    Environmental Law Compliance

    As our business plan involves offering equipment for lease to oil and gas companies, we do not expect that we will be governed by the comprehensive federal, provincial and local laws that regulate the discharge of materials into the environment or otherwise relate to health and safety or the protection of the environment. Our well testing equipment has been developed to assist oil and gas companies in Western Canada to comply with "Guide 40: Pressure and Deliverability Testing - Oil and Gas Wells" as developed by the Alberta Energy and Utilities Board. Guide 40 provides the requirements and recommended practices for pressure and deliverability testing of oil and gas wells. We need to ensure that the equipment which we create assists our clients in meeting these regulations. The Alberta Energy and Utilities Board is an independent, quasi-judicial agency of the Government of Alberta which regulates the safe, responsible, and efficient development of Alberta's energy resources.

    To the extent which environmental compliance may be necessary, we do not anticipate any significant compliance expense.

    Employees

    As of May 10, 2006, we have one full time employee, an administration assistant in our Vancouver office. Both of our directors work full time as independent contractors and work in the areas of business development and management. We are currently negotiating with our President Larry Kristof and our VP, Operations to change their relationship from independent contractors to employees. On March 28, 2006 our Chief Financial Officer resigned. We intend to hire a new Chief Financial Officer but we have not yet identified a suitable candidate. Our President and CEO, Larry Kristof, will be our Chief Financial Officer until a new person is found. We currently engage independent contractors in the areas of accounting, bookkeeping and legal services. We have identified a candidate to act as VP, Operations of our wholly-owned subsidiary, LexCore Services Inc., and we are currently negotiating terms of a management agreement.

    Management's Discussion and Analysis or Plan of Operation

    We are a start-up stage corporation with limited operations and no revenues from our business operations. Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. We do not anticipate that we will generate significant revenues until we have built or otherwise acquired well service equipment, which we will only be able to do if we raise money from this offering. Accordingly, we must raise cash from sources other than operations. Our only other source for cash at this time is investments by others in our company. We must raise cash to implement our marketing plan. Whether we raise no money or the maximum amount from this offering, it will last twelve months.

    We anticipate that the demand for our services will be primarily determined by current and anticipated oil and gas prices and the related general production spending and level of drilling activity in Western Canada, where we intend to focus our operations. Volatility or weakness in oil and gas prices (or the perception that oil and gas prices will decrease) may affect the


    — 47 —

    spending patterns of our customers and may result in the drilling of fewer new wells or lower production spending on existing wells. This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment.

    If we need additional cash and cannot raise it we will either have to suspend operations until we do raise the cash, or cease operations entirely. If we raise no money from this offering, we have enough money to continue operations for a year but with limited funds available to build and grow our business. If we raise 100% of the amount we are seeking through this direct offering, we will be able to complete construction of two mobile well testing (p-tank) units, purchase two coring units and two nitrogen generation units, and design and complete construction of a warehouse, operations and office facility , and remain in business for twelve months. If we raise less than the maximum amount and we need more money we will have to revert to obtaining additional money through a second public offering, a private placement of securities, or loans. If we are unable to generate revenues after the twelve months for any reason, or if we are unable to make a reasonable profit after twelve months, we may have to cease operations.

    Results of Operations

    Our expenses for the period from inception on March 30, 2005 to November 30, 2005 were $77,144 of which $36,936 was for professional fees; $13,404 was for office and general costs; and $26,774 was for management fees. Our loss since inception is $77,144. During the three months ended February 28, 2006, we incurred expenses of $85,250, which included $27,031 for professional fees, $25,500 for management fees and $32,719 for general and administrative expenses. Our general and administrative expenses included office rent, telephone expenses, travel and entertainment, and wages for our administrative assistant.

    During the period from our inception to February 28, 2006, we hired consultants in the areas of bookkeeping and accounting. We also retained an attorney for the preparation of this Registration Statement, and an auditor to audit our financial statements.

    Plan of Operation

    Lexington plans to grow its 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 includes the following:

    • 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.

    — 48 —

    Mobile Well Testing Units

    We intend to build two mobile well testing units (p-tanks) which we have named Lexington Unit 2000 and Lexington Unit 3000.

    Each p-tank will have four major components, a semi tractor, a pressure vessel, a flare stack and a dog house. There are many suppliers of these parts. Brent Nimeck, our VP, Operations, through his company Southern Well Testing Ltd., has many established relationships with suppliers for the parts to build our p-tank. The major components include all the equipment necessary to test a well, a tractor, along with parts to construct a mini mobile office We intend to obtain the parts for our p-tanks through suppliers located in Western Canada that Mr. Nimeck has dealt with in the past. We do no have any written agreements with any suppliers. We will not use any raw materials in assembling the p-tanks.

    As of March 31, 2006 we have spent approximately $10,000 on parts for one p-tank. The two p-tank units we have designed are slightly different and one will cost approximately $390,000 (we have already spent $10,000 on parts) to build and the other will cost us approximately $300,000 to build. We will complete the purchase of parts to build one p-tank if we raise 50% of our direct offering and we will complete the purchase of parts for both p-tanks if we raise 100% of our direct offering. It is therefore possible that we may not have enough capital to complete the construction of the p-tanks after this financing is complete. Also, other factors could prevent us from completing the construction of the p-tanks, such as a failure of management to devote adequate time to their construction. We have entered into lease agreements with two customers which provide for the least of the p-tanks once they are built by us. If we fail to complete the p-tanks 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.

    If we are successful in selling 100% of the shares in this direct offering, we expect that we will begin generating total monthly revenues of approximately $12,000 from the lease of both p-tanks by September 2006.

    Nitrogen Generation Unit

    As of May 10, 2006, we have paid deposits totaling $495,000 towards construction of a nitrogen generation unit that is currently being assembled in California, USA . We are relying on one supplier to build this nitrogen unit in its entirety. We are obligated to make the following payments to complete the construction of the unit:

    May 1, 2006 $67,500
    June 1, 2006 $375,000
    July 1, 2006 $125,000

    If we fail to make these payments, we may lose our deposit, or we may be required to pay higher costs to complete construction of the nitrogen unit. After the nitrogen unit has been


    — 49 —

    completed, we expect to spend another $200,000 per year for modification and maintenance of the unit. We do not need any raw materials for the completion of this 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. We have not entered into any written agreements with our supplier of the nitrogen generation unit.

    We currently have enough in our bank account to cover the $67,500 payment to our supplier in May 2006. If we raise 25% of our direct offering, we will complete payment to our supplier for our nitrogen generation unit by making our June and July 2006 payments as outlined above. If we raise 50% of our direct offering, we will also be able to cover the cost of one year of maintenance and specific modifications to one unit. If we raise 100% of our direct offering, we will also complete construction of a second nitrogen generation unit.

    Coring Units

    We have already paid a deposit of over $60,000 to purchase two coring units from the same supplier. If we raise 25% of our offering, we will complete the purchase of one coring unit, on which we would expect to be generating revenues within two months after the completion of this offering. If we raise 50% of this direct offering we will purchase two coring units. If we fail to purchase one or both coring units, we could lose some or all of our deposit.

    New Facility

    Lexington will be headquartered in Brooks, Alberta. Brooks is a small town located one and a half hours south of Calgary, Alberta, Canada. Brooks is located in the centre of Southern Alberta and accesses the largest areas of Alberta which extends into Saskatchewan and to the US border. We intend to build a 10,000 square foot manufacturing and repair facility with a connected 2,000 square foot office space for our use and for possible lease to other companies, depending on how much space we need ourselves. We intend to design the facility to be used for in-house engineering and design staff, human resources, accounting and an in-house employee office and development centre. This combination of manufacturing space, warehouse, repair, in-house design facility and office may enable us to have direct feedback from clients, employees and engineers to facilitate a fast reaction to the changing needs of clients and the market.

    On February 23, 2006 we entered into an agreement to purchase a property in Brooks, Alberta for a purchase price of $214,671. The property is comprised of raw land and is approximately 8.2 acres. We have paid a deposit of $43,479 and we are required to pay the balance prior to closing on June 30, 2006. As of May 10, 2006, we have the money in our bank account to complete the purchase. We are currently considering consultants to work with to design a manufacturing and repair facility on the land. If we are successful in raising 75% or more of the direct offering, we intend to complete the construction of the facility, which we estimate will cost approximately $740,000, including design. Our intention is to complete design of this facility and obtain building permits within three months of completion of this offering, and to begin construction at that time. We anticipate that the construction will take approximately five months. Once it is complete, we intend to hire an administrative assistant and a manager to oversee the offices. We intend to contract with other companies for maintenance and cleaning services once the facility is built.


    — 50 —

    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 in a start-up stage operations 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. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

    Our independent certified public accountants have stated in their report dated February 3, 2006 included herein, that we have incurred operating losses from its inception and that we are dependent upon our ability to raise capital from stockholders or other sources to sustain operations. These factors raise substantial doubt about our ability to continue as a going concern.

    Liquidity and Capital Resources

    As of February 28, 2006, we had working capital of $26,770. Our accumulated net loss of $162,364 since our inception to February 28, 2006 was funded by a combination of private placements and a loan from a related party. During this period we raised $497,000 in equity finance.

    Lexington expects to incur substantial losses over the next two years. We estimate that our cash requirements over the next 12 months will be approximately $4,210,000 as follows:

    Purchase of parts for well
    testing equipment (p-tanks)
    $ 680,000
    Construction of nitrogen
    generation unit
    1,700,000
    Purchase of parts to build
    coring units
    500,000
    Design and build operating
    facility
    740,000
    Administrative expenses 480,000
    General working capital 110,000

    In addition, we intend to complete the purchase of our property in Brooks, Alberta, which will cost an additional $171,192. We already have the funds to complete this purchase in our bank


    — 51 —

    account. The $4,210,000 described above we hope to raise by selling all 5,000,000 share offered in this direct offering. If we are unsuccessful in raising money through the direct offering we may review other financing possibilities such as bank loans. If we cannot raise at least $4,210,000 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.

    Known Material Trends and Uncertainties

    Subsequent to November 30, 2005, we made a $250,000 deposit for construction of a nitrogen generation unit. If we want to complete the purchase of the unit, we estimate that we will have to pay another $812,500 over the next six months.

    We believe that the above discussion contains a number of forward-looking statements. Our actual results and our actual plan of operations may differ materially from what is stated above. Factors which may cause our actual results or our actual plan of operations to vary include, among other things, decision of the Board of Directors not to pursue a specific course of action based on a re-assessment of the facts or new facts, changes in oil and gas prices or general economic conditions.

    Critical Accounting Policies

    Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in note 2 of the notes to our historical financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

    Foreign Currency Translation

    Our functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars and are translated into United States dollars, in accordance with Statement of Accounting Standards ("SFAS") No. 52 “Foreign Currency Translation,” using exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at each balance sheet date at the exchange rate prevailing at the balance sheet date. Foreign currency exchange gains and losses are charged to operations. We have not, as of March 31, 2006, entered into derivative instruments to offset the impact of foreign currency fluctuations.

    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. Brooks is a small town located near Calgary, Alberta. 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, Alberta, Canada for a total purchase price of $214,671. The agreements states that the closing for the purchase of the land shall be on June 30, 2006, by which time we must pay the balance owing of $212,792.


    — 52 —

    Certain Relationships and Related Transactions

    We have entered into two agreements to lease out our 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 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.

    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 mobile testing unit on similar terms. The agreement, which will become effective once we have completed and insured the p-tank, provides for the lease of a p-tank mobile testing unit for 48 months for $6,105 per month commencing on July 1, 2006 or the first of the month following the month in which the p-tank is made available by us to the customer. Both agreements are attached as exhibits to this Prospectus.

    Other than these agreements described above, and the management agreements described on page 55, 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.

    Market For Common Equity and Related Stockholder Matters

    Market Information

    Our common stock is not traded on any exchange. We plan to eventually seek listing on the OTC Bulletin Board, once our Prospectus has been declared effective by the Commission. We cannot guarantee that we will obtain a listing. There is no trading activity in our securities and there can be no assurance that a regular trading market for our common stock will ever be developed.

    A market maker sponsoring a company's securities is required to obtain a listing of the securities on any of the public trading markets, including the OTC Bulletin Board. If we are unable to obtain a market maker for our securities, we will be unable to develop a trading market for our common stock. We may be unable to locate a market maker that will agree to sponsor our securities. Even if we do locate a market maker, there is no assurance that our securities will be able to meet the requirements for a quotation or that the securities will be accepted for listing on the OTC Bulletin Board.

    We intend to apply for listing of the securities on the OTC Bulletin Board, but there can be no assurance that we will be able to obtain this listing. The OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board stocks are traditionally smaller companies that


    — 53 —

    do not meet the financial and other listing requirements of a regional or national stock exchange.

    As of May 10, 2006, there were 190 holders of record of our common stock.

    Executive Compensation

    The following Summary Compensation Table sets forth the total annual compensation paid or accrued by us to or for the account of the Chief Executive Officers who held this position during 2005 and each other executive officer whose total cash compensation exceeds $100,000:

    Summary Compensation Table

        Annual Compensation Long Term Compensation  
                     
              Awards Payout(s)  
    Name and
    Principal
    Position


    Year


    Salary
    $


    Bonus
    $
    Other
    Annual
    Compensation
    $
    Restricted
    Stock
    Award(s)
    $
    Securities
    Underlying
    Options/SARs
    (#)

    LTIP
    Payouts
    $

    All Other
    Compensation
    $
    Larry
    Kristof (1)
    2005
    (2)
    10,000
    (3)

    0

    0

    0

    250,000

    0

    0

    Tannisah
    Kruse (4)
    2005
    (2)
    7,000
    (3)

    0

    0

    0

    250,000

    0

    0
                     

      (1)

    Larry Kristof was appointed as Chief Executive Officer on October 1, 2005

         
      (2)

    For the period from Inception (March 30, 2005) to November 30, 2005

         
      (3)

    Paid as management consulting fees

         
      (4)

    Tannisah Kruse was Chief Executive Officer from April 1, 2005 to October 1, 2005 and was a director, Chief Financial Officer, Treasurer and Secretary from April 1, 2005 to March 28, 2006.

    Option Grants in the Last Fiscal Year

    The following table sets forth the stock options that were granted to the named executive officers in fiscal year 2005.

      Number of % of Total Options Exercise or  
      Securities Underlying Granted to Employees Base Price  
    Name Options Granted (#) In Fiscal Year 2005 ($/Sh) Expiration Date
    Larry Kristof 250,000 50% $0.10 October 1, 2007
    Tannisah Kruse 250,000 50% $0.10 October 1, 2007

    Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

    The following table sets forth certain information concerning unexercised stock options held by the named executive officers as of November 30, 2005. None of the named executive officers exercised any of their stock options during the period from inception (March 30, 2005) to November 30, 2005.


    — 54 —





    Name
    Number Of Securities
    Underlying Unexercised
    Options At 2005 Fiscal
    Year-End(#)
    Exercisable/Unexercisable

    Value Of Unexercised
    In-The-Money Options
    At 2005 Fiscal Year-End ($)(1)
    Exercisable/Unexercisable
    Larry Kristof 250,000/0 $25,000/0
    Tannisah Kruse 250,000/0 $25,000/0

    (1) The calculation of the value of unexercised options held by the named executive officers is based upon the average sales of our unregistered stock at prices of $0.20 per share in December 2005.

    Management Agreements

    On October 1, 2005, we entered into a Management Agreement with Larry Kristof as President and Chief Executive Officer. The agreement provides that Mr. Kristof will receive a monthly salary of $5,000.00 per month. The agreement also provides that Mr. Kristof will receive a stock option to purchase 250,000 common shares of Lexington at $0.10 per share for a two-year period ending October 1, 2007. We are currently negotiating a new agreement with Mr. Kristof which will likely include an increase in salary.

    Also, on October 1, 2005, we entered into a Management Agreement with Tannisah Kruse as Chief Financial Officer, Secretary and Treasurer. Ms. Kruse resigned these positions on March 28, 2006. We entered into a settlement agreement with Ms. Kruse relating to her resignation. The key terms of the settlement agreement were:

    • Ms. Kruse was allowed to retain her options to purchase 250,000 shares at an exercise price of $0.10 per share, exercisable until October 1, 2007;
    • Ms. Kruse was allowed to sell 4,750,000 shares in a private transaction;
    • Lexington agreed to register on Form SB-2 250,000 of the remaining 500,000 shares Ms. Kruse owns; and
    • both parties agreed to release each other from any claims.

    On October 20, 2005, we entered into a Management Agreement with Brent Nimeck as Senior Vice-President of Operations. The agreement provides that Mr. Nimeck will receive a one-time payment of US $5,000.00. The agreement also provides that Mr. Nimeck will receive a stock option to purchase 250,000 common shares of Lexington at US $0.10 per share for a two-year period ending October 20, 2007 or on the termination of the management agreement, whichever occurs earlier. We are currently negotiating a new agreement with Mr. Nimeck which will likely include an increase in salary.

    On November 17, 2005, we entered into a Management Agreement with Douglas Blackman as Vice-President of Business Development. The agreement provides that Mr. Blackman will receive an hourly salary of CDN $50.00 per hour, to be invoiced monthly.

    Compensation of Directors

    None of our directors received compensation for their service as directors during the fiscal year ended November 30, 2005.


    — 55 —

    Compensation Committee

    We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.

    Financial Statements

    Our Audited Financial Statements as of November 30, 2005 and for the period from March 30, 2005 (Date of Inception) to November 30, 2005, and our Unaudited Interim Financial Statements as of February 28, 2006 and for the three month period ended February 28, 2006 and accumulated for the period from March 30, 2005 (Date of Inception) to February 28, 2006 follow as pages F-1 through F- 20.


    — 56 —

    Lexington Energy Services Inc.
    (A Development Stage Company)

      Index


    November 30, 2005 (audited)  
       
    Report of Independent Registered Public Accounting Firm F-1
       
    Balance Sheet F-2
       
    Statement of Operations F-3
       
    Statement of Cash Flows F-4
       
    Statement of Stockholders’ Equity F-5
       
    Notes to the Financial Statements F-6
       
    February 28, 2006 (unaudited)  
       
    Interim Balance Sheets F-13
       
    Interim Statements of Operations F-14
       
    Interim Statements of Cash Flows F-15
       
    Interim Statement of Stockholders’ Equity F-16
       
    Notes to the Interim Financial Statements F-17



    A PARTNERSHIP OF INCORPORATED PROFESSIONALS AMISANO HANSON
      CHARTERED ACCOUNTANTS

     

     

    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    To the Stockholders,
    Lexington Energy Services Inc.
    (A Development Stage Company)

    We have audited the accompanying balance sheet of Lexington Energy Services Inc. (A Development Stage Company) as of November 30, 2005 and the related statements of operations, stockholders' equity and cash flows for the period from March 30, 2005 (Date of Inception) to November 30, 2005. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

    We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

    In our opinion, these financial statements referred to above present fairly, in all material respects, the financial position of Lexington Energy Services Inc. as of November 30, 2005 and the results of its operations and its cash flows for the period from March 30, 2005 (Date of Inception) to November 30, 2005, in conformity with accounting principles generally accepted in the United States of America.

    The accompanying financial statements referred to above have been prepared assuming that the company will continue as a going concern. As discussed in Note 1 to the financial statements, the company is in the development stage, and has no established source of revenue and is dependent on its ability to raise capital from stockholders or other sources to sustain operations. These factors, along with other matters as set forth in Note 1, raise substantial doubt that the company will be able to continue as a going concern. Management plans in regard to their planned financing and other matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

    Vancouver, Canada “AMISANO HANSON”
    April 20, 2006 CHARTERED ACCOUNTANTS

     

    750 WEST PENDER STREET, SUITE 604 TELEPHONE: 604-689-0188
    VANCOUVER CANADA FACSIMILE: 604-689-9773
    V6C 2T7 E-MAIL: amishan@telus.net

    F-1


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Balance Sheet
    (Expressed in US dollars)

        November 30,  
        2005  
       
    ASSETS      
    Current Assets      
       Cash   71,850  
       Stock subscriptions receivable   10,000  
       Prepaid expenses (Note 4)   4,042  
        85,892  
    Equipment (Note 3)   3,307  
    Total Assets   89,199  
           
    LIABILITIES AND STOCKHOLDERS’ EQUITY      
    Current Liabilities      
       Accounts payable   3,654  
       Accrued liabilities   4,750  
       Due to related parties (Note 4)   10,909  
    Total Liabilities   19,313  
    Stockholders’ Equity      
    Preferred Stock, 20,000,000 authorized, $0.0001 par value      
    nil issued and outstanding    
    Common Stock, 100,000,000 shares authorized, $0.0001 par value      
    12,365,000 shares issued and outstanding (Notes 4 and 7)   1,237  
    Additional paid-in capital   155,763  
    Stock subscriptions receivable   (10,000 )
    Deficit accumulated during the development stage   (77,114 )
    Total Stockholders’ Equity   69,886  
    Total Liabilities and Stockholders’ Equity   89,199  
           
    Nature and Continuance of Operations (Note 1)      
    Commitments (Notes 5 and 6)      

    (The accompanying notes are an integral part of these financial statements)
    F-2


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Statement of Operations
    (Expressed in US dollars)

        For the Period From  
        March 30, 2005  
        (Date of Inception)  
        to November 30,  
        2005  
       
           
           
           
    Revenue    
           
           
    Expenses      
           
           General and administrative   13,404  
           Management fees (Note 4)   26,774  
           Professional fees   36,936  
           
    Total Expenses   77,114  
           
    Net Loss   (77,114 )
           
    Net Loss Per Share – Basic and Diluted   (0.01 )
           
    Weighted Average Shares Outstanding   7,629,000  

    (The accompanying notes are an integral part of these financial statements)
    F-3


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Statement of Cash Flows
    (Expressed in US dollars)

        For the period from  
        March 30, 2005  
        (Date of Inception)  
        to November 30,  
        2005  
        $  
           
    Operating Activities      
           
       Net loss   (77,114 )
       Adjustment to reconcile net loss to net cash used in operating activities      
           Depreciation   1,654  
       Changes in operating assets and liabilities:      
           Prepaid expenses   (4,042 )
           Accounts payable and accrued liabilities   8,404  
           Due to related party   10,909  
           
    Net Cash Flows Used in Operating Activities   (60,189 )
           
    Investing Activity      
           
     Purchase of equipment   (4,961 )
           
    Net Cash Flows Used in Investing Activity   (4,961 )
           
    Financing Activities      
           
           Common stock subscription receivable   (20,000 )
           Proceeds from issuance of common stock   157,000  
           
    Net Cash Flows Provided By Financing Activities   137,000  
           
    Increase In Cash   71,850  
           
    Cash - Beginning of Period    
           
    Cash - End of Period   71,850  

    (The accompanying notes are an integral part of these financial statements)
    F-4


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Statement of Stockholders’ Equity
    From March 30, 2005 (Date of Inception) to November 30, 2005
    (Expressed in US dollars)

                                Deficit        
                                Accumulated        
        Common Stock     Additional     Stock     During the        
              Par     Paid-in     Subscriptions     Development          
        Shares     Value     Capital     Receivable     Stage     Total  
        #     $     $     $     $     $  
                                         
    Balance – March 30, 2005 (Date of Inception)                        
                                         
    Issue of common stock for cash                                    
    pursuant to private placements at                                    
    $0.0001 per share                                    
    - June 1, 2005   10,000,000     1,000                 1,000  
                                         
    Issue of common stock for cash                                    
    pursuant to private placements at                                    
    $0.03 per share                                    
    - November 2, 2005   1,150,000     115     34,385             34,500  
                                         
    Issue of common stock for cash                                    
    pursuant to private placements at                                    
    $0.10 per share                                    
    - November 16, 2005   1,215,000     122     121,378     (20,000 )       101,500  
                                         
    Net loss                   (77,114 )   (77,114 )
                                         
    Balance – November 30, 2005   12,365,000     1,237     155,763     (20,000 )   (77,114 )   59,886  

    (The accompanying notes are an integral part of these financial statements)
    F-5


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    1.

    Nature and Continuance of Operations

         

    The Company was incorporated in the State of Nevada on March 30, 2005 under the name Lexington Media, Inc. On September 30, 2005, the Company changed its name to Lexington Energy, Inc., and on January 5, 2006, the Company changed its name to Lexington Energy Services Inc. The Company is a development stage company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 “Accounting and Reporting by Development Stage Enterprises,” in the business of providing products and services to companies that find and develop oil and natural gas resources.

         

    These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which implies the Company will continue to meets its obligations and continue its operations for the next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has not generated revenues since inception, has accumulated losses of $77,114 since inception and does not have sufficient working capital to sustain its operations for the next fiscal year. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, the successful acquisition of a business or assets, and the attainment of profitable operations. Management has plans in place to address this concern and expects that the Company will be able to obtain additional funds by equity financing and/or related party advances; however, there is no assurance that additional funding will be available to the extent required to address this concern.

         
    2.

    Summary of Significant Accounting Policies

         

    a)

    Basis of Presentation
         

    These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is November 30.

         

    b)

    Use of Estimates
         

    The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

         
    c)

    Basic and Diluted Net Income (Loss) Per Share

         

    The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

         

    d)

    Comprehensive Loss
         

    SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at November 30, 2005, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

         

    e)

    Cash and Cash Equivalents
         

    The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

    F-6


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    2.

    Summary of Significant Accounting Policies (continued)

         
    f)

    Financial Instruments

         

    The fair values of cash, accounts payable and accrued liabilities approximate their carrying values due to the immediate or short-term maturity of those financial instrument. The carrying value of due to related parties also approximates their fair value. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

         
    g)

    Equipment

         

    Equipment is stated at cost. Depreciation is provided on a straight-line basis over three years.

         
    h)

    Income Taxes

         

    The Company uses the asset and liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards, (“SFAS”) No. 109 “Accounting for Income Taxes”. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

         
    i)

    Foreign Currency Translation

         

    The Company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars and are translated into United States dollars, in accordance with SFAS No. 52 “Foreign Currency Translation,” using exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at each balance sheet date at the exchange rate prevailing at the balance sheet date. Foreign currency exchange gains and losses are charged to operations. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

         
    j)

    Recent Accounting Pronouncements

         

    In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

         

    In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard did not have a material effect on the Company’s results of operations or financial position.

    F-7


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    2.

    Summary of Significant Accounting Policies (continued)

         
    j)

    Recent Accounting Pronouncements (continued)

         

    In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, “Share Based Payment”. SFAS 123R is a revision of SFAS No. 123 “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant- date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS 123R in the first annual reporting period that begins after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

         

    In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 (“SAB 107”) to give guidance on the implementation of SFAS 123R. The Company will consider SAB 107 during implementation of SFAS 123R.

         
    3.

    Equipment


                Accumulated        
          Cost     Amortization     Net  
          $     $     $  
                         
      Computer equipment   4,961     1,654     3,307  

    4.

    Related Party Transactions

         

    During the period ended November 30, 2005:

         
    a)

    The Company incurred $7,000 for management fees to the Secretary and CFO of the Company. At November 30, 2005, $10,413 is owing to the Secretary and CFO, which is unsecured, non-interest bearing, and due on demand.

         

    The Company incurred $2,500 for management fees to the vice-President of Finance of the Company. At November 30, 2005, $382 is owing to the Vice-President of Finance, which is unsecured, non-interest bearing and due on demand.

         

    The Company incurred $5,000 for management fees, to the Vice-President of Operations of the Company.

         

    The Company incurred $10,000 for management fees to the President of the Company.

         

    These transactions were recorded at the exchange amount which were the amounts agreed to by the transacting parties.

         
    b)

    At November 30, 2005, prepaid expenses include $2,500 incurred with the President of the Company and $740 incurred with the Vice-President of Business Development.

         
    c)

    At November 30, 2005, the Company is indebted to a related company for $114 of general and administrative expenses incurred on behalf of the Company, which is unsecured, non-interest bearing, and due on demand.

    F-8


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    4.

    Related Party Transactions (continued)

         
    d)

    During the period ended November 30, 2005, the Company issued 5,000,000 shares of common stock to the President of the Company and 5,000,000 shares of common stock to the Secretary and CFO of the Company at $0.0001 per share for aggregate cash proceeds of $1,000.

         
    e)

    During the period ended November 30, 2005, the Company issued 550,000 shares of common stock to Directors of the Company at $0.03 per share for aggregate cash proceeds of $16,500.

         
    5.

    Stock Options

         

    The Company accounts for stock-based awards using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). Under the intrinsic value method of accounting, compensation expense is recognized if the exercise price of the Company’s employee stock options is less than the market price of the underlying common stock on the date of grant. SFAS No. 123, “Accounting for Stock-Based Compensation,” (SFAS 123), established a fair value based method of accounting for stock-based awards. Under the provisions of SFAS 123, companies that elect to account for stock-based awards in accordance with the provisions of APB 25 are required to disclose the pro forma net income (loss) that would have resulted from the use of the fair value based method under SFAS 123.

         

    The following table summarizes the continuity of the Company’s stock options:


                Weighted  
                average  
          Number of     exercise price  
          Shares     $  
                   
      Outstanding, March 30, 2005 (date of inception)        
      Granted   875,000     0.10  
                   
      Outstanding, November 30, 2005   875,000     0.10  

    The pro forma information is as follows:

          November 30,  
          2005  
          $  
             
      Net loss — as reported   (77,114 )
      Deduct: Stock-based compensation expense determined under fair value method   (6,841 )
             
      Net loss — pro forma   (83,955 )
             
      Net loss per share – basic and diluted — as reported   (0.01 )
      Net loss per share – basic and diluted — pro forma   (0.01 )

    The fair value for options granted was estimated at the date of grant using the Black-Scholes option-pricing model.

    F-9


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    5.

    Stock Options (continued)

       

    The weighted average assumptions used are as follows:


        From March 30, 2005  
        (Date of Inception) to  
        November 30,  
        2005  
        $  
           
      Expected dividend yield 0%  
      Risk-free interest rate 4.09%  
      Expected volatility 100%  
      Expected option life (in years) 2.0  

    Additional information regarding options outstanding as at November 30, 2005 is as follows:

        Outstanding   Exercisable
          Weighted        
          average Weighted     Weighted
          remaining average     average
        Number of contractual exercise   Number of exercise
      Exercise prices shares life (years) price   shares price
                   
      $ 0.10 875,000 1.92          $ 0.10        875,000          $ 0.10

    6.

    Commitments

         
    a)

    The Company entered into an employment agreement dated October 1, 2005, with the Secretary and CFO of the Company, at a rate of $3,500 per month and the option to buy 250,000 shares of the Company for $0.10 per share. The agreement was terminated subsequent to November 30, 2005.

         
    b)

    The Company entered into an employment agreement dated October 1, 2005, with the President of the Company, at a rate of $5,000 per month and the option to buy 250,000 shares of the Company for $0.10 per share. The agreement can be terminated by either party at any time with 14 days notice.

         
    c)

    The Company entered into a one year lease agreement commencing October 1, 2005, at $687 per month.

         
    7.

    Subsequent Events – Note 6

         

    Subsequent to November 30, 2005:

         
    a)

    The Company completed private placements consisting of 460,000 shares of common stock at $0.20 per share for proceeds of $92,000.

         
    b)

    The Company granted stock options to an Advisory Board member to acquire up to 150,000 shares of common stock exercisable at $0.20 per share for a period of two years.

         
    c)

    The Company granted stock options to acquire up to 370,000 shares of common stock exercisable at $0.50 per share until March 13, 2008; up to 860,000 shares of common stock exercisable at $0.50 per share until April 5, 2008; and up to 20,000 shares of common stock exercisable at $0.50 per share until April 10, 2008.

         
    d)

    The Company cancelled 100,000 common shares pursuant to a rescinded share subscription agreement.

         
    e)

    The Company received cash proceeds totalling $1,147,150 in respect to a proposed private placement of 3,000,000 common shares at $0.50 per share.

         
    f)

    The Company paid $250,000 as a deposit in respect to the purchase of equipment with a total cost of $1,250,000.

         
    g)

    The Company intends on filing a registration statement on Form SB-2 with the Securities and Exchange Commission for the public distribution of 5,000,000 common shares at $0.85 per share and 9,093,626 common shares at $0.85 per share by existing shareholders.

    F-10


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Financial Statements
    November 30, 2005
    (Expressed in US dollars)

    8.

    Income Taxes

       

    Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has non-capital losses carried forward totalling $77,114 for US tax purposes which expire starting in 2025. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

       

    The components of the net deferred tax asset at November 30, 2005 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are scheduled below:


      2005
      $
    Net Operating Loss 77,114
    Statutory Tax Rate 35%
    Effective Tax Rate
    Deferred Tax Asset 26,990
    Valuation Allowance (26,990)
    Net Deferred Tax Asset

    F-11


    LEXINGTON ENERGY SERVICES INC.

    (A Development Stage Company)

    INTERIM FINANCIAL STATEMENTS

    February 28, 2006

    (Stated in US Dollars)

    (Unaudited)

    F-12


    LEXINGTON ENERGY SERVICES INC.
    (A Development Stage Company)
    INTERIM BALANCE SHEETS
    February 28, 2006 and November 30, 2005
    (Stated in US Dollars)
    (Unaudited)

        February 28,     November 30,  
    ASSETS   2006     2005  
    Current            
    Cash $  15,737   $  71,850  
         Prepaid expenses – Note 4   3,785     4,042  
         Stock subscriptions receivable   25,000     10,000  
                 
        44,522     85,892  
    Equipment – Notes 3 and 6   265,887     3,307  
    Deposit on land – Note 6   43,479     -  
                 
      $  353,888   $  89,199  
                 
    LIABILITIES            
                 
    Current            
         Accounts payable $  7,842   $  3,654  
         Accrued liabilities   1,500     4,750  
         Due to related parties – Note 4   8,410     10,909  
                 
        17,752     19,313  
                 
    STOCKHOLDERS’ EQUITY            
                 
    Capital stock – Note 5            
         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:            
              13,241,000 common shares (November 30, 2005: 12,365,000            
                                 common shares)   1,324     1,237  
    Additional paid-in capital   497,176     155,763  
    Stock subscriptions receivable   -     (10,000 )
    Deficit accumulated during the development stage   (162,364 )   (77,114 )
                 
        336,136     69,886  
                 
      $  353,888   $  89,199  

    SEE ACCOMPANYING NOTES

    F-13


    LEXINGTON ENERGY SERVICES INC. 
    (A Development Stage Company)
    INTERIM STATEMENTS OF OPERATIONS
    for the three months ended February 28, 2006 and
    for the period March 30, 2005 (Date of Inception) to February 28, 2006
    (Stated in US Dollars)
    (Unaudited)

              March 30, 2005  
        Three months     (Date of  
        ended     Inception) to  
        February 28,     February 28,  
        2006     2006  
                 
    Expenses            
         Professional fees $  27,031   $  63,967  
         Management fees   25,500     52,274  
         General and administrative   32,719     46,123  
                 
    Total expenses   85,250     162,364  
                 
    Net loss for the period $  (85,250 ) $  (162,364 )
                 
    Net loss per share, basic and diluted $  (0.01 )      
                 
    Weighted average number of shares outstanding   12,730,000        

    SEE ACCOMPANYING NOTES

    F-14


    LEXINGTON ENERGY SERVICES INC. 
    (A Development Stage Company)
    INTERIM STATEMENTS OF CASH FLOWS
    for the three months ended February 28, 2006 and
    for the period March 30, 2005 (Date of Inception) to February 28, 2006
    (Stated in US Dollars)
    (Unaudited)

              March 30, 2005  
        Three months     (Date of  
        ended     Inception) to  
        February 28,     February 28,  
        2006     2006  
                 
    Operating Activities            
         Net loss $  (85,250 ) $  (162,364 )
         Adjustments to reconcile loss to cash used by            
           operating activities            
               Depreciation   600     2,253  
               Stock based compensation   1,500     1,500  
         Changes in non-cash working capital:            
               Prepaid expenses   257     (3,785 )
               Accounts payable   4,188     7,842  
               Accrued liabilities   (3,250 )   1,500  
               Due to related parties   (2,500 )   8,410  
                 
        (84,455 )   (144,644 )
                 
    Investing Activities            
         Purchase of equipment   (263,179 )   (268,140 )
         Deposit on land   (43,479 )   (43,479 )
                 
        (306,658 )   (311,619 )
                 
    Financing Activities            
         Common stock issued for cash   370,000     507,000  
         Common stock subscription receivable   (25,000 )   (25,000 )
         Share subscription cancelled   (10,000 )   (10,000 )
                 
        335,000     472,000  
                 
    Increase (decrease) in cash during the period   (56,113 )   15,737  
                 
    Cash, beginning of the period   71,850     -  
                 
    Cash, end of the period $  15,737   $  15,737  

    SEE ACCOMPANYING NOTES

    F-15


    LEXINGTON ENERGY SERVICES INC.
    (A Development Stage Company)
    INTERIM STATEMENT OF STOCKHOLDERS’ EQUITY
    for the period March 30, 2005 (Date of Inception) to February 28, 2006
    (Stated in US Dollars)
    (Unaudited )

                                Deficit        
        Common Stock           Accumulated        
                    Share     Additional     During the        
        Number of           Subscriptions     Paid In     Development        
        Shares     Amount     Received     Capital     Stage     Total  
                                         
    Issuance of common shares                                    
                   - at $0.0001 per share   10,000,000   $  1,000   $  -   $  -   $  -   $  1,000  
    Issuance of common shares                                    
                   - at $0.03 per share   1,150,000     115     -     34,385     -     34,500  
    Issuance of common shares                                    
                    - at $0.10 per share   1,215,000     122     (20,000 )   121,378     -     101,500  
    Net loss for the period   -     -     -     -     (77,114 )   (77,114 )
                                         
    Balance, November 30, 2005   12,365,000     1,237     (20,000 )   155,763     (77,114 )   59,886  
    Common shares cancelled   (100,000 )   (10 )   -     (9,990 )   -     (10,000 )
    Share subscriptions received   -     -     20,000     -     -     20,000  
    Issuance of common shares                                    
                    - at $0.20 per share   460,000     46     -     91,954     -     92,000  
    Issuance of common shares                                    
                    - at $0.50 per share   516,000     51     (25,000 )   257,949     -     233,000  
    Stock based compensation   -     -     -     1,500     -     1,500  
    Net loss for the period   -     -     -     -     (85,250 )   (85,250 )
                                         
    Balance, February 28, 2006   13,241,000   $  1,324   $  (25,000 ) $  497,176   $  (162,364 ) $  311,136  

    SEE ACCOMPANYING NOTES

    F-16


    LEXINGTON ENERGY SERVICES INC.
    (A Development Stage Company)
    NOTES TO THE INTERIM FINANCIAL STATEMENTS
    February 28, 2006
    (Stated in US Dollars)
    (Unaudited)

    Note 1 Interim Reporting

    While the information presented in the accompanying interim three 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 three months ended February 28, 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 interim financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At February 28, 2006, the Company had not yet achieved profitable operations, has accumulated losses of $162,364 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.

    F-17


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Interim Financial Statements
    February 28, 2006
    (Stated in US Dollars)
    (Unaudited) – Page 2

    Note 3 Equipment

          February 28, 2006  
                Accumulated        
          Cost     Amortization     Net  
                         
      Computer and equipment $  4,961   $  2,067   $  2,894  
      Office equipment   2,237     186     2,051  
      Equipment   260,942     -     260,942  
                         
        $  268,140   $  2,253   $  265,887  

          November 30, 2005  
                Accumulated        
          Cost     Amortization     Net  
                         
      Computer equipment $  4,961   $  1,654 $     3,307  

    Note 4 Related Party Transactions
       
      During the period ended February 28, 2006:

      a)

    The Company incurred $10,500 for management fees to the Secretary and CFO of the Company. At February 28, 2006, $7,769 is owing to the Secretary and CFO, which is unsecured, non-interest bearing, and due on demand. The Secretary and CFO of the Company resigned on March 31, 2006.

         
     

    The Company incurred $15,000 for management fees to the President and CEO of the Company. At February 28, 2006, $350 is owing to the President and CEO, which is unsecured, non-interest bearing, and due on demand.

         
     

    These charges were measured by the exchange amount which is the amount agreed upon by the transacting parties.

         
      b)

    At February 28, 2006, prepaid expenses include $2,200 incurred with the President of the Company and $880 incurred with the Vice-President of Business Development.

         
      c)

    At February 28, 2006, the Company is indebted to a related company for $290 of general and administrative expenses incurred on behalf of the Company, which is unsecured, non-interest bearing, and due on demand.

    F-18


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Interim Financial Statements
    February 28, 2006
    (Stated in US Dollars)
    (Unaudited) – Page 3

    Note 5 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.

    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   150,000   $ 0.20  
                   
      Outstanding, February 28, 2006   1,025,000        

    The fair value of the stock options granted during the three months ended February 28, 2006 of $1,500 was determined using the Black-Scholes option pricing model with the following assumptions:

    Expected dividend yield 0%
    Risk-free interest rate 2.18%
    Expected volatility 0.1%
    Expected option life (in years) 2 years

    Additional information regarding options outstanding as at February 28, 2006 is as follows:

        Outstanding   Exercisable
          Weighted        
          Average Weighted     Weighted
          Remaining Average     Average
      Exercise Number of Contractual Exercise   Number of Exercise
      Prices Shares Life (years) Price      Shares Price
                   
      $0.10 875,000 1.67 $0.10   875,000 $0.10
      $0.20 150,000 1.83 $0.20   150,000 $0.20
                   
        1,025,000       1,025,000  

    F-19


    Lexington Energy Services Inc.
    (A Development Stage Company)
    Notes to the Interim Financial Statements
    February 28, 2006
    (Stated in US Dollars)
    (Unaudited) – Page 4

    Note 6 Commitments – Note 5

      a)

    The Company entered into an employment agreement dated October 1, 2005, with the President and CEO of the Company, at a rate of $5,000 per month and the option to buy 250,000 shares of the Company for $0.10 per share. Either party can terminate the agreement at any time with 14 days notice.

         
      b)

    The Company paid $262,110 in respect to non-refundable deposits on equipment purchases with a total cost commitment of $1,349,585.

         
      c)

    The Company paid $43,479 in respect to a refundable deposit on a purchase of land with a total cost of $214,671.


    Note 7 Subsequent Events
       
      Subsequent to February 28, 2006:

      a)

    The Company granted stock options to consultants and officers of the Company to acquire up to 1,250,000 shares of common stock exercisable at $0.50 per share for a period of two years from the date of grant.

         
      b)

    The Company received cash proceeds totalling $889,513 in respect to a proposed private placement of 2,484,000 common shares at $0.50 per share.

         
      c)

    The Company intends to file a registration statement on Form SB-2 with the Securities and Exchange Commission for the public distribution of 9,093,626 common shares by existing shareholders, and for registration of a direct offering of up to 5,000,000 common shares at a price of $0.85 per share.

    F-20


    — 57 —

    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

    The accounting firm of Amisano Hanson, Chartered Accountants, audited our consolidated financial statements. Since inception, we have had no changes in or disagreements with our accountants.

    PART II — INFORMATION NOT REQUIRED IN THE PROSPECTUS

    Indemnification of Officers and Directors

    The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of Lexington is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows:

    • Article V of our bylaws, filed as Exhibit 3.4 to this Registration Statement; and
    • Nevada Revised Statutes, Chapter 78.

    The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making Lexington responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.

    Other Expenses of Issuance and Distribution

    Our estimated expenses in connection with the issuance and distribution of the securities being registered are estimated to be as follows:

    Commission filing fee $  1,300  
    Legal fees and expenses   25,000  
    Accounting fees and expenses   13,500  
    Printing and marketing expenses   100  
    Miscellaneous   100  
    Total $  40,000  

    Recent Sales of Unregistered Securities

    Since inception on March 30, 2005, we have completed the following sales of unregistered securities.

    • On June 1, 2005, we issued 5,000,000 common shares to our director Tannisah Kruse and 5,000,000 shares to our director Larry Kristof at a price of $0.0001 per share for total proceeds of $1,000.

    — 58 —

    • From October 24 to November 2, 2005, we issued 1,150,000 shares of common stock to 7 shareholders at $0.03 per share for total proceeds of $34,500.

    • From November 4 to November 16, 2005, we issued 1,115,000 shares of common stock to 19 investors at $0.10 per share, for total proceeds of $111,500. (Taking into consideration the cancellation of 100,000 shares on January 4, 2006, pursuant to a rescinded share subscription agreement).

    • In December 2005, we issued 460,000 shares of common stock to 14 investors at $0.20 per share for cash proceeds of $92,000.

    • In February 2006, we issued 516,000 shares of common stock to 23 investors at $0.50 per share for cash proceeds of $258,000. We relied on Regulation S and Section 4(2) of the Securities Act as exemptions from registration for this issuance.

    • In March 2006, we issued 1,155,930 shares of common stock to 84 investors at $0.50 per share for cash proceeds of $577,965.

    • On March 29, 2006, Tannisah Kruse (who resigned as our director on March 28, 2006) sold 4,750,000 shares of her common shares to Greystone Holdings Ltd., a company controlled by Brent Nimeck, another director at $0.0001 per share for proceeds of $475.

    • On March 29, 2006, our director Larry Kristof sold 100,000 shares of his common stock to Elston Johnson at a price of $0.25 per share, for proceeds of $25,000.

    • In April 2006, we issued 896,696 shares of common stock to 55 investors at $0.50 per share for cash proceeds of $448,348.

    Except as otherwise noted above, all of the above issuances were exempt from registration under Regulation S of the Securities Act.

    Exhibits



    — 59 —

    Undertakings

    Lexington hereby undertakes:

    1.

    to file, during any period in which offers or sales are being made, a post-effective amendment to this Prospectus to:

  • include any Prospectus required by Section 10(a)(3) of the Securities Act;

  •  
  • reflect in the Prospectus any facts or events arising after the effective date of the Prospectus (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Prospectus. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Prospectus; and

  •  
  • include any material information with respect to the plan of distribution not previously disclosed in the Prospectus or any material change to such information in the Prospectus;


  • — 60 —

    2.

    that for determining liability under the Securities Act, treat each post-effective amendment as a new Prospectus of the securities offered, and the offering of the securities at that time to be the initial bona fide offering;

       
    3.

    to file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering; and

       
    4.

    in the event that a claim for indemnification against the liabilities, other than the payment by Lexington of expenses incurred and paid by a director, officer or controlling person of Lexington in the successful defense of any action, suit or proceeding, is asserted by the director, officer or controlling person in connection with the securities being registered by this Prospectus, will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether the indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of the issue.

    SIGNATURES

    In accordance with the requirements of the Securities Act, Lexington certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Prospectus on Form SB-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Province of British Columbia, Canada, on May 12, 2006.

      LEXINGTON ENERGY SERVICES INC.
         
      By: /s/ Larry Kristof
        Larry Kristof
    President, Director, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer, Secretary

    In accordance with the requirements of the Securities Act, this Prospectus has been signed by the following persons in the capacities and on the dates stated.

    SIGNATURES   TITLE   DATE
             
             
      President, Director, Chief       
      Executive Officer, Chief       
    /s/ Larry Kristof   Financial Officer,   May 12, 2006
        Chief Accounting Officer,       
    Larry Kristof   Treasurer, Secretary    
             
    /s/ Brent Nimeck   Director   May 12, 2006
    Brent Nimeck