Lexington Resources 10QSB/A 2007 Q2 Quarterly report (small business) (amended)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB/A

First Amended

Mark One

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

For the period ended June 30, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission file number: 0-25455

Lexington Resources, Inc. (Name of small business issuer in its charter)

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

	7473 West Lake Mead Road, Las Vegas, Nevada 89128
	(Address of principal executive offices)

	(702) 382-5139
	(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:		Name of each exchange on which registered:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.00025 par value
(Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.

N/A

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes o No o

Applicable Only to Corporate Registrants

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date: Class	Outstanding as of August 14, 2007
Common Stock, $0.00025 par value	38,766,270

Transitional Small Business Disclosure Format (Check one): Yes o No x

INDEX	PAGE

PART I. FINANCIAL INFORMATION	3

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS	3

CONSOLIDATED BALANCE SHEETS	4

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS	5

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS	6

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS	7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION	20

ITEM 3. CONTROLS AND PROCEDURES	25

PART II. OTHER INFORMATION	26

ITEM 1. LEGAL PROCEEDINGS	26

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	26

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	26

ITEM 5. OTHER INFORMATION	26

ITEM 6. EXHIBITS	26

SIGNATURES	27

LEXINGTON RESOURCES, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(UNAUDITED)

LEXINGTON RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2007			December 31, 2006
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	108,963		$	86,241
Accounts receivable, net of allowance for doubtful accounts of $177,367 (2006 - $177,367)		1,380,077			1,425,450
Due from related parties (Note 8)		97,978			73,916
Prepaid expenses and other		2,917			2,917
Current portion of deferred finance fees		-			39,803
		1,589,935			1,628,327

ASSETS HELD FOR SALE (Note 5)		300,000			2,767,225

PROPERTY AND EQUIPMENT (Note 4)
Oil and gas properties - full cost method of accounting
Proved, net of accumulated depletion $1,393,981 (2006 - $1,114,985)		8,133,395			8,408,510
Unproved		4,749,682			5,049,858
		12,883,077			13,458,368
Other equipment, net of accumulated depreciation of $69,709 (2006 - $235,858)		86,083			578,724
		12,969,160			14,037,092

	$	14,859,095		$	18,432,644


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	8,097,626		$	8,404,178
Due to related parties (Note 8)		204,599			202,881
Promissory note and other short term advances (Note 6)		670,027			640,274
Current portion of convertible notes and accrued interest (Note 6)		-			615,824
Contingent liability (Notes 2 and 7)		676,012			-
		9,648,264			9,863,157

LONG TERM DEBT (Note 6)		-			1,295,961
DERIVATIVE LIABILITY (Note 7)		-			1,538,829
		9,648,264			12,697,947

CONTINGENCIES AND COMMITMENTS (Notes 1, 4, 7 & 10)		-			-

STOCKHOLDERS’ EQUITY (Note 7)
Common stock $.00025 par value: 200,000,000 shares authorized
Preferred stock, $.001 par value: 75,000,000 shares authorized
Issued and outstanding:
38,766,270 common shares (December 31, 2006 – 38,766,270)		10,611			10,611
Additional paid-in capital		30,510,613			30,398,613
Common stock purchase warrants		6,181,340			2,009,340
Accumulated deficit		(31,491,733	)		(26,683,867	)
		5,210,831			5,734,697

	$	14,859,095		$	18,432,644

The accompanying notes are an integral part of these interim consolidated financial statements.

LEXINGTON RESOURCES, INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three month period ended						For the six month period ended
	June 30,						June 30,
	2007			2006			2007			2006

REVENUES
Oil and gas revenue	$	195,572		$	90,303		$	351,737		$	257,510
Drilling and service revenue		6,832			555,011			59,538			689,110

		202,404			645,314			411,275			946,620

OPERATING EXPENSES
Operating costs and taxes		64,581			58,184			160,780			118,282
Rig, well and pulling unit expense		17,679			241,404			56,125			462,890
Salaries, wages and related		33,220			320,563			77,947			476,943
Depreciation, depletion and amortization		175,513			198,346			372,537			385,150
General and administrative		190,053			473,451			371,335			739,329
Investor relations and promotion		-			331,801			37,500			1,930,975

		481,046			1,623,749			1,076,224			4,113,569

NET LOSS FROM OPERATIONS		(278,642	)		(978,435	)		(664,949	)		(3,166,949	)

INTEREST AND FINANCE FEES		(14,959	)		(1,369,061	)		(334,505	)		(2,990,136	)
GAIN ON DISPOSAL OF OTHER EQUIPMENT		-			-			342,195			-
IMPAIRMENT OF OTHER EQUIPMENT		(99,100	)		-			(99,100	)		-
GAIN ON DERIVATIVE LIABILITY (Note 6)		-			2,309,500			-			2,309,500
LOSS ON CONTINGENT LIABILITY (Note 2)		(338,006	)		-			(448,225	)		-

NET LOSS FOR THE YEAR	$	(730,707	)	$	(37,996	)	$	(1,204,584	)	$	(3,847,585	)


BASIC AND FULLY DILUTED NET LOSS PER SHARE	$	(0.02	)	$	(0.00	)	$	(0.03	)	$	(0.13	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		38,766,270			34,119,917			38,766,270			28,991,126

The accompanying notes are an integral part of these interim consolidated financial statements.

LEXINGTON RESOURCES, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six month period ended June 30,
	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$	(1,204,584	)	$	(3,847,585	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on disposal of other equipment		(342,195	)		-
Impairment of other equipment		99,100			-
Non–cash expenses		37,500			112,500
Oil and gas depletion		278,996			94,941
Depreciation		93,541			290,209
Non-cash interest and finance fees		146,809			2,792,725
Gain on derivative liability		-			(2,309,500	)
Loss on contingent liability		448,225			-
Changes in working capital assets and liabilities:
Accounts receivable		45,373			220,601
Prepaid expenses and other		-			8,692
Accounts payable		(969,956	)		1,208,065
Accrued liabilities		7,380			(63,360	)

NET CASH FLOWS USED IN OPERATING ACTIVITIES		(1,359,811	)		(1,492,712	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of other equipment		(120,000	)		(312,514	)
Proceeds on disposal of other equipment		3,225,000			-
Oil and gas property disposals (additions)		296,295			(5,611,546	)
Cash acquired on acquisition of Oak Hills, net of transaction costs		-			119,544

NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		3,401,295			(5,804,516	)

CASH FLOWS FROM FINANCING ACTIVITIES
Advances to related parties		(22,344	)		(77,524	)
Convertible note repayments		(700,457	)		(645,690	)
Long term debt repayments		(1,295,961	)		(222,423	)
Proceeds on sale of common stock		-			9,426,250

NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		(2,018,762	)		8,480,613

INCREASE IN CASH AND CASH EQUIVALENTS		22,722			1,183,385

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		86,241			520,332

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	108,963		$	1,703,717

SUPPLEMENTAL CASH FLOW INFORMATION (Note 9).

The accompanying notes are an integral part of these interim consolidated financial statements.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION

Lexington Resources, Inc., a Nevada corporation, and its wholly owned subsidiary Lexington Oil & Gas Ltd. Co., an Oklahoma Limited Liability Corporation (“Lexington”), were organized for the purposes of the acquisition and development of oil and natural gas properties in the United States, concentrating on unconventional gas production initiatives that include coal bed methane gas acquisitions and developments in the Arkoma Basin in the State of Oklahoma as well as Barnett Shale targeted acquisitions and developments in the Dallas Fort Worth Basin in the State of Texas.

On January 23, 2006, the Company acquired 100% of the shares of Oak Hills Drilling and Operating International, Inc., and its wholly owned operating subsidiary, Oak Hills Drilling and Operating LLC (“Oak Hills”). The purpose of the acquisition of Oak Hills was to enable the Company to improve scheduling of property development, to decrease costs associated with drilling and completing wells, and to increase the Company's control over its oil and gas leasehold developments by utilizing Oak Hills’ in house drilling and completion teams for its property exploration initiatives and gas well development programs.

Commencing in the fourth quarter of 2006, management of the Company considered monetizing certain of the Company's assets and those of Oak Hills in order to decrease liabilities and overhead incurred by the Company in connection with previous capital expenditures and as a result of a lack of current debt and equity resources made available to the Company. On January 2, 2007, the Board of Directors of the Company authorized and approved the execution by Oak Hills of an agreement dated December 29, 2006 with Innovative Energy Services for the sale of the Company’s drilling rig. In accordance with the Agreement, Innovative Energy Services paid to Oak Hills an aggregate amount of $3,100,000 for the drilling rig and certain related equipment (Refer to Note 5).

During the quarter ended June 30, 2007, Oasis Operating, LLC (“Oasis”), an Oklahoma limited liability company, became the new third party contract operator for the Company’s oil and gas assets and exploration properties as part of cost streamlining efforts effected to conserve cash resources. To facilitate the operator transition, and to decrease liabilities, the Company approved the sale of the majority of its oil and gas related operating fixed assets to Oasis for $300,000. A director of Oasis is related to a director of the Company.

Going Concern

The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a working capital deficiency of $8,058,329 at June 30, 2007, has incurred losses since inception of $31,491,733 and further losses are anticipated in the development of its oil and gas properties raising substantial doubt as to the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing losses and property development and ultimately on generating future profitable operations. The Company will continue to fund operations with advances and debt instruments, as well as further equity placements.

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

Unaudited Interim Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2006 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended June 30, 2007, are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

(a) Change in accounting principle

Effective January 1, 2007, the Company adopted the provisions of FASB Staff Position (“FSP”) No. EITF 00-19-2 Accounting for Registration Payment Arrangements (“EITF 00-19-2”), which provides more definitive guidance on accounting for registration arrangements including those described in more detail in Note 7 in connection with the Company’s 2006 private placement.

The Company originally accounted for the various components of the private placement transaction using the provisions of SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities; EITF Issue No. 00-19 Accounting for Derivative Financial instruments Indexed to, and Potentially Settled in a Company’s Own Stock; EITF Issue No. 05-4 The Effect of Liquidated Damages Clause on Freestanding Financial Instruments Subject to Issue No. 00-19 and related amendments and guidance.

Under the original accounting treatment, the Company classified the shares of common stock issued and the common stock purchase warrants without registration damages as equity at their estimated fair values and classified the remainder of the proceeds, representing common stock registration damages and the common stock purchase warrants subject to registration damages, as a derivative liability. This derivative liability was then subsequently adjusted to its estimated fair value with the corresponding gain or loss being charged to operations in the period.

Under the provisions of EITF 00-19-2, the Company is required to classify the financing component parts as equity, assets or liabilities, notwithstanding the registration damages and related payment arrangements. If at inception of the related instruments, the damages and related payments are deemed likely, then the proceeds of the instrument are apportioned on a relative fair value basis inclusive of the estimated fair value of the damages and related payments. Otherwise, the proceeds are apportioned between their component parts with the damages and related payments being recorded when they are determined to be likely through a charge to operations in the period. The damages and related payments are recorded as a contingent liability which continues to be adjusted to its estimated fair value, through charges to operations, until the contingency is resolved. EITF 00-19-2 was effective for the Company’s first interim period commencing after December 15, 2006, being the quarter ended March 31, 2007.

The Company’s registration damages and related payment arrangements, which were entered into prior to the adoption of EITF 00-19-2 and were unresolved as of the date of adoption, are required to be accounted for as a change in accounting principle in accordance with the provisions of EITF 00-19-2, through a cumulative-effect adjustment to retained earnings (accumulated deficit) as may be required. The applicable transition provisions and their impact are as follows:

The instrument is to be evaluated on issuance notwithstanding the existence of the registration damages and related payment arrangements.

Where this evaluation results in a different classification of items from the previously recorded derivative liability to equity, this adjustment is made based on the issuance date relative fair values.

At issuance, the damages and related payments were not considered likely and accordingly, were not included in the original allocation of the proceeds.

Upon adoption of EITF 00-19-2 effective January 1, 2007, the damages and related payments were considered likely and accordingly, were recorded through a charge to the opening accumulated deficit.

The results of adopting EITF 00-19-2 on certain components of stockholders’ equity are as follows:

	Additional paid in capital		Common stock purchase warrants		Accumulated deficit

Amounts as previously reported, December 31, 2006	$	30,398,613	$	2,009,340	$	(26,683,867	)

Reclassification of components on issuance		74,500		4,172,000		-
Reversal of previous derivative liability gain		-		-		(2,288,000	)
Record EITF 00-19-2 contingent liability at adoption		-		-		(1,315,282	)

Amounts subsequent to adoption, January 1, 2007	$	30,473,113	$	6,181,340	$	(30,287,149	)

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Change in accounting principle (continued)

The contingent liability recorded under EITF 00-19-2 and the related changes during the period ended June 30, 2007 are as follows:

	Estimated contingent liability			Actual damages accrued and unpaid to date			Contingent liability carrying value

Balance, January 1, 2007 upon adoption	$	1,315,282		$	(419,671	)	$	895,611

Record actual damages accrued during the period		-			(667,824	)		(667,824	)
Less: amount of damages paid during the period		(75,960	)		75,960			-
Record loss on change in estimated fair value of contingent liability during the period		448,225			-			448,225

Balance, June 30, 2007	$	1,687,547		$	(1,011,535	)	$	676,012

(b) Recent Accounting Pronouncements

In 2006, the FASB issued Financial Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No 109 Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 as of January 1, 2007, as required.

There were no interest or general and administrative expenses accrued or recognized related to income taxes for the six months ended June 30, 2007. The Company has not taken a tax position that would have a material effect on the financial statements or the effective tax rate for the six months ended June 30, 2007 or during the prior three years applicable under FIN 48. It is determined not to be reasonably possible for the amounts of unrecognized tax benefits to significantly increase or decrease within 12 months of the adoption of FIN 48. The Company is currently subject to a three year statute of limitations by major tax jurisdictions.

NOTE 3: ACQUISITION OF OAK HILLS DRILLING AND OPERATING INTERNATIONAL, INC.

On January 23, 2006, the Company acquired 100% of the shares of Oak Hills Drilling and Operating International, Inc., and its wholly owned operating subsidiary, Oak Hills. The companies were acquired from the existing shareholders for an aggregate of 6,000,000 restricted shares of the Company’s common stock. The assets of Oak Hills were independently valued at approximately $5.85 million and management of the Company determined a net tangible fair value of approximately $3.82 million as the basis for the total number of common shares issued at a price per share of $0.637. As of the acquisition date, Oak Hills had secured promissory notes totaling $1.28 million owed to certain of the Oak Hills vendors. The $1.28 million in promissory notes accrue interest at 9% per annum, and require no payments of interest or principal until the end of a two year term ending January 22, 2008.

The purpose of the acquisition of Oak Hills was to enable the Company to improve scheduling of property development, to decrease costs associated with drilling and completing wells, and to increase the Company's control over its oil and gas leasehold developments by utilizing Oak Hills’ in house drilling and completion teams for its property exploration initiatives and gas well development programs.

Prior to the acquisition of Oak Hills, there were 18,627,523 shares of common stock of the Company outstanding. Accordingly, the pre-acquisition shareholders of the Company owned approximately 76% of the post-acquisition issued and outstanding shares of the Company’s common stock. As a result, this business combination has been accounted for using the purchase method with the Company being the acquirer.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 3: ACQUISITION OF OAK HILLS DRILLING AND OPERATING INTERNATIONAL, INC. (continued)

The fair value of the assets acquired and liabilities assumed effective January 23, 2006 were as follows:

Current assets	$	1,024,458
Property, plant and equipment		5,228,736
Current liabilities		(842,836	)
Due to related parties		(1,280,789	)
Long term debt		(222,423	)

	$	3,907,146

Consideration paid
- 6,000,000 common shares at $0.6374 per share	$	3,824,190
- transaction costs		82,956

	$	3,907,146

The results of operations and cash flows presented include those of the Company for all periods presented and those of Oak Hills for all periods subsequent to January 23, 2006.

The following unaudited pro forma information for the three month and six month periods ended June 30, 2006 presents the pro forma results of operations as if the acquisition had occurred as of January 1, 2006. The pro forma information presented is not necessarily indicative of what would have occurred had the acquisition been made as of January 1, 2006, nor is it necessarily indicative of future results of operations. The following pro forma amounts give effect to appropriate adjustments for an increase in depreciation, additional intercompany profit elimination and an increase in weighted average shares outstanding.

	For the three Months Ended June 30,			For the Six Months Ended June 30,
	2006			2006

Revenues	$	645,314		$	1,293,253

Net loss	$	(37,996	)	$	(3,823,513	)

Net loss per share – basic and diluted	$	(0.00	)	$	(0.13	)

Weighted average shares outstanding		34,119,917			29,720,408

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 4: PROPERTY AND EQUIPMENT

Property and equipment includes the following:

	June 30,			December 31,
	2007			2006
Oil and gas properties:
Proved, subject to depletion	$	11,677,376		$	11,673,495
Unproved, not subject to depletion		4,749,682			5,049,858
Accumulated depletion		(1,393,981	)		(1,114,985	)
Impairment provision		(2,150,000	)		(2,150,000	)
Net oil and gas properties		12,883,077			13,458,368

Other equipment		163,525			841,859
Accumulated depreciation		(69,709	)		(235,858	)
Impairment provision		(7,733	)		(27,277	)
Net other property and equipment		86,083			578,724

Property and equipment, net of accumulated depreciation and depletion	$	12,969,160		$	14,037,092

For the period ended June 30, 2007, estimated future development costs totaling $3,686,000 were included in costs subject to amortization for the purposes of determining depletion for the period.

Total depletion expense per unit of production for the period ended June 30, 2007 was $3.85 per mcf (2006 - $0.94).

The Company's oil and gas activities are currently conducted in the United States. The Company has completed the following significant transactions related to its oil and gas activities:

Acquisition of Oak Hills Drilling and Operating International, Inc.

On January 23, 2006, the Company completed the acquisition of Oak Hills as described in Note 3.

Joint Exploration Agreement – Arkoma Basin, Oklahoma

On March 3, 2006, effective January 31, 2006, the Company entered into an exploration agreement with Dylan Peyton, LLC (“Dylan”) of Dallas, Texas to jointly develop Lexington’s Arkoma Basin leases located in Hughes and MacIntosh Counties in the State of Oklahoma (the “Arkoma Basin Exploration Agreement”). The properties were to be developed on a 50/50 equal working interest basis. An affiliate to Dylan, named Avatar Energy, LLC, became the operator for the project. During 2006, the Company has assigned 50% of its undeveloped leasehold interests in Oklahoma in exchange for cash proceeds of $575,000 which equates to approximately 50% of the Company’s originally incurred leasing costs. Assignments to 50% of the Company’s undeveloped leasehold interests in Coal Creek, South Lamar, Middle Creek, and H-9 Prospects have been effected to Dylan. Well bores and acreage relating to previously drilled and completed wells by the Company do not form part of any assignments under the Arkoma Basin Exploration Agreement. Proceeds from this disposal were recorded as a reduction of the capitalized costs without recognition of a gain or loss as the disposal did not result in a change of 20 percent or more in the Company’s depletion rate.

Joint Exploration Agreement – Comanche County, Texas

On March 3, 2006, effective January 31, 2006, the Company entered into an exploration agreement with Dylan to jointly develop approximately 5,000 acres of Barnett Shale and shallow gas targets in Comanche County, Texas (the “Comanche County Exploration Agreement”). The property would be developed on a 50/50 equal working interest basis. The Company’s subsidiary, Oak Hills became the operator of the project. The Company will pay approximately $1,225,500 for its 50% working interest in the new acreage through a combination of $575,000 in cash (paid during 2006) and approximately $650,500 of carried drilling costs in the first Comanche Barnett Shale test well required to be drilled on or before September 2006. The test well commenced drilling on September 1, 2006. It is estimated that the total amount owing for the acreage will be approximately $1,225,500, resulting in no additional amount to be paid after deducting the original payment of $575,000 and the carried drilling costs estimated to be $650,500. The Company is currently in negotiations and reconciliation of expenditures relating to the Joint Exploration Agreement in Comanche County, Texas.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 4: PROPERTY AND EQUIPMENT (continued)

During 2006, the Company’s leases relating to the H-9 Prospect acreage lapsed according to their terms resulting in an impairment to the carrying value of unamortized property of $331,963. In accordance with the provisions of full cost accounting, the Company transferred this carrying value into its cost pool subject to amortization. Also during 2006, certain other acreage leases were allowed to lapse, however, these expiries did not result in any property impairments.

On October 2, 2006, the Company entered into a convertible debt set-off agreement with Dylan (the “Convertible Debt Agreement”), relating to amounts due and owing to Dylan from fractures and completion of certain coal bed methane gas wells. Pursuant to the terms and provisions of the Convertible Debt Agreement: (i) Oak Hills sold to Ada Energy Services LLC (“AES”) certain of its assets, including two Wilson 600 duplex pumps for an aggregate consideration of $120,000 as a set-off for the debt due and owing to Dylan; (ii) Oak Hills had 120 days to pay the amount of $120,000 due and owing to Dylan to re-purchase the two Wilson pumps from AES for $120,000 plus the cost of any work done on them other than repairs made for damages caused by AES’ usage of the pumps; (iii) Oak Hills made a payment of $20,000 to Avatar Energy relating to the completion and fracture job on the Gray Well #1H-22 and the fracture job on the Dylan Well #1-23; and (iv) in the event Oak Hills does not re-purchase the Wilson pumps for $120,000 within the 120 days, the sale of the pumps will constitute full and complete settlement of the $120,000 due and owing Dylan. On January 27, 2007, the Company extinguished its obligations under the convertible debt set-off agreement with Dylan by repaying $120,000 to Ada Energy Services and reclaiming its pledged collateral (two Wilson 600 duplex pumps). Accordingly, as at December 31, 2006, the Company off-set the amount owing to Dylan against the carrying value of the pumps with the residual carrying value being included in the Rig and related equipment impairment provision as described in Note 5. On January 27, 2007, the Company sold its two Wilson 600 duplex pumps to Innovative Energy Services for $125,000.

Sale of Undeveloped Acreage

During the period, the Company sold approximately 719 acres of Barnett Shale targeted exploration leases located in Hood County, Texas for net proceeds of approximately $380,000. Also during the period, the Company received $8,125 as compensation for forfeiting the right to participate in a new well on the Panther Creek prospect.

Unproven Properties

The following is a summary of the transactions involving the Company’s unproven properties not subject to depletion:

	Acquisition Costs		Development Costs			Total

Balance, December 31, 2006	$	2,067,267	$	2,982,591		$	5,049,858

Incurred during the period		-		88,060			88,060
Proceeds from disposals during the period		-		(388,236	)		(388,236	)

Balance, June 30, 2007	$	2,067,267	$	2,682,415		$	4,749,682

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 5: ASSETS HELD FOR SALE

On January 2, 2007, the Company authorized and approved the execution by Oak Hills of an agreement dated December 29, 2006 with Innovative Energy Services pertaining to the sale of the Company’s drilling rig and related equipment. In accordance with the Agreement, Innovative Energy Services paid to Oak Hills a gross aggregate amount of $3,100,000 for the drilling rig and related equipment. As at December 31, 2006, these assets were reclassified to assets held for sale at their estimated net recoverable amount of $2,767,225 resulting in an impairment of the carrying value of these assets totaling $1,572,723 being recorded during 2006. During the period, this Agreement was completed, and the net proceeds received effective January 5, 2007 with the net recoverable amount exceeding the original resulting in a gain on disposal of $342,195 being recorded during the period.

On June 24, 2007, the Company approved the sale of certain oil and gas related operating fixed assets to Oasis for $300,000. As at June 30, 2007, these assets were reclassified to assets held for sale at their estimated net recoverable amount of $300,000 resulting in an impairment of the carrying value of these assets totaling $99,100 being recorded during the period. Amounts owing pursuant to this agreement will be offset against amounts subsequently owed by the Company to Oasis in connection with their ongoing operator activities.

NOTE 6: LONG TERM DEBT, SHORT TERM DEBT AND OTHER ADVANCES

During the period ended June 30, 2007, the Company had the following activity in connection with long term debt, short term debt and other advances:

Promissory note

On December 20, 2005, the Company obtained an unsecured loan by way of promissory note from a shareholder of the Company totaling $600,000. The term of the loan is for two years with interest calculated at 10% per annum. Interest is to be paid on a quarterly basis with the principal to be repaid on or before the two year loan period. As of June 30, 2007, $70,027 (December 31, 2006 - $40,274) of accrued interest remains unpaid on this loan.

Long term debt

As at the date of the Oak Hills acquisition, Oak Hills had outstanding promissory notes totaling $1,295,961 which accrue interest at 9% per annum, and require no payments of interest or principal until the end of a two year term ending January 22, 2008. These promissory notes are owed to certain former shareholders of Oak Hills, being vendors in the Oak Hills acquisition described in Note 3 and are secured against the assets of Oak Hills.

On January 26, 2007, the $1,295,961 in promissory notes and accrued interest of $227,775 was repaid in full pursuant to the sale of equipment securing these notes.

Secured convertible notes

As at December 31, 2006, the Company had secured convertible debt principal outstanding of $700,457 less an unamortized discount of $107,006 resulting in a net carrying value of $593,451 which, including accrued interest of $22,373, was recorded as a current liability. The convertible notes are due September 15, 2007 and bear interest at a rate of 8% per annum. The repayment of the notes has been guaranteed by the Company supported by a collateral security agreement covering all the assets of the Company. On January 26, 2007, the Company repaid all outstanding convertible promissory notes principal of $700,457, accrued interest of $32,105, and a 20% penalty repayment amount of $146,512 for an aggregate amount of $879,074 to the remaining convertible note holders who had a secured interest on the assets of the Company.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 7: STOCKHOLDERS' EQUITY

The authorized capital of the Company consists of 200,000,000 voting common shares with $0.00025 par value, and 75,000,000 non-voting preferred shares with $0.001 par value.

Common Stock Issuances –period ended June 30, 2007

The Company did not issue any shares of common stock during the period ended June 30, 2007.

Liquidated damages related to common stock and warrants issued to investors in the 2006 private placement

During 2006, the Company completed a private placement pursuant to which the Company issued an aggregate of 7,650,000 units ("Unit") of the Company’s securities at a subscription price of U.S. $1.00 per Unit for total gross proceeds of $7,650,000; with each Unit being comprised of one common share and one non-transferable common stock purchase warrant ("Warrant"). Each resulting Warrant entitles the subscriber to purchase an additional common share (“Warrant Share”) of the Company at a price of $1.25 per share for the period commencing upon the date of issuance of the Units by the Company and ending on the day which is the earlier of (i) 18 months from the date of issuance of the Units and (ii) 12 months from the effective date of the Company’s proposed registration statement. Both the Warrant Shares and the common shares issued pursuant to the private placement offering are to be proposed for registration under the United States Securities Act of 1933, as amended. The Company paid finders fees of 5% of the gross cash proceeds received under the private placement offering and 10% restricted common shares on the gross units issued, with such restricted shares carrying piggy back registration rights. Of the total Units sold, 7,450,000 are subject to potential damages relating to the registration requirement. Effective July 3, 2006, the Company filed a Form SB-2 Registration Statement under the United States Securities Act of 1933, as amended, to register the 8,415,000 common shares issued and 7,650,000 common shares underlying the common stock purchase warrants. This registration statement was not declared effective before financial penalties were due pursuant to registration timing. During the period the Company paid $75,960 in penalties leaving $1,011,535 accrued and unpaid as at June 30, 2007 (December 31, 2006 - $419,671) which have been included in accounts payable and accrued liabilities. The Company continues to incur 1.5% of $7,450,000 raised per month of delay until the Registration Statement is declared effective.

Effective January 1, 2007, the Company adopted the provisions of FASB Staff Position (“FSP”) No. EITF 00-19-2 Accounting for Registration Payment Arrangements (“EITF 00-19-2”), which provides more definitive guidance on accounting for registration arrangements including those described above in connection with the Company’s 2006 private placement. The impact of adopting EITF 00-19-2 is described in more detail in Note 2.

The following table summarizes the initial allocation of the proceeds from the private placement:

Gross proceeds	$	7,650,000
Fair value of warrants subject to registration damages		(4,172,000	)
Estimated fair value of liquidated damages on common shares and warrants		(74,500	)
Share issuance costs		(411,250	)

Proceeds allocated to equity components	$	2,992,250

Allocated as follows:
Common shares	$	2,880,250
Warrants not subject to registration damages		112,000

	$	2,992,250

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 7: STOCKHOLDERS' EQUITY (continued)

Private placement warrants

The fair value of the Warrants at inception was estimated to be $4,284,000 and has been allocated between warrants subject to damages (derivative liability) and warrants not subject to damages (equity) as outlined above. The fair value of the warrants at inception was estimated using the Black-Scholes option-pricing model with the following assumptions: expected warrant life of 1.33 years, risk-free interest rate of 4.81%, dividend yield of 0% and expected volatility of 77%.

At inception, the Company determined that the warrants and related liquidated damages provisions associated with the common stock issuable upon exercise of the warrants did not meet the criteria for equity accounting under EITF 00-19. Further, the Company determined that the liquidated damages provision related to the common stock issued is an embedded derivative under SFAS No. 133.

As at issuance of the shares and warrants, the fair value of the warrants subject to damages was estimated to be $4,172,000 using the Black-Scholes option-pricing model as described above. The fair value of the liquidated damages on the common stock and warrants at issuance was estimated to be $74,500. This estimate was based on the probability of non-registration over time and the damages related thereto. The total fair value of the combined warrants and liquidated damages was $4,246,500 at issuance of the shares and warrants and was recorded as a derivative liability which will be revalued each quarter until the liquidated damages provisions expire. Changes in the fair value estimate for the period from inception to December 31, 2006 were recorded in the consolidated statement of operations.

As at December 31, 2006, the fair value of the warrants was estimated to be $36,500 using the Black-Scholes option-pricing model with the following assumptions: expected warrant life of 0.83 years, risk-free interest rate of 5.0%, dividend yield of 0% and expected volatility of 89%. As at December 31, 2006, the fair value of the liquidated damages on the common stock and warrants was estimated to be $1,922,000 and accordingly, the combined derivative liability had a carrying value of $1,958,500. During 2006, the company recorded a gain of $2,288,000 on the change in the carrying value of the derivative liability resulting primarily from a decline in the price of the Company’s common stock of approximately 82%.

The carrying value of the derivative liability as at December 31, 2006 is summarized as follows:

Derivative liability:
Fair value of warrants subject to registration damages	$	4,172,000
Estimated fair value of liquidated damages on common shares and warrants		74,500

Balance as at issuance of the shares and warrants		4,246,500
Change in fair value for the year ended December 31, 2006		(2,288,000	)
Less: actual damages accrued to December 31, 2006		(419,671	)

Derivative liability, December 31, 2006	$	1,538,829


Allocated as follows:
Fair value of warrants subject to registration damages	$	36,500
Estimated fair value of liquidated damages on common shares and warrants		1,922,000
Less: actual damages accrued to December 31, 2006		(419,671	)

	$	1,538,829

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 7: STOCKHOLDERS' EQUITY (continued)

Share Purchase Warrants

A summary of the Company’s stock purchase warrants and related activity is presented below:

	Number of Warrants		Weighted average exercise price per share		Weighted average remaining contractual life (in years)
					$
Balance at December 31, 2006		11,399,000		1.21		1.11
Issued during the period		-		-
Exercised during the period		-		-
Expired during the period		-		-
Balance at June 30, 2007		11,399,000		1.21		0.72

The Series A and Series B warrants were originally issued as part of the secured convertible note unit offering at exercise prices of $1.50 per share and $1.25 per share, respectively were subject to exercise price changes under certain conditions relating to a subsequent financing. As a result of the private placement completed during 2006, the Series A and Series B warrants were all repriced to $1.00 per share. During 2006, the Company recorded a non-cash finance cost of $615,300 being the estimated fair value increase in the warrants resulting from the price reduction described above.

During 2006 the Company reclassified from common stock purchase warrants to additional paid in capital, $130,358 on the exercise of warrants and $1,397,438 on the expiration of warrants.

Stock Options

The Company has stock options outstanding to certain employees, officers, directors and consultants of the Company and its subsidiaries. The Company’s Stock Option Plan (the “Plan”), most recently amended and approved by the board of directors on August 19, 2005, was effective August 7, 2003 for the purpose of advancing the interests of the Company and its stockholders. The Plan allows for the granting of options to key employees, officers, directors and consultants of the Company for terms not to exceed 10 years and at prices and vesting conditions to be determined by the board of directors. The Plan also allows for the granting of Incentive Stock Options that must be granted at no less than the grant date market price of the Company’s common stock.

The Plan allows for a total of 7,500,000 options outstanding of which 1,285,000 were outstanding as at June 30, 2007 and December 31, 2006 resulting in options available for grant of 6,215,000. To date, all options granted under the Plan have been immediately vested and exercisable, and accordingly, there is no unrecognized stock based compensation expense as at June 30, 2007 or December 31, 2006.

As at June 30, 2007 and December 31, 2006, the Company had no stock options outstanding for which the exercise price was lower than the market value of the Company’s common stock.

The total estimated intrinsic value of options exercised during the period ended June 30, 2007 was $NIL (year ended December 31, 2006 - $19,100). No stock options were granted during the period ended June 30, 2007 or the year ended December 31, 2006.

A summary of the Company’s stock options and related activity is presented below:

	Number of options	Weighted average exercise price per share	Weighted average remaining contractual life (in years)
Outstanding at December 31, 2006	1,285,000	$1.72	3.16
Granted during the period	-	-
Cancelled during the period	-	-
Exercised during the period	-	-
Outstanding at June 30, 2007	1,285,000	1.72	2.66

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 7: STOCKHOLDERS' EQUITY (continued)

A summary of information about stock options as at June 30, 2007 is as follows:

Exercise Price	Number of options outstanding and exercisable	Weighted average remaining contractual life (in years)

$0.167	50,000	1.39
$1.00	5,000	1.60
$1.25	850,000	3.14
$3.00	380,000	1.78

	1,285,000

NOTE 8: RELATED PARTY TRANSACTIONS

Related party transactions not otherwise disclosed elsewhere are listed as follows:

The Company previously entered into a one year contract with IMT on November 10, 2003, a private company that performs a wide range of management, administrative, financial, and business development services to the Company. The contract has been renewed annually. During the period ended June 30, 2007, the Company incurred $30,000 (2006 - $60,000) in fees to IMT.

During the period ended June 30, 2007, the Company incurred (a) $15,000 to its officers for management fees (2006 - $90,000), (b) $NIL to an officer and director for legal and other expense reimbursements (2006 - $15,000) and (c) $5,000 in fees to a director (2006 - $25,000). As at June 30, 2007, the Company owes $204,599 (December 31, 2006 - $202,881) to these related parties.

During the period ended June 30, 2007, the Company incurred $45,000 (2006 - $45,000) in fees to the sole officer and director of Oak Hills who is also a director of the Company. In addition, Oak Hills incurred $24,500 (2006 - $21,000) to this director and a relative of this director for rent on the Company’s field offices in Oklahoma. This director has previously been assigned a 10% carried working interest in each well successfully drilled on the Wagnon lease, as partial compensation for his involvement in obtaining and facilitating the execution of the Farm-Out Agreement and to compensate for his services relating to operation and completion of wells to be located on the Wagnon lease. This director also receives a 10% carried working interest of the Company's interest in all wells successfully drilled by the Company and its properties, and has also been provided the right to purchase up to an additional 5% working interest of the Company’s total interest in all wells drilled by the Company on its properties provided that funds for this participation are paid prior to the commencement of drilling of said wells. During the periods ended June 30, 2007 and 2006, no compensation was recorded in connection with the costs of this carried working interest. As at June 30, 2007, a total of $97,978 (December 31, 2006 - $73,916) is owed to the Company from this director and / or affiliates of this director for costs incurred in connection with certain well interests.

During the quarter ended June 30, 2007, Oasis became the new third party contract operator for the Company’s oil and gas assets and exploration properties as part of cost streamlining efforts effected to conserve cash resources. To facilitate the operator transition, and to decrease liabilities, the Company approved the sale of the majority of its oil and gas related operating fixed assets to Oasis for $300,000. A director of Oasis is related to a director of the Company.

Refer to Notes 3, 4 and 5.

LEXINGTON RESOURCES, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

NOTE 9: SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

	For the Six Months Ended June 30,
	2007		2006
Cash paid during the period for:
Interest and debt payout penalties	$	482,352	$	199,825

Income taxes	$	-	$	-

NOTE 10: LITIGATION

To date the Company has received twenty-one law suits from creditors of the Company for the payment of services and goods totaling approximately $2,056,039 with $418,072 of the amount forming summary judgments or partial summary judgments against the Company. The Company also currently has a total of four well liens for the payment of services and goods totaling approximately $116,622, and seventeen demand letters for the payment of services and goods totaling approximately $443,482 pursuant to expenditures incurred in the development of oil and gas assets on the Company’s leasehold interests. All amounts owing in connection with these law suits, well liens and demand letters have been accrued, as applicable, as of June 30, 2007 and December 31, 2006.

NOTE 11: SUBSEQUENT EVENT

On July 3, 2007, we received a Wells Notice from the United States Securities and Exchange Commission (“SEC”). The Wells Notice advised us that the SEC Staff intended to recommend that the SEC bring a civil action against us alleging that we violated Sections 5(a) and 5(c) of the Securities Act of 1933, as amended (the “Act”). The SEC Staff advised that the alleged violations of Sections 5(a) and 5(c) of the Act relate to the issuance of shares of the Company's common stock that were registered under Forms S-8 to certain individuals who allegedly were not eligible to receive shares registered on Form S-8. The Wells Notice advised that the SEC Staff may seek a permanent injunction against future violations, disgorgement plus prejudgment interest, and civil monetary penalties.

The SEC's Staff, in accordance with Rule 5(c) of the Commission's Rules of Informal and Other Procedures, 17 C.F.R. § 202.5(c), afforded the Company the opportunity to make a “Wells Submission” regarding the SEC Staff's intended recommendations. On August 8, 2007, we submitted a Wells Submission to the Commission setting forth the reasons why no enforcement proceeding should be authorized by the SEC. Although there can be no assurance as to the ultimate outcome, we believe we have meritorious legal and factual defenses in this matter. We cannot predict the outcome of this matter, and an adverse resolution of this matter could have a material adverse effect on our business, financial condition and/or results of operations.

On July 3, 2007, Grant Atkins, the Chief Executive Officer of the Company also received a Wells Notice. The Wells Notice advised Mr. Atkins that the SEC Staff intends to recommend that the SEC bring a civil action against him alleging that he also violated Sections 5(a) and 5(c) of the Act in connection with the issuance of the Company's shares of common stock that were registered under Forms S-8 certain to individuals allegedly who were not eligible to receive shares registered on Form S-8. The SEC Staff indicated that it may recommend that the SEC seek disgorgement plus prejudgment interest, an order prohibiting Mr. Atkins from participating in any offering of penny stock, civil monetary penalties, and a permanent injunction. On August 6, 2007, Mr. Atkins submitted a Wells Submission to the Commission setting forth the reasons why he should not be charged with violations of the federal securities laws in connection with this investigation. We cannot predict the outcome of the potential claims against Mr Atkins, and an adverse resolution could have a material adverse effect on the Company's business and operations.

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

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

GENERAL

Lexington Resources, Inc. is a corporation organized under the laws of the State of Nevada. We currently trade on the OTC Bulletin Board under the symbol "LXRS" and on the Frankfurt and Berlin Stock Exchanges under the symbol “LXR”; WKN: AØBKLP. Our oil and gas operations are conducted through our wholly owned subsidiary, Lexington Oil and Gas Ltd. Co., an Oklahoma limited liability company via a third party contract operator.

Two additional wholly-owned subsidiaries, Oak Hills Drilling and Operating International, Inc., a Nevada company, and Oak Hills Drilling and Operating LLC, an Oklahoma limited liability company (“Oak Hills”), were acquired in the first quarter of 2006. Oak Hills Drilling and Operating International Inc. is the private parent company to Oak Hills.

Oil and Gas Properties

As of the date of this Quarterly Report, we have an aggregate of approximately 5,138 gross developed acres, 3,186 net undeveloped acres and 4,798 gross undeveloped acres, 2,524 net developed acres pursuant to leases and/or concessions. Our material mineral properties, which are briefly summarized below, are as follows. In all developed acreage, Paluca Petroleum, Inc. receives a 10% carried interest of our working interest pursuant to a management agreement with one of our directors.

Wagnon Lease in Pittsburg County, Oklahoma. We have a 53.95% working interest and a 40.4625% net revenue interest in 590.2 gross acres. As of the date of this Quarterly Report, the Kellster 1-2, Kyndal 2-2, Bryce 3-2 and Caleigh 4-2 wells are all in production.

Coal Creek Prospect in Hughes and Pittsburg Counties, Oklahoma. We have a 47.5% working interest and a minimum 37.525% net revenue interest in 1,024 net mineral acres as of December 31, 2006. The Lex 1-34 and Brumbaugh 1-10 wells are in production, in which we have a 43.5% working interest and 34.4% NRI and 18.88% working interest and 14.92% NRI, respectively. The Ellis 1-15 well, in which we have a 44% working interest, is not completed. Paluca Petroleum, Inc. receives a 10% carried interest of our working interest pursuant to a farm-out agreement.

Panther Creek Prospect in Hughes County, Oklahoma. The Poe 1-29 well is a non-operated producing interest of Lexington, in which our 165 net mineral acres equates to a 25.78% working interest and 20.95% net revenue interest.

South Lamar Prospect in Hughes County, Oklahoma. We have a 45% working interest in 955 net mineral acres. The Peyton 1-25 (35.99% NRI) and the Nicole 1-23 (34.23% NRI) are completed and are both flowing gas, and the Dylan Peyton 1-24H (36.21% NRI) is in the completion stage.

H-9 Prospect in Hughes County, Oklahoma. We have a 50% leasehold interest and a 39.625% net revenue interest in 712 net mineral acres. The Gates 1-19 and 2-19, which were drilled by Orion Exploration, are completed and in production. We participate 50/50 with Dylan Peyton LLC in an 11.33% working interest and a 8.98% net revenue interest in those wells. The Gray 1-22 has been drilled with Dylan Peyton LLC and we have a 41.16% working interest and 32.62% net revenue interest. As of the date of this Quarterly Report, the well is flowing but requires fracturing.

Middle Creek Prospect in Hughes County, Oklahoma. There are two minimal producing gas wells, the Betsey 1-23 and the Fix 1-14, that existed at the time of purchase in which we have a 45% working interest and a 31.5% net revenue interest in 320 net mineral acres. As of the date of this Quarterly Report, there has been no new development on the property.

Barnett Pathway Prospect – Undeveloped acreage. In Jack County, Texas, we have a 100% working interest and 70% net revenue interest in 1,115 net mineral acres. The interest in Jack County is in the Barnett Shale and includes deep rights. In Hood County, Texas, we have an additional 459 acres in which we have a 100% working interest and a 72.5% net revenue interest. On February 26, 2007, we sold our interest in its Hood County, Texas leases to Initial Energy Services, LLC of Texas.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (continued)

Barnett Pathway Prospect - Developed acreage. The Martin 1H well in Parker County, Texas, has completed the drilling phase and fracturing and is now in production. We have a 90% working interest and a 63% net revenue interest in this well. In Palo Pinto County, Texas, we have a 90% working interest and 63% net revenue interest in 1,211 net mineral acres. There are no depth limitations in our interest in Palo Pinto County. The Gilbert #1H has been drilled in Palo Pinto County and is shut in pending resolution of water infiltration and the setup of compressor equipment to aid gas flows into a small diameter higher pressure pipeline. A Marble Falls zone above the Barnett Shale target represents an alternative or commingled production opportunity for the Gilbert #1H. We also have a non-operating 9% working interest and a 6.3% net revenue interest in the Paradise Park 1H well which was acquired through our drilling contract work. As of the date of this Quarterly Report, the well has been fractured, stimulated and fitted with production equipment and compressor and is in production. Total developed gross acreage is 1,152 net mineral acres.

Geneva Prospect in Tarrant County, Texas. We have a 90% working interest and a 63% net revenue interest in 312 acres. As of the date of this Quarterly Report, the Oliver Unit 1H well is shut in pending resolution of water infiltration.

Comanche County Prospect in Comanche County, Texas. On March 3, 2006, effective January 31, 2006, we entered into an exploration agreement with Dylan-Peyton, LLC to jointly develop approximately 5,670 acres of Barnett Shale and shallow gas targets in Comanche County, Texas (the “Comanche County Exploration Agreement”). The property will be developed on a 50/50 equal working interest basis. Our subsidiary, Oak Hills, will become the operator of the project. We will pay approximately $1,225,500 for our 50% working interest in the new acreage through a combination of $575,000 in cash (paid during the period) and approximately $650,500 of carried drilling costs in the first Comanche Barnett Shale test well required to be drilled on or before September 1, 2006. The test well commenced drilling on September 1, 2006 and we are currently evaluating the final costs associated with drilling in order to determine the total amounts owing. We are currently in negotiations and reconciliation of expenditures relating to the Joint Exploration Agreement in Comanche County, Texas.

New Oil and Gas Operator Appointed/Sale of Assets

During the quarter ended June 30, 2007, Oasis Operating, LLC (“Oasis”) became our new third-party contractor for our oil and gas assets and exploration properties as part of cost streamlining efforts effected to conserve cash resources. On June 24, 2007, we approved the sale of certain oil and gas related operating fixed assets to Oasis for $300,000. Amounts owing pursuant to this agreement will be offset against amounts subsequently owed by us to Oasis in connection with Oasis’ ongoing operator activities. A director of Oasis is related to a director of Oak Hills.

RESULTS OF OPERATIONS

Six-Month Period Ended June 30, 2007 Compared to Six-Month Period Ended June 30, 2006.

Our net loss for the six-month period ended June 30, 2007 was approximately ($1,204,584) compared to ($3,847,585) for the six-month period ended June 30, 2006 (a decrease of $2,643,001).

During the six-month period ended June 30, 2007, we generated $411,275 in gross revenue compared to $946,620 in gross revenue generated during the six-month period ended June 30, 2006 (a decrease of $535,345), resulting primarily from oil and gas revenue of $351,737 and $59,538 in well drilling and services revenue generated by our subsidiary, Oak Hills. Drilling and service revenue of $59,538 declined from $689,110 during the same period in 2006 resulting from the sale of our drilling rig. Oil and gas revenue of $351,737 increased from $257,510 during the same period in 2006 resulting from increased volume of gas sold. Prices from natural gas averaged $4.85 per mcf (net of marketing and transportation costs) during the six month period ended June 30, 2007 compared to $4.75 per mcf for the six-month period ended June 30, 2006. Volume of gas sold for the six-month period ended June 30, 2007 was approximately 72,495 mcf, an increase from approximately 54,244 mcf from the six-month period ended June 30, 2006. The volume of gas sold resulted from new wells coming into production, however, the volume of gas sold was moderated by a decline in production from older wells and an increase in average production costs.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (continued)

During the six-month period ended June 30, 2007, we incurred operating expenses in the aggregate amount of $1,076,224 compared to $4,113,569 incurred during the six-month period ended June 30, 2006 (a decrease of $3,037,345). The operating expenses incurred during the six-month period ended June 30, 2007 consisted of: (i) operating costs and taxes of $160,780 (2006: $118,282); (ii) depreciation, depletion and amortization of $372,537 (2006: $385,150); (iii) general and administrative of $371,335 (2006: $739,329); (iv) investor relations and promotion of $37,500 (2006: $1,930,975); (v) drilling rig, well and pulling unit expense of $56,125 (2006: $462,890); and (vi) salaries, wages and related of $77,947 (2006: $476,943). The decrease in operating expenses incurred during the six-month period ended June 30, 2007 compared to the six-month period June 30, 2006 resulted primarily from the decrease in operating expenditures including rig, well and pulling unit expense relating to our subsidiary, Oak Hills, and the sale of the drilling rig previously owned by Oak Hills, a decrease in overall general administration expenses resulting from the decrease in scale and scope of well drilling operations, and a substantial decrease in investor relations and promotion relating to investor awareness programs.

Of the $1,076,224 incurred as operating expenses during the six-month period ended June 30, 2007, an aggregate of $60,000 was incurred in fees payable to International Market Trend (“IMT”) for amounts due and owing for operational, administrative and consulting services rendered during the six-month period ended June 30, 2007. On November 10, 2003, we entered into a consulting agreement with IMT (the “Consulting Agreement”), whereby IMT performs a wide range of management, administrative, financial, and business development services for us. The contract with IMT has been renewed annually.

Of the $1,076,224 incurred as operating expenses during the six-month period ended June 30, 2007: (i) an aggregate of $15,000 was incurred to our officers/directors for management fees; and (ii) an aggregate of $5,000 was incurred to one of our directors for fees. Furthermore, an additional $45,000 was incurred to Mr. Humphreys, who is also the sole officer and director of Oak Hills, as compensation during the six-month period ended June 30, 2007. In addition, Oak Hills incurred $24,500 to Mr. Humphreys and a relative of this director for rent on our field offices in Oklahoma. As at June 30, 2007, $97,978 is owed to us from Mr. Humphreys and/or affiliates of Mr. Humphreys for costs incurred in connection with certain well interests. Subsequent to June 30, 2007, we have received $-0- of this amount due and owing. This director has previously been assigned a 10% carried working interest in each well successfully drilled on the Wagnon lease, as partial compensation for his involvement in obtaining and facilitating the execution of the Farm-Out Agreement and to compensate for his services relating to operation and completion of wells to be located on the Wagnon lease, and has also been provided the right to purchase up to an additional 5% working interest of our total interest in all wells drilled by us on our properties provided that funds for this participation are paid prior to the commencement of drilling of said wells. During the six-month period ended June 30, 2007, compensation was recorded in connection with the costs of this carried working interest totaling $-0-. This director also received a 10% carried working interest of the Company's interest in all wells successfully drilled by the Company and its properties.

Our net loss from operations during the six-month period ended June 30, 2007 also includes: (i) $334,505 (2006: $2,990,136) related to interest and finance fees; (ii) a loss of $448,225 (2006: $-0-) related to a contingent liability; (iii) a gain of $342,195 (2006: $-0-) related to the disposal of other equipment; (iv) impairment of other equipment of $99,100 (2006: $-0-); and (v) a gain of $-0- (2006: $2,309,500) related to a derivative liability. Together with operating expenses, this results in a net loss of ($1,204,584). The decrease in net loss during the six-month period ended June 30, 2007 compared to the six-month period ended June 30, 2006 is attributable primarily to) the decrease in operating expenditures relating to our subsidiary, Oak Hills, a decrease in the scale and scope of well drilling operations and related capital expenditure, a decrease in overall general administration, and a decrease in investor relations and promotion relating to investor awareness programs. Our net loss during the six-month period ended June 30, 2007 was ($1,204,584) or ($0.03) per share compared to a net loss of ($3,847,585) or ($0.13) per share for the six-month period ended June 30, 2006. The weighted average number of shares outstanding was 38,766,270 for the six-month period ended June 30, 2007 compared to 28,991,126 for the six-month period ended June 30, 2006.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (continued)

Three-Month Period Ended June 30, 2007 Compared to Three-Month Period Ended June 30, 2006.

Our net loss for the three-month period ended June 30, 2007 was approximately ($730,707) compared to ($37,996) for the three-month period ended June 30, 2006 (an increase of $692,711).

During the three-month period ended June 30, 2007, we generated $202,404 in gross revenue compared to $645,314 in gross revenue generated during the three-month period ended June 30, 2006 (a decrease of $442,910), resulting primarily from oil and gas revenue of $195,572 and $6,832 in well drilling and services revenue generated by our subsidiary, Oak Hills. Drilling which service revenue declined from $555,011 during the same period in 2006 resulting from the sale of our drilling rig. Oil and gas revenue increased from $90,303 during the same period in 2006 resulting from increased volume of gas sold.

During the three-month period ended June 30, 2007, we incurred operating expenses in the aggregate amount of $481,046 compared to $1,623,749 incurred during the three-month period ended June 30, 2006 (a decrease of $1,142,703). The operating expenses incurred during the three-month period ended June 30, 2007 consisted of: (i) operating costs and taxes of $64,581 (2006: $58,184); (ii) depreciation, depletion and amortization of $175,513 (2006: $198,346); (iii) general and administrative of $190,053 (2006: $473,451); (iv) investor relations and promotion of $-0- (2006: $331,801); (v) drilling rig, well and pulling unit expense of $17,679 (2006: $241,404); and (vi) salaries, wages and related of $33,220 (2006: $320,563). The decrease in operating expenses incurred during the three-month period ended June 30, 2007 compared to the three-month period June 30, 2006 resulted primarily from the decrease in operating expenditures including rig, well and pulling unit expense relating to our subsidiary, Oak Hills, and the sale of the drilling rig previously owned by Oak Hills, a decrease in overall general administration expenses resulting from the decrease in scale and scope of well drilling operations, and a substantial decrease in investor relations and promotion relating to investor awareness programs.

Our net loss from operations during the three-month period ended June 30, 2007 also includes: (i) $14,959 (2006: $1,369,061) related to interest and finance fees; (ii) a loss of $338,006 (2006: $-0-) related to a contingent liability; (iii) a gain of $-0- (2006: $2,309,500) related to a derivative liability; and (iv) impairment of other equipment of $99,100 (2006: $-0-). Together with operating expenses, this results in a net loss of ($730,707). Although operating expenses decreased during the three-month period ended June 30, 2007, the increase in net loss during the three-month period ended June 30, 2007 compared to the three-month period ended June 30, 2006 is attributable primarily to the recognition of the gain on the derivative liability of $2,309,500 during the three-month period ended June 30, 2006 compared to $-0- during the same period in 2007.

LIQUIDITY AND CAPITAL RESOURCES

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

As of June 30, 2007, our current assets were $1,589,935 and our current liabilities were $9,648,264, resulting in a working capital deficit of $8,058,329. As of June 30, 2007, current assets were comprised of: (i) $108,963 in cash and cash equivalents; (ii) $1,380,077 in accounts receivable, net of allowance for doubtful accounts of $177,367; (iii) $97,978 in amounts due from related parties; and (iv) $2,917 in prepaid expenses and other. As of June 30, 2007, our current liabilities were comprised of: (i) $8,097,626 in accounts payable and accrued liabilities; (ii) $670,027 in promissory note and other short term advances; (iii) $204,599 in amounts due to related parties; and (iv) $676,012 in contingent liability. See “ - Material Commitments.”

As of June 30, 2007, our total assets were $14,859,095 comprised of: (i) $1,589,935 in current assets; (ii) $8,133,395 in carrying value of proved oil and gas properties (net of accumulated depletion of $1,393,981); (iii) $4,749,682 in carrying value of unproved oil and gas properties; (iv) $86,083 in other equipment (net of accumulated depreciation of $69,709); and (v) $300,000 in assets held for sale. The decrease in total assets during the six-month period ended June 30, 2007 from fiscal year ended December 31, 2006 was primarily due to a decrease in assets held for sale of $2,767,225 recorded during fiscal year ended December 31, 2006 resulting from classification of the drilling rig at its estimated net recoverable amount and the decrease in carrying value of proved and unproved oil and gas properties from well drilling and leasehold related capital expenditures.

As of June 30, 2007, our total liabilities were $9,648,264 comprised of $9,648,264 in current liabilities. The decrease in total liabilities during the six-month period ended June 30, 2007 from fiscal year ended December 31, 2006 was primarily due to a decrease in derivative liability of $1,538,829 and a decrease in long term debt of $1,295,961.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (continued)

Stockholders’ equity decreased from $5,734,697 at December 31, 2006 to $5,210,831 at June 30, 2007.

We have not generated positive cash flows from operating activities. For the six-month period ended June 30, 2007, net cash flow used in operating activities was ($1,359,811) compared to net cash flow used in operating activities of ($1,492,712) for the six-month period ended June 30, 2006. Net cash flow used in operating activities during the six-month period ended June 30, 2007 consisted primarily of a net loss of ($1,204,584) adjusted by $146,809 relating to non-cash interest and finance fee expenses, ($342,195) relating to gain on disposal of other equipment, $278,996 relating to oil and gas depletion, $93,541 in depreciation, $146,809 in non-cash interest and finance fees, $37,500 in non-cash expenses, and $448,225 in loss on contingent liability.

During the six-month period ended June 30, 2007, net cash flow provided by investing activities was $3,401,295 compared to net cash flow used in investing activities of ($5,804,516) for the six-month period ended June 30, 2006. Net cash flow provided by investing activities during the six-month period ended June 30, 2007 was primarily the result of $3,225,000 in proceeds on disposal of the drilling rig and $296,295 in disposal of oil and gas properties adjusted by ($120,000) in purchases of other equipment.

During the six-month period ended June 30, 2007, net cash flow used in financing activities was ($2,018,762) compared to net cash flow from financing activities of $8,480,613 for the six-month period ended June 30, 2006. Net cash flow used in financing activities during the six-month period ended June 30, 2007 pertained primarily to ($1,295,961) in long-term debt repayments, ($700,457) in convertible note repayments, and ($22,344) in advances to related parties.

PLAN OF OPERATION

During fiscal year ended December 31, 2006, we completed a private placement pursuant to which we issued an aggregate of 7,650,000 Units at a subscription price of U.S. $1.00 per Unit for total gross proceeds of $7,650,000; with each Unit being comprised of one common share and one non-transferable common stock purchase Warrant. Each resulting Warrant entitles the subscriber to purchase an additional share of our common stock ("Warrant Share") at a price of $1.25 per share for the period commencing upon the date of issuance of the Units and ending on the day which is the earlier of (i) 18 months from the date of issuance of the Units and (ii) 12 months from the effective date of our proposed registration statement. Both the Warrant Shares and the common shares issued pursuant to the private placement offering are to be proposed for registration under the 1933 Securities Act. We paid finders fees of 5% of the gross cash proceeds received under the private placement offering and 10% restricted common shares on the gross units issued, with such restricted shares carrying piggy back registration rights.

Effective July 3, 2006, we filed the 2006 Registration Statement under the Securities Act of 1933, as amended (the “Securities Act”) to register the 8,415,000 common shares issued and 7,650,000 common shares underlying the Warrants. The 2006 Registration Statement was not declared effective before financial penalties were due pursuant to registration timing. During the six-month period ended June 30, 2007, we have paid $75,960 in penalties leaving $1,011,535 accrued and unpaid as at June 30, 2007. As of the date of this Quarterly Report, we continue to incur 1.5% of $7,450,000 raised per month of delay until the 2006 Registration Statement is declared effective by the Securities and Exchange Commission.

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION (continued)

The reports of the independent registered public accounting firms that accompany our December 31, 2006 and December 31, 2005 consolidated financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

MATERIAL COMMITMENTS

Promissory Note

During 2007, a material commitment for us relates to an unsecured promissory note from one of our shareholders aggregating $600,000 (the "Promissory Note"). The provisions of the Promissory Note are:(i) two-year term with interest at the rate of 10% per annum; and (ii) interest to be paid on a quarterly basis with the principal to be repaid on or before the due date of the Promissory Note. As at June 30, 2007, there is $70,027 of accrued and unpaid interest on this loan.

2006 Registration Statement Penalties

On July 3, 2006, we filed the 2006 Registration Statement to register the 8,415,000 common shares issued and 7,650,000 common shares underlying the Warrants. The 2006 Registration Statement was not declared effective before financial penalties were due pursuant to registration timing. Penalties accrued and unpaid to June 30, 2007 aggregate $1,011,535. As of the date of this Quarterly Report, we continue to incur 1.5% of $7,450,000 raised per month of delay until the registration statement is declared effective by the Securities and Exchange Commission.

Accounts Payable Related Legal Proceedings

See PART II. OTHER INFORMATION, ITEM 1. LEGAL PROCEEDINGS

ITEM 3. CONTROLS AND PROCEDURES

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

In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of our management, including Mr. Grant Atkins, our Chief Executive Officer and interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management concluded that our disclosure controls and procedures are effective, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms. There have been no changes to our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during our six-month period ended June 30, 2007, that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the fourth quarter of 2006 and to the date of this Quarterly Report, we have received twenty-one law suits from our creditors for the payment of services and goods totaling approximately $2,056,039 with $418,072 of the amount forming summary judgments or partial summary judgments against us. We also currently have a total of four well liens for the payment of services and goods totaling approximately $116,622 and seventeen demand letters for the payment of services and goods totaling approximately $443,482 pursuant to expenditures incurred in the development of oil and gas assets on our leasehold interests. All amounts owing in connection with these law suits, mediation requests, well liens and demand letters have been accrued, as applicable, as of June 30, 2007.

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

No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

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

No report required.

ITEM 5. OTHER INFORMATION

Resignation of Director

Effective on July 23, 2007, our Board of Directors accepted the resignation of Norman J R MacKinnon as a director, our Chief Financial Officer and a member of our audit committee.

Effective on May 2, 2007, our Board of Directors accepted the resignation of Mr. Gino Cicci as a director.

ITEM 6. EXHIBITS

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

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

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

SIGNATURES

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

	LEXINGTON RESOURCES, INC.

Dated: August 23, 2007	By:	/s/ Grant Atkins
		Grant Atkins
		President and Chief Executive Officer


Dated: August 23, 2007	By:	/s/ Grant Atkins
		Grant Atkins
		Chief Financial Officer

Lexington Resources (LXRS) Inactive 10QSB/A2007 Q2 Quarterly report (small business) (amended)