filing:
http://www.otcbb.com/asp/Info_Center.asp
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
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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.
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. This asset sale was completed during the quarter ended September 30, 2007. A director of Oasis is related to a director of the Company.
During the quarter ended September 30, 2007, the Company sold, in three transactions, virtually all its Oklahoma based assets except for the uncompleted Ellis well and three non-operated minority interests in wells drilled by non-related third parties as follows: (a) the Company sold all of its self operated and already developed Oklahoma based wells including Wagnon and Coal Creek leases including six wells developed by the Company and two further wells with minor production, (b) the Company sold all of its Oklahoma based Dylan Peyton LLC operated assets and (c) the Company sold its 25% working interest in Newfield Exploration Mid-Continent, Inc.’s (“Newfield”) POE well and undeveloped lands connected thereto.
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 $7,365,750 at September 30, 2007, has incurred losses since inception of $40,152,709 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, obtaining debt settlements and ending litigation regarding debts outstanding, and ultimately on generating future profitable operations. The Company will attempt to fund operations with advances and debt instruments, the sale of assets, 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 nine months ended September 30, 2007, are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.
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