Part I [Business Overview](index=5&type=section&id=Item%201.%20Business) Mexco Energy Corporation is an independent oil and gas company focused on non-operated interests in the Permian Basin, with 1.616 MMBOE proved reserves - The company is an independent oil and gas entity primarily engaged in acquiring and developing non-operated working and royalty interests in the Permian Basin[14](index=14&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) Proved Reserves and PV-10 Value (as of March 31, 2022) | Metric | Value | | :--- | :--- | | Total Estimated Proved Reserves | 1.616 million BOE | | Oil and NGLs Percentage | 50% | | Natural Gas Percentage | 50% | | Estimated PV-10 Value | ~$31 million | - The Permian Basin is the company's core operational area, contributing **84%** of discounted future net cash flows from proved reserves, with the Delaware Basin accounting for **61%**[26](index=26&type=chunk)[28](index=28&type=chunk) Historical Production Volumes | Year | Oil (Bbls) | Gas (Mcf) | | :--- | :--- | :--- | | 2022 | 61,689 | 393,841 | | 2021 | 50,327 | 324,205 | | 2020 | 44,301 | 294,007 | | 2019 | 35,359 | 295,133 | | 2018 | 34,743 | 318,774 | - A single customer accounted for **68%** of oil and gas revenues in fiscal 2022, indicating significant customer concentration[38](index=38&type=chunk) - The company maintains a lean operational structure with only two full-time and three part-time employees as of March 31, 2022[54](index=54&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from volatile commodity prices, reserve replacement, PUD development, and reliance on third-party operators - Volatility of oil and gas prices is a primary risk, impacting revenues, capital expenditure cash flow, borrowing capacity, and potentially leading to ceiling test writedowns[60](index=60&type=chunk)[61](index=61&type=chunk) - Approximately **37%** of total estimated net proved reserves were undeveloped as of March 31, 2022, requiring significant capital and successful drilling for recovery[70](index=70&type=chunk) - Limited control over non-operated properties, including operational procedures, expenditures, and development timelines, poses a risk to revenues and production[80](index=80&type=chunk) - The Chairman and CEO, Nicholas C. Taylor, beneficially owns approximately **44%** of common stock, granting significant influence over shareholder matters and business strategy[88](index=88&type=chunk) - The company has never paid cash dividends and does not anticipate doing so, as earnings are retained for business growth[91](index=91&type=chunk) [Properties and Reserves](index=18&type=section&id=Item%202.%20Properties) Total proved reserves increased **7.5%** to **1.616 MMBOE** by March 31, 2022, with PV-10 value doubling to **$30.8 million** - Average commodity prices used in fiscal 2022 reserve calculations increased dramatically year-over-year, with oil rising to **$74.52/bbl** and natural gas to **$4.60/mcf**[98](index=98&type=chunk) Proved Reserves and PV-10 Value Comparison (as of March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Net Proved Reserves (BOE) | 1,616,180 | 1,503,970 | | PV-10 Value ($) | $30,777,000 | $13,758,300 | | Standardized Measure ($) | $25,920,000 | $12,763,000 | - In fiscal 2022, the company added **307 MBOE** through extensions and discoveries and **21 MBOE** through acquisitions, offset by production and downward revisions of **86 MBOE**[109](index=109&type=chunk) Net Production and Average Sales Price (Fiscal Year Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Oil** | | | | Production (Bbls) | 61,689 | 50,327 | | Average Sales Price/Bbl ($) | $75.95 | $40.31 | | **Gas** | | | | Production (Mcf) | 393,841 | 324,205 | | Average Sales Price/Mcf ($) | $4.67 | $2.30 | | **Total** | | | | Total Production (BOE) | 127,329 | 104,361 | [Legal and Safety Disclosures](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any material legal or governmental proceedings, and mine safety disclosures are not applicable to its operations - The company is not aware of any material legal or governmental proceedings against it[119](index=119&type=chunk) - Mine safety disclosures are not applicable to the company's operations[121](index=121&type=chunk) Part II [Common Stock Market and Shareholder Matters](index=23&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Mexco's common stock trades on NYSE American under 'MXC' with significant volatility; no cash dividends are anticipated, and a **$250,000** repurchase program is authorized Quarterly Stock Price Range (Fiscal 2022) | Quarter (2021-2022) | High ($) | Low ($) | | :--- | :--- | :--- | | Apr - Jun 2021 | 10.60 | 6.88 | | Jul - Sep 2021 | 11.80 | 7.80 | | Oct - Dec 2021 | 18.00 | 8.35 | | Jan - Mar 2022 | 43.00 | 9.00 | - The company has never declared or paid cash dividends and does not anticipate doing so, with its current bank loan also prohibiting such payments without permission[126](index=126&type=chunk) - A **$250,000** share repurchase program is authorized, but no shares were repurchased in fiscal years 2022 or 2021[129](index=129&type=chunk)[130](index=130&type=chunk) [Management's Discussion and Analysis (MD&A)](index=24&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2022 net income surged to **$2.86 million** on **135%** revenue growth, driven by higher commodity prices and production, enabling debt repayment [Liquidity and Capital Resources](index=24&type=section&id=MD%26A_Liquidity_and_Capital_Resources) Liquidity significantly improved in fiscal 2022, with operating cash flow reaching **$3.7 million**, enabling **$1.6 million** in property additions and full debt repayment Cash Flow Summary (Years Ended March 31) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities ($) | $3,744,407 | $710,047 | | Net Cash Used in Investing Activities ($) | ($1,710,024) | ($1,387,624) | | Net Cash (Used in) Provided by Financing Activities ($) | ($721,430) | $701,009 | - During fiscal 2022, the company participated in drilling **40** horizontal wells at a cost of approximately **$1.3 million**, primarily in the Delaware Basin[141](index=141&type=chunk) - The company acquired overriding royalty interests in **53** producing wells in the Eagle Ford area for **$567,000**[159](index=159&type=chunk) - Subsequent to fiscal year-end, the company acquired additional royalty interests for **$939,000** and committed to further drilling projects in the Permian Basin[154](index=154&type=chunk)[155](index=155&type=chunk)[160](index=160&type=chunk) [Results of Operations](index=27&type=section&id=MD%26A_Results_of_Operations) Net income for fiscal 2022 surged **1731%** to **$2.86 million**, driven by **135%** revenue growth to **$6.5 million** from higher commodity prices and production - Net income for fiscal 2022 was **$2,855,066**, an increase of **1731%** compared to **$155,932** in fiscal 2021[164](index=164&type=chunk) Revenue and Price Analysis (FY 2022 vs FY 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | **Oil Revenue** | $4,685,094 | $2,028,792 | +130.9% | | Average Oil Price/bbl ($) | $75.95 | $40.31 | +88.4% | | **Gas Revenue** | $1,840,170 | $744,987 | +147.0% | | Average Gas Price/mcf ($) | $4.67 | $2.30 | +103.0% | - Operating expenses increased at a slower pace than revenues, with production costs up **47%**, DD&A up **48%**, and G&A expenses up **26%** year-over-year[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Critical Accounting Policies](index=28&type=section&id=MD%26A_Critical_Accounting_Policies) Critical accounting policies include the full cost method for oil and gas properties and the quarterly ceiling test, where proved reserve estimates are key judgments - The company uses the full cost method of accounting, capitalizing all costs associated with property acquisition, exploration, and development[174](index=174&type=chunk) - A quarterly ceiling test ensures capitalized costs do not exceed the after-tax present value of future net cash flows from proved reserves; no write-downs were recorded in fiscal 2022 or 2021[67](index=67&type=chunk)[177](index=177&type=chunk) - Estimates of proved reserves, prepared by an independent engineering firm, are critical and inherently uncertain, serving as a key input for DD&A calculation and the ceiling test[179](index=179&type=chunk) [Market Risk Disclosures](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is commodity price volatility; a **$10/bbl** oil price change impacts pretax income by **$617,000**, and a **$1/mcf** gas price change by **$394,000** - The primary market risk stems from fluctuating commodity prices; a hypothetical **$10/bbl** change in oil price would have altered fiscal 2022 pretax income by **$616,890**[194](index=194&type=chunk)[200](index=200&type=chunk) - A hypothetical **$1/mcf** change in the average natural gas price for fiscal 2022 would have altered pretax income by **$393,841**[200](index=200&type=chunk) - Credit risk is concentrated, with one purchaser accounting for **60%** of total oil and gas receivables at March 31, 2022, though significant credit losses have not been experienced[195](index=195&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2022, with no material changes reported - Management, including the CEO and CFO, assessed and concluded the company's internal control over financial reporting was effective as of March 31, 2022, based on the COSO 2013 framework[203](index=203&type=chunk)[205](index=205&type=chunk) - The company's disclosure controls and procedures were also evaluated and found to be effective as of March 31, 2022[206](index=206&type=chunk) Part III [Directors, Compensation, and Related Party Transactions](index=33&type=section&id=Items%2010-14) Information on directors, executive compensation, security ownership, and related party transactions is incorporated by reference from the separately filed 2022 Proxy Statement - Detailed information for Items 10 through 14 is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[209](index=209&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) Financial Statements and Notes [Consolidated Financial Statements](index=41&type=section&id=Consolidated%20Financial%20Statements) Audited consolidated financial statements for fiscal 2022 show significant improvement, with total assets at **$13.3 million**, liabilities reduced to **$1.1 million**, and net income surging to **$2.86 million** Consolidated Balance Sheet Highlights (as of March 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets ($) | $2,733,539 | $757,494 | | Property and Equipment, Net ($) | $10,132,902 | $9,768,943 | | Total Assets ($) | $13,284,520 | $10,830,687 | | Total Current Liabilities ($) | $263,763 | $138,534 | | Long-Term Debt ($) | $0 | $1,154,949 | | Total Liabilities ($) | $1,059,904 | $2,007,280 | | Total Stockholders' Equity ($) | $12,224,616 | $8,823,407 | Consolidated Statement of Operations Highlights (Years Ended March 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Operating Revenues ($) | $6,587,780 | $2,799,004 | | Operating Income ($) | $2,881,238 | $158,701 | | Net Income ($) | $2,855,066 | $155,932 | | Diluted EPS ($) | $1.32 | $0.08 | [Note 5: Long-Term Debt](index=49&type=section&id=Note%205.%20Long-Term%20Debt) In fiscal 2022, the company fully repaid its **$1.18 million** outstanding debt, resulting in a zero balance by March 31, 2022, with a **$1.5 million** credit facility available Credit Facility Activity (Years Ended March 31) | Activity | Principal Amount ($) | | :--- | :--- | | Balance at March 31, 2021 | $1,180,000 | | Borrowings (FY 2022) | $275,000 | | Repayments (FY 2022) | $1,455,000 | | **Balance at March 31, 2022** | **$0** | - The credit facility has a borrowing base of **$1,500,000**, which was fully available as of March 31, 2022[326](index=326&type=chunk)[327](index=327&type=chunk) [Note 16: Oil and Gas Reserve Data (Unaudited)](index=56&type=section&id=Note%2016.%20Oil%20and%20Gas%20Reserve%20Data%20%28Unaudited%29) Unaudited proved oil and gas reserves increased to **1.616 MMBOE**, with PUDs at **37%**; the standardized measure rose to **$25.9 million** due to higher prices Changes in Proved Reserves (BOE) | Description | Oil (Bbls) | Gas (Mcf) | | :--- | :--- | :--- | | As of March 31, 2021 | 738,000 | 4,595,000 | | Revisions/Purchases/Discoveries (Net) | 133,000 | 641,000 | | Production | (62,000) | (394,000) | | **As of March 31, 2022** | **809,000** | **4,842,000** | - At March 31, 2022, Proved Undeveloped Reserves (PUDs) were estimated at **590 MBOE**, representing **37%** of total proved reserves[370](index=370&type=chunk) Standardized Measure of Discounted Future Net Cash Flows | Metric | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Standardized Measure ($) | $25,920,000 | $12,763,000 | - The increase in the standardized measure was primarily driven by a **$16.8 million** positive change from higher prices and adjusted production costs[381](index=381&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Financial statements reflect significant improvement in financial health, with increased assets and equity, and a turnaround to net income driven by higher oil and gas revenues [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Balance sheets show total assets increased to **$12.07 million** and liabilities decreased to **$1.04 million**, boosting equity to **$11.04 million** Consolidated Balance Sheet Highlights (Unaudited) | Account | Dec 31, 2021 | Mar 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $880,190 | $57,813 | | Total current assets | $1,652,037 | $757,494 | | Property and equipment, net | $10,012,520 | $9,768,943 | | Total assets | $12,073,396 | $10,830,687 | | **Liabilities & Equity** | | | | Total current liabilities | $208,359 | $138,534 | | Long-term debt | $0 | $1,154,949 | | Total liabilities | $1,035,210 | $2,007,280 | | Total stockholders' equity | $11,038,186 | $8,823,407 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Statements of operations show a significant turnaround to **$1.86 million** net income for nine months, driven by doubled operating revenues Operating Results (Unaudited) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2021 | Nine Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $1,595,344 | $699,894 | $4,413,023 | $1,706,392 | | Operating income (loss) | $756,379 | $26,073 | $1,880,391 | ($272,113) | | Net income (loss) | $753,302 | $80,497 | $1,857,136 | ($261,143) | | Basic EPS | $0.36 | $0.04 | $0.89 | ($0.13) | | Diluted EPS | $0.35 | $0.04 | $0.87 | ($0.13) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show operating activities provided **$2.73 million**, leading to an **$822k** increase in cash and equivalents by period end Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Dec 31, 2021 | Nine Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,728,586 | $372,863 | | Net cash used in investing activities | ($1,021,849) | ($818,597) | | Net cash (used in) provided by financing activities | ($884,360) | $452,369 | | **Net increase in cash and cash equivalents** | **$822,377** | **$6,635** | | **Cash and cash equivalents at end of period** | **$880,190** | **$41,016** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail oil and gas operations, accounting policies, zero long-term debt, no derivatives, and recent mineral interest acquisitions - The company's oil and gas interests are centered in West Texas and Southeastern New Mexico, with all interests operated by other parties[17](index=17&type=chunk) - As of December 31, 2021, the company had no derivative contracts. It previously used crude oil put options which expired in 2020[24](index=24&type=chunk) - The company had no balance outstanding on its line of credit as of December 31, 2021, having made net repayments of **$1,180,000** during the first nine months of the fiscal year[41](index=41&type=chunk) - In January 2022, the company invested an additional **$25,000** in a limited liability company focused on mineral interests in Ohio. In February 2022, it agreed to purchase overriding royalty interests in Texas for **$567,000**[53](index=53&type=chunk)[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant financial improvement from higher oil/gas prices and production, debt repayment, and future drilling plans [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with working capital at **$1.44 million** and operating cash flow at **$2.73 million**, supporting debt repayment Cash Flow Changes (Nine Months Ended Dec 31) | Activity | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,728,586 | $372,863 | 632% | | Net cash used in investing activities | ($1,021,849) | ($818,597) | 25% | | Net cash (used in) provided by financing activities | ($884,360) | $452,369 | (295)% | - Working capital increased by **$824,718** to **$1,443,678** at December 31, 2021, compared to March 31, 2021[62](index=62&type=chunk) [Oil and Natural Gas Property Development](index=17&type=section&id=Oil%20and%20Natural%20Gas%20Property%20Development) The company plans to participate in 43 horizontal wells in the Delaware Basin for **$1.2 million** in fiscal 2022 - The company plans to participate in **43** horizontal wells in the Delaware Basin during fiscal 2022 at an estimated cost of approximately **$1,200,000**[68](index=68&type=chunk) - The company participated in multiple drilling and completion projects in the Delaware Basin, including wells in the Wolfcamp, Bone Spring, and Lower Wolfcamp Shale formations[69](index=69&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Operating results show a dramatic improvement with **159%** revenue growth to **$4.37 million** and **$1.86 million** net income Q3 FY2022 vs Q3 FY2021 Sales Performance | Metric | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | **Oil** | | | | | Revenue | $1,073,078 | $520,261 | 106.3% | | Volume (bbls) | 14,142 | 13,004 | 8.8% | | Average Price (per bbl) | $75.88 | $40.01 | 89.7% | | **Gas** | | | | | Revenue | $500,906 | $171,982 | 191.3% | | Volume (mcf) | 91,534 | 82,688 | 10.7% | | Average Price (per mcf) | $5.47 | $2.08 | 163.0% | Nine Months Ended Dec 31 Sales Performance | Metric | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | **Oil** | | | | | Revenue | $3,193,315 | $1,307,588 | 144.2% | | Volume (bbls) | 45,857 | 37,681 | 21.7% | | Average Price (per bbl) | $69.64 | $34.70 | 100.7% | | **Gas** | | | | | Revenue | $1,177,405 | $378,798 | 210.8% | | Volume (mcf) | 274,204 | 251,094 | 9.2% | | Average Price (per mcf) | $4.29 | $1.51 | 184.1% | - General and administrative expenses for the nine months increased **25%** to **$794,961** from **$634,526**, primarily due to higher bonuses, director's fees, and stock option compensation expense[95](index=95&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include commodity price volatility, with a **$10/bbl** oil price change impacting pretax income by **$458k** - The most significant market risk is energy price volatility. WTI crude prices ranged from **$43.60** to **$80.63** per barrel in the last twelve months[100](index=100&type=chunk)[101](index=101&type=chunk) - A **$10/bbl** change in oil price would alter nine-month pretax income by **$458,570**[102](index=102&type=chunk) - A **$1/mcf** change in gas price would alter nine-month pretax income by **$274,204**[102](index=102&type=chunk) - The company has significant credit risk concentration, with one purchaser representing **71%** (**$530,696**) of total oil and gas receivables as of December 31, 2021[99](index=99&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[103](index=103&type=chunk) - No material changes to internal control over financial reporting occurred during the nine months ended December 31, 2021[104](index=104&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any material legal or governmental proceedings against its operations or financial condition - The company is not aware of any material legal or governmental proceedings against it[106](index=106&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the 2021 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2021 Annual Report on Form 10-K[107](index=107&type=chunk) [Exhibits](index=21&type=section&id=Item%206.%20Exhibits) Exhibits include CEO and CFO certifications and Inline XBRL data files as required by regulations - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents[108](index=108&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-31785 MEXCO ENERGY CORPORATION (Exact name of registrant as specified in its charter) Colorado 84-0627918 (State or other jurisdiction of ( ...

Financial Performance - For the quarter ended June 30, 2021, net income was $395,006 compared to a net loss of $299,670 for the same quarter in 2020, primarily due to increased operating revenues from higher oil and gas prices and production [75]. - Revenue from oil and gas sales was $1,255,565 for the quarter ended June 30, 2021, a 245% increase from $364,179 for the same quarter in 2020 [76]. - Cash flow provided by operating activities was $666,054 for the three months ended June 30, 2021, a 902% increase from $66,472 for the same period in 2020 [59]. Oil and Gas Revenue - Oil revenue was $987,103 for the quarter ended June 30, 2021, a 249.6% increase from $282,370 in the same quarter of 2020, with an average price per barrel of $63.94, up 161.2% from $24.48 [76]. - Gas revenue was $268,462 for the quarter ended June 30, 2021, a 228.2% increase from $81,809 in the same quarter of 2020, with an average price per mcf of $2.98, up 189.3% from $1.03 [76]. Costs and Expenses - Production costs were $276,987 for the three months ended June 30, 2021, a 61% increase from $171,666 for the same period in 2020 [76]. - General and administrative expenses were $308,167 for the three months ended June 30, 2021, a 24% increase from $248,878 for the same period in 2020 [78]. Working Capital and Debt - As of June 30, 2021, the company had working capital of $626,850, an increase of $7,890 from $618,960 at March 31, 2021 [57]. - The company has no off-balance sheet debt or unrecorded obligations as of June 30, 2021 [74]. - As of June 30, 2021, the outstanding loan balance under the credit agreement was $800,000, with a potential annual pretax income change of $8,000 for each 1% change in interest rates [81]. Credit Risk - The largest credit risk associated with a single purchaser was $495,512, representing 74% of total oil and gas receivables, with no significant credit losses reported [82]. - The company has not experienced significant credit losses despite the high concentration of credit risk [82]. Market Conditions - The NYMEX West Texas Intermediate (WTI) crude oil price ranged from $31.75 per barrel in October 2020 to $70.03 per barrel in June 2021, while the Henry Hub natural gas price ranged from $1.33 per MMBtu to $23.86 per MMBtu during the same period [86]. - On June 30, 2021, the WTI crude oil price was $69.45 per barrel, and the Henry Hub natural gas price was $3.79 per MMBtu [86]. - A $10 increase or decrease in average oil price for the quarter ended June 30, 2021, would have resulted in a $154,380 change in pretax income [88]. - A $1 increase or decrease in average gas price for the same quarter would have led to a $90,063 change in pretax income [88]. - Declines in oil and natural gas prices could materially adversely affect the company's financial condition, liquidity, and ability to obtain financing [87]. - Improvements in oil and gas prices can positively impact the company's financial condition and capital resources [88]. - The volatility in oil and natural gas prices is expected to continue, influenced by global demand, supply levels, and geopolitical factors [85]. Future Plans - The company plans to participate in the drilling and completion of 36 horizontal wells at an estimated aggregate cost of approximately $1,250,000 for the fiscal year ending March 31, 2022 [64].

PART I [Business](index=4&type=section&id=Item%201.%20Business) Mexco Energy Corporation is an independent oil and gas company focused on acquisition, exploration, and production in the U.S., primarily in the Permian Basin, with 1.504 MMBOE proved reserves - The company is an independent oil and gas entity engaged in acquisition, exploration, development, and production of crude oil and natural gas in the U.S.[11](index=11&type=chunk) - The majority of the company's activities are centered in the Permian Basin (West Texas and Southeastern New Mexico), which accounts for **80% of its discounted future net cash flows** and **86% of gross revenues**[16](index=16&type=chunk)[26](index=26&type=chunk) - All of the company's oil and gas interests are operated by others; Mexco acquires working, royalty, and mineral interests rather than operating properties itself[16](index=16&type=chunk) - The business environment in fiscal 2021 was challenging due to the COVID-19 pandemic, which reduced energy demand and caused extreme commodity price volatility, but prices recovered to pre-pandemic levels by Q4 FY2021[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) Proved Reserves and Present Value (as of March 31, 2021) | Metric | Value | | :--- | :--- | | Total Estimated Proved Reserves | 1.504 million BOE | | Oil and NGLs Percentage | 49% | | Natural Gas Percentage | 51% | | Estimated Present Value (PV-10) | ~$14 million | [Company Profile and Strategy](index=5&type=section&id=Company%20Profile%20and%20Strategy) Mexco's strategy focuses on acquiring proved oil and gas reserves, primarily working, royalty, and mineral interests, with all properties operated by third parties - The company's primary strategy is to acquire proved reserves, preferably with value in producing wells, behind pipe reserves, and high-quality undeveloped locations[15](index=15&type=chunk) - From 1983 to 2021, Mexco completed approximately **80 acquisitions** of producing oil and gas properties, including royalties, overriding royalties, minerals, and working interests[17](index=17&type=chunk) [Oil and Gas Operations](index=6&type=section&id=Oil%20and%20Gas%20Operations) Mexco's operations are heavily concentrated in the Permian Basin, representing 80% of future net cash flows, with interests in approximately 6,400 producing wells Key Operational Area Contribution (FY2021) | Basin | % of Discounted Future Net Cash Flows | % of Gross Revenues | | :--- | :--- | :--- | | Delaware Basin | 52% | 66% | | Midland Basin | 14% | 14% | | **Total Permian** | **80%** | **86%** | - As of March 31, 2021, the company owned partial interests in approximately **6,400 producing wells** located across 14 U.S. states[31](index=31&type=chunk) Historical Oil and Gas Production | Year | Oil (Bbls) | Gas (Mcf) | | :--- | :--- | :--- | | 2021 | 50,327 | 324,205 | | 2020 | 44,301 | 294,007 | | 2019 | 35,359 | 295,133 | | 2018 | 34,743 | 318,774 | | 2017 | 34,689 | 356,268 | [Major Customers and Competition](index=7&type=section&id=Major%20Customers%20and%20Competition) Mexco operates in a highly competitive oil and gas industry, with significant revenue concentration from one major customer, though a ready market mitigates risk Major Customer Revenue Concentration | Customer | % of Revenues (FY 2021) | % of Revenues (FY 2020) | | :--- | :--- | :--- | | Company A | 66% | 52% | - The company does not believe the loss of any individual customer would have a material adverse effect on its financial position, as a ready market exists for oil and gas production[38](index=38&type=chunk) [Executive Officers and Employees](index=9&type=section&id=Executive%20Officers%20and%20Employees) The company is led by a small team of experienced executive officers and had two full-time and three part-time employees as of March 31, 2021 Executive Officers (as of March 31, 2021) | Name | Age | Position | | :--- | :--- | :--- | | Nicholas C. Taylor | 83 | Chairman and Chief Executive Officer | | Tamala L. McComic | 52 | President, Chief Financial Officer, Treasurer, and Assistant Secretary | | Donna Gail Yanko | 76 | Vice President and Secretary | - As of March 31, 2021, the company had **two full-time and three part-time employees**[53](index=53&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to volatile commodity prices, operational challenges, regulatory compliance, reserve estimates, and common stock matters including dilution and CEO influence [Risks Related to Business and Industry](index=10&type=section&id=Risks%20Related%20to%20Business%20and%20Industry) The company's operations are subject to industry-specific risks including volatile commodity prices, global events, regulations, reserve uncertainty, operational hazards, and limited control as a non-operator - Oil and gas price volatility significantly affects profitability, cash flow, and the ability to fund capital expenditures; lower prices can lead to ceiling test writedowns and reduce economically recoverable reserves[59](index=59&type=chunk)[60](index=60&type=chunk) - The COVID-19 pandemic created significant economic disruption, reducing demand for oil and gas, and while prices recovered, the continued spread of the virus remains a risk[63](index=63&type=chunk) - Approximately **32% of the company's total estimated net proved reserves** at March 31, 2021, were undeveloped, and their recovery requires significant capital expenditures and successful drilling[70](index=70&type=chunk) - As a non-operator for all its properties, the company has limited control over operating procedures, expenditures, and future development, which could reduce production and revenues[81](index=81&type=chunk) - The company is dependent on its key personnel, particularly CEO Nicholas C. Taylor, who beneficially owns approximately **46% of the common stock** and has significant influence over business strategy and operations[92](index=92&type=chunk)[93](index=93&type=chunk) [Risks Related to Common Stock](index=17&type=section&id=Risks%20Related%20to%20Common%20Stock) Ownership of Mexco's common stock carries risks including potential dilution, absence of dividends, significant influence by executive officers, and historical price volatility - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future, intending to retain all future earnings to fund business development[96](index=96&type=chunk) - As of March 31, 2021, executive officers and directors beneficially owned approximately **51% of the common stock**, enabling them to significantly influence all matters requiring stockholder approval[98](index=98&type=chunk) - The market price of the company's common stock has been and could continue to be volatile due to factors like commodity prices, political conditions, and limited trading volume[99](index=99&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[102](index=102&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) As of March 31, 2021, Mexco's properties included interests in approximately 6,400 gross wells and 586,000 gross acres, with proved reserves estimated at 1.504 MMBOE, a decrease from the prior year - As of March 31, 2021, the company had interests in approximately **6,400 gross (20 net) oil and gas wells** and owned interests in approximately **586,000 gross (3,169 net) acres**[103](index=103&type=chunk) - Downward revisions in fiscal 2021 were primarily due to reserves being written off because of the five-year development limitation, mainly affecting working interests in the Wolfcamp B Zone in Upton and Reagan Counties, Texas[116](index=116&type=chunk) Proved Reserves Summary (as of March 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Net Proved Reserves (BOE) | 1,503,970 | 1,816,195 | | PV-10 Value | $13,758,300 | $21,636,700 | | Standardized Measure | $12,763,000 | $18,976,000 | | Oil Price Used (per Bbl) | $37.42 | $53.23 | | Gas Price Used (per Mcf) | $2.29 | $1.66 | [Drilling Activities and Production](index=20&type=section&id=Drilling%20Activities%20and%20Production) In fiscal 2021, the company participated in drilling 25 gross development wells, with total production increasing to 104,361 BOE from the prior year Drilling Activity (Working Interest) | Well Type | FY 2021 (Gross/Net) | FY 2020 (Gross/Net) | | :--- | :--- | :--- | | Exploratory Wells | 0 / 0 | 0 / 0 | | Development Wells | 25 / 0.13 | 58 / 0.18 | Net Production and Average Prices | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Oil Production (Bbls) | 50,327 | 44,301 | | Avg. Oil Price (per Bbl) | $40.31 | $52.15 | | Gas Production (Mcf) | 324,205 | 294,007 | | Avg. Gas Price (per Mcf) | $2.30 | $1.40 | | Total BOE | 104,361 | 93,302 | [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company is not aware of any material legal or governmental proceedings against it - The company is not aware of any legal or governmental proceedings against it, or contemplated to be brought against it[127](index=127&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[128](index=128&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Mexco's common stock trades on the NYSE American, experienced volatility, has never paid dividends, and authorized a share repurchase program with no shares bought in fiscal 2021 - The company's common stock trades on the NYSE American under the symbol "**MXC**"[129](index=129&type=chunk) - The company has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future, as it intends to retain earnings for business operations and development[133](index=133&type=chunk) - In September 2020, the Board authorized a share repurchase program of up to **$250,000**, but no shares were repurchased under this program during the fiscal year ended March 31, 2021[136](index=136&type=chunk)[137](index=137&type=chunk) [Selected Consolidated Financial Data](index=24&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) This item is not applicable to the company - Not applicable[138](index=138&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For fiscal 2021, Mexco reported net income of $155,932, a turnaround from a prior year loss, driven by increased natural gas sales and reduced G&A expenses Financial Performance Summary (FY2021 vs FY2020) | Metric | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net Income (Loss) | $155,932 | ($99,478) | | Total Oil & Gas Sales | $2,773,779 | $2,720,353 | | Cash from Operations | $710,047 | $864,960 | - The increase in net income was primarily due to an **81.6% rise in natural gas revenue**, driven by a **64.3% increase in average price per Mcf**, and a **17% decrease in general and administrative expenses**[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk) - The company participated in the drilling and completion of **22 horizontal wells** in the Delaware Basin during fiscal 2021 at a cost of approximately **$1,030,000**[149](index=149&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company funds operations through cash flow, borrowings, and asset sales; in fiscal 2021, operating cash flow was $710,047, and working capital increased to $618,960 Summary of Cash Flows (For the Years Ended March 31) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $710,047 | $864,960 | | Net cash used in investing activities | ($1,387,624) | ($1,741,565) | | Net cash provided by financing activities | $701,009 | $782,734 | - Working capital increased by **$409,849** during fiscal 2021, reaching **$618,960** as of March 31, 2021[147](index=147&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Mexco's net income improved to $155,932 in fiscal 2021, driven by increased natural gas sales and reduced operating expenses, despite a decline in average oil prices Oil and Gas Sales Breakdown (FY2021 vs FY2020) | Category | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | **Oil Revenue** | **$2,028,792** | **$2,310,127** | **(12.1)%** | | Oil Volume (bbls) | 50,327 | 44,301 | 13.6% | | Avg. Oil Price (per bbl) | $40.31 | $52.15 | (22.7)% | | **Gas Revenue** | **$744,987** | **$410,226** | **81.6%** | | Gas Volume (mcf) | 324,205 | 294,007 | 10.3% | | Avg. Gas Price (per mcf) | $2.30 | $1.40 | 64.3% | - Production costs decreased by **5%** in fiscal 2021 due to wells being shut-in during May 2020 and operator cost-cutting measures[165](index=165&type=chunk) - General and administrative expenses decreased by **17%** in fiscal 2021, primarily due to lower salaries, contract services, and professional fees[167](index=167&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on critical accounting policies, primarily the full cost method for oil and gas properties, requiring a quarterly ceiling test for impairment, and the estimation of proved reserves - The company uses the full cost method of accounting, capitalizing all costs associated with property acquisition, exploration, and development[174](index=174&type=chunk) - A quarterly ceiling test is required under the full cost method, which limits the book value of oil and gas properties to the after-tax present value of future net cash flows from proved reserves; exceeding this limit results in a non-cash impairment charge[177](index=177&type=chunk) - Estimates of proved reserves are critical as they materially impact DD&A expense and the ceiling test; these estimates are inherently uncertain and depend on numerous assumptions[179](index=179&type=chunk)[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks stem from volatile commodity prices and interest rates, with significant exposure to energy price fluctuations and credit risk concentration from a major customer - The most significant market risk is the pricing of crude oil and natural gas production, which is highly volatile and unpredictable[199](index=199&type=chunk) - A **+/- $10 per barrel** change in the average oil price for fiscal 2021 would have changed oil revenue by **$503,270**; a **+/- $1 per Mcf** change in the average gas price would have changed natural gas revenue by **$324,205**[204](index=204&type=chunk) - At March 31, 2021, the company had a **$1,180,000 loan balance** with a variable interest rate; a one percentage point change in the rate would alter annual pretax income by **$11,800**[197](index=197&type=chunk) - The company has credit risk concentration, with its largest purchaser accounting for **71% of total oil and gas receivables** as of March 31, 2021[198](index=198&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the company's consolidated financial statements and supplementary data located on pages F1 through F24 - The information required by this item appears on pages **F1 through F24** of the report[205](index=205&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=32&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[206](index=206&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's internal control over financial reporting and disclosure controls and procedures were effective as of March 31, 2021 - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2021[208](index=208&type=chunk) - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[209](index=209&type=chunk) [Other Information](index=33&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[211](index=211&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=33&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders to be held September 9, 2021[211](index=211&type=chunk) [Executive Compensation](index=33&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement under the caption "Executive Compensation"[213](index=213&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=33&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Employee Incentive Stock Option Plans"[214](index=214&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=34&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement under the captions "Certain Relationships and Related Transactions" and "Meetings and Committees of the Board of Directors"[215](index=215&type=chunk) [Principal Accounting Fees and Services](index=34&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement under the caption "Audit Fees and Services"[216](index=216&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=34&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K - A list of consolidated financial statements is provided in the "Index to Consolidated Financial Statements" on page **F-1**[217](index=217&type=chunk) - A list of exhibits filed with the Form 10-K is provided in the "Index to Exhibits" on page **F-25**[218](index=218&type=chunk) Financial Statements and Notes [Consolidated Financial Statements](index=43&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets increased to $10.83 million, net income of $155,932, and total stockholders' equity rose to $8.82 million in fiscal 2021 Key Financial Metrics (as of March 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Assets | $10,830,687 | $10,070,509 | | Total Liabilities | $2,007,280 | $1,706,147 | | Total Stockholders' Equity | $8,823,407 | $8,364,362 | | Net Income (Loss) | $155,932 | ($99,478) | | Diluted EPS | $0.08 | ($0.05) | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including the full cost method and ceiling test, long-term debt, deferred tax assets, and unaudited oil and gas reserve data - The company accounts for its oil and gas properties using the full cost method, capitalizing all costs of acquisition, exploration, and development[290](index=290&type=chunk) - As of March 31, 2021, the company had **$1,180,000 outstanding** on its credit facility, which matures in March 2023[329](index=329&type=chunk)[330](index=330&type=chunk) - The company has a net deferred tax asset of **$1,258,401** as of March 31, 2021, but has recorded a full valuation allowance against it, believing it is more likely than not that the asset will not be realized[342](index=342&type=chunk)[346](index=346&type=chunk) - In May 2020, the company received a PPP loan of approximately **$68,600**, which was fully forgiven in November 2020[370](index=370&type=chunk)[371](index=371&type=chunk) [Note 16. Oil and Gas Reserve Data (Unaudited)](index=59&type=section&id=Note%2016.%20Oil%20and%20Gas%20Reserve%20Data%20%28Unaudited%29) This note provides unaudited data on proved oil and gas reserves, which decreased in fiscal 2021 due to downward revisions, with PUDs at 484 MBOE Changes in Proved Reserves (FY2021) | Category | Oil (Bbls) | Natural Gas (Mcf) | | :--- | :--- | :--- | | **As of March 31, 2020** | **1,008,000** | **4,850,000** | | Revision of previous estimates | (292,000) | (200,000) | | Extensions and discoveries | 92,000 | 283,000 | | Sales of minerals in place | (20,000) | (14,000) | | Production | (50,000) | (324,000) | | **As of March 31, 2021** | **738,000** | **4,595,000** | Standardized Measure of Discounted Future Net Cash Flows | Date | Value | | :--- | :--- | | March 31, 2021 | $12,763,000 | | March 31, 2020 | $18,976,000 | - At March 31, 2021, proved undeveloped reserves (PUDs) were **484 MBOE**, accounting for **32% of total estimated proved reserves**[376](index=376&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-31785 MEXCO ENERGY CORPORATION (Exact name of registrant as specified in its charter) Colorado 84-0627918 (State or other jurisdiction o ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Mexco Energy Corporation reported a net loss of $341,640 for the six months ended September 30, 2020, with total assets increasing to $10.21 million and liabilities growing to $2.15 million [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $10.21 million, liabilities rose to $2.15 million due to debt and a PPP loan, and stockholders' equity decreased to $8.06 million Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2020 ($) | Mar 31, 2020 ($) | | :--- | :--- | :--- | | **Total Current Assets** | $407,943 | $369,266 | | **Property and equipment, net** | $9,573,669 | $9,472,913 | | **Total Assets** | **$10,209,769** | **$10,070,509** | | **Total Current Liabilities** | $167,200 | $182,481 | | **Long-term debt** | $1,143,686 | $757,423 | | **PPP loan payable** | $68,574 | $- | | **Total Liabilities** | **$2,149,664** | **$1,706,147** | | **Total Stockholders' Equity** | **$8,060,105** | **$8,364,362** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of $41,970 for Q2 2020, while the six-month net loss widened to $341,640 due to decreased operating revenues Quarterly and Six-Month Operating Results (Unaudited) | Metric | Q2 2020 ($) | Q2 2019 ($) | Six Months 2020 ($) | Six Months 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | **Total Operating Revenues** | $636,042 | $625,884 | $1,006,498 | $1,325,475 | | **Operating Loss** | $(16,806) | $(74,771) | $(298,186) | $(122,621) | | **Net Loss** | **$(41,970)** | **$(82,787)** | **$(341,640)** | **$(136,973)** | | **Loss Per Share (Basic)** | $(0.02) | $(0.04) | $(0.17) | $(0.07) | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased from $8.36 million to $8.06 million, primarily due to a net loss, partially offset by stock-based compensation and option exercises Changes in Stockholders' Equity (Six Months Ended Sep 30, 2020) | Description | Amount ($) | | :--- | :--- | | Balance at April 1, 2020 | $8,364,362 | | Net loss | $(341,640) | | Issuance of stock through options exercised | $9,435 | | Stock based compensation | $27,948 | | **Balance at September 30, 2020** | **$8,060,105** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to $164,237, investing activities used $593,949, and financing provided $458,009, resulting in a net cash increase of $28,297 Cash Flow Summary (Six Months Ended Sep 30) | Cash Flow Activity | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $164,237 | $342,938 | | Net cash used in investing activities | $(593,949) | $(915,691) | | Net cash provided by financing activities | $458,009 | $515,000 | | **Net increase (decrease) in cash** | **$28,297** | **$(57,753)** | | **Cash at end of period** | **$62,678** | **$70,499** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail oil and gas operations, COVID-19 impact on energy prices, and key accounting policies including debt, leases, and derivatives - The company explores, develops, and produces oil and natural gas primarily in West Texas and Southeastern New Mexico, with all interests operated by others[17](index=17&type=chunk) - The COVID-19 pandemic has significantly reduced oil and natural gas demand, adversely impacting the company's operations and financial performance[18](index=18&type=chunk) - The credit facility with West Texas National Bank was increased to **$2.5 million** and extended to March 28, 2023, with an outstanding balance of **$1.175 million** as of September 30, 2020[31](index=31&type=chunk)[37](index=37&type=chunk) - The company incurred a realized loss of **$19,200** from crude oil put option contracts that expired in July and August 2020[58](index=58&type=chunk)[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 52% decrease in cash flow from operations, a widened net loss of $341,640, and plans for drilling 20 horizontal wells [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is funded by operations, borrowings, and asset sales; cash flow from operations decreased by 52% to $164,237 due to lower oil prices - Cash flow from operations for the first six months of fiscal 2021 decreased by **52%** to **$164,237**, primarily due to lower crude oil and natural gas prices[80](index=80&type=chunk) - The company plans to participate in drilling 20 horizontal wells at an estimated cost of approximately **$1.2 million** for fiscal year 2021[82](index=82&type=chunk) - The company received a Paycheck Protection Program (PPP) loan of approximately **$68,600** in May 2020 to maintain payroll and cover overhead[91](index=91&type=chunk) [Results of Operations – Three Months Ended September 30, 2020](index=18&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20September%2030%2C%202020) Net loss for Q2 fiscal 2021 improved to $41,970 due to increased oil and gas sales volumes offsetting lower oil prices, and a 25% decrease in G&A expenses Q2 2021 vs Q2 2020 Oil and Gas Sales | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | **Oil Revenue ($)** | $504,957 | $531,086 | (4.9)% | | Oil Volume (barrels) | 13,143 | 10,094 | 30.2% | | Avg. Oil Price ($/barrel) | $38.42 | $52.61 | (27.0)% | | **Gas Revenue ($)** | $125,007 | $94,664 | 32.1% | | Gas Volume (Mcf) | 88,890 | 72,686 | 22.3% | | Avg. Gas Price ($/Mcf) | $1.41 | $1.30 | 8.5% | - General and administrative expenses decreased by **25%** to **$192,360**, driven by lower salaries, legal fees, and insurance[99](index=99&type=chunk) [Results of Operations – Six Months Ended September 30, 2020](index=19&type=section&id=Results%20of%20Operations%20%E2%80%93%20Six%20Months%20Ended%20September%2030%2C%202020) The six-month net loss widened to $341,640 due to a 25% decrease in oil and gas sales revenue, primarily from a 41% drop in average oil prices Six Months 2021 vs 2020 Oil and Gas Sales | Metric | Six Months 2021 | Six Months 2020 | % Change | | :--- | :--- | :--- | :--- | | **Oil Revenue ($)** | $787,327 | $1,119,522 | (29.7)% | | Oil Volume (barrels) | 24,677 | 20,703 | 19.2% | | Avg. Oil Price ($/barrel) | $31.91 | $54.08 | (41.0)% | | **Gas Revenue ($)** | $206,816 | $197,922 | 4.5% | | Gas Volume (Mcf) | 168,406 | 144,533 | 16.5% | | Avg. Gas Price ($/Mcf) | $1.23 | $1.37 | (10.2)% | - Production costs decreased by **13%** due to lower production taxes and operator cost-cutting measures amid depressed commodity prices[103](index=103&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces significant market risks from commodity price volatility and interest rate changes, with a concentrated credit risk from a single purchaser - Energy price risk is significant; a **$10 per barrel** change in oil price would alter pretax income by **$246,770** for the first six months of fiscal 2021[111](index=111&type=chunk)[115](index=115&type=chunk) - A **$1 per Mcf** change in average gas price would alter pretax income by **$168,406** for the first six months of fiscal 2021[115](index=115&type=chunk) - As of September 30, 2020, credit risk is concentrated, with one purchaser accounting for **$212,549**, or **66%**, of total oil and gas receivables[110](index=110&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as of September 30, 2020, as concluded by principal executive and financial officers[116](index=116&type=chunk) - No material changes in internal control over financial reporting occurred during the six months ended September 30, 2020[117](index=117&type=chunk) [PART II. OTHER INFORMATION](index=21&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal or governmental proceedings - The company is not currently involved in any material litigation or claims arising from its operations[119](index=119&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Form 10-K for the fiscal year 2020[120](index=120&type=chunk) [Exhibits](index=21&type=section&id=Item%206.%20Exhibits) The report includes required certifications from the Chief Executive Officer and Chief Financial Officer - The exhibits filed with this report include CEO and CFO certifications pursuant to securities laws (31.1, 31.2, 32.1)[121](index=121&type=chunk)

Financial Performance - For the first three months of fiscal 2021, cash flow from operations was $66,472, a decrease of 64% compared to the same period in fiscal 2020, primarily due to a 56% decrease in crude oil price and a 29% decrease in natural gas price [73]. - Revenue from oil and gas sales was $364,179 for the quarter ended June 30, 2020, a 47% decrease from $691,694 for the quarter ended June 30, 2019, primarily due to a decrease in oil and gas prices [86]. - The company reported a net loss of $299,670 for the quarter ended June 30, 2020, compared to a net loss of $54,186 for the same quarter in 2019 [85]. - General and administrative expenses were $248,878 for the three months ended June 30, 2020, a 20% decrease from $311,061 for the same period in 2019 [89]. - Working capital decreased to $102,065 as of June 30, 2020, from $186,785 at March 31, 2020, a decrease of $84,720 [74]. Oil and Gas Prices - The average price per barrel of oil decreased by 55.9% to $24.48 in 2020 from $55.47 in 2019, while the average price per MMBtu of natural gas decreased by 28.5% to $1.03 from $1.44 [87]. - As of June 30, 2020, the WTI posted price for crude oil was $35.25 per bbl, with average prices of $14.68, $24.67, and $34.35 per bbl for April, May, and June 2020 respectively [99]. - The Henry Hub posted price for natural gas on June 30, 2020 was $1.67 per MMBtu, with average prices of $1.74, $1.75, and $1.63 per MMBtu for April, May, and June 2020 respectively [99]. - A $10 increase or decrease in average oil price per barrel for the quarter ended June 30, 2020 would result in a pretax income change of $115,340 [101]. - A $1 increase or decrease in average gas price per mcf for the quarter ended June 30, 2020 would result in a pretax income change of $79,516 [101]. Operational Plans and Constraints - The company plans to participate in the drilling and completion of approximately 20 horizontal wells at an estimated aggregate cost of $950,000 for the fiscal year ending March 31, 2021 [75]. - The company is unable to predict the duration of temporary pipeline capacity constraints in the Permian Basin affecting natural gas prices [98]. Impact of Price Changes - Declines in oil and natural gas prices can materially adversely affect the company's financial condition, liquidity, and operating results [100]. - Improvements in oil and gas prices can have a favorable impact on the company's financial condition and capital resources [101]. - Changes in oil and gas prices impact estimated future net revenue and the estimated quantity of proved reserves [100]. - A noncash write-down of oil and gas properties may be required under full cost accounting rules if prices decline significantly [100]. - Lower prices may reduce the amount of crude oil and natural gas that can be produced economically, affecting reserve quantities [100]. Production and Financial Support - The company received approximately $68,574 from the Paycheck Protection Program to maintain payroll and cover overhead costs [82]. - The company has an outstanding loan balance of $930,000 under its credit agreement, which bears interest at a floating rate [93]. - The company’s working interest in completed wells currently producing is 0.48% for 4 wells and 0.006% for 3 wells, with production rates of 4,324 and 2,905 barrels of oil equivalent per day respectively [76].

Oil and Gas Production - As of March 31, 2020, oil constituted approximately 55% of the company's total proved reserves and approximately 84% of its revenues for fiscal 2020[22]. - The company's oil production for fiscal 2020 was 44,301 barrels, an increase from 35,359 barrels in 2019, representing a growth of approximately 25.5%[31]. - Approximately 27% of the company's revenues for fiscal 2020 came from oil and gas royalty interests[22]. Basin Contributions - The Delaware Basin properties accounted for approximately 40% of the company's discounted future net cash flows from proved reserves and 54% of its gross revenues for fiscal 2020[24]. - The Midland Basin properties accounted for approximately 41% of the company's discounted future net cash flows from proved reserves and 22% of its gross revenues for fiscal 2020[26]. - The Permian Basin accounts for 92% of the company's discounted future net cash flows from proved reserves and 78% of its gross revenues[23]. Financial Performance and Risks - Major customers accounted for 52% of revenues in fiscal 2020, up from 42% in 2019, indicating a significant reliance on key customers[36]. - The company had an outstanding loan balance of $795,000 under its credit agreement as of March 31, 2020, with interest rates tied to the prime rate[191]. - As of March 31, 2019, the largest credit risk associated with a single purchaser was $170,418, representing 63% of total oil and gas receivables[192]. - The company has not experienced any significant credit losses related to its receivables[192]. Price Volatility - The NYMEX West Texas Intermediate (WTI) crude oil price on March 31, 2020, was $16.75 per barrel, with averages of $14.68 and $24.67 per barrel for April and May 2020, respectively[197]. - The Henry Hub Spot Market Price for natural gas on March 31, 2020, was $1.71 per MMBtu, averaging $1.74 and $1.75 per MMBtu for April and May 2020, respectively[197]. - A $5 increase or decrease in average oil price for fiscal 2020 would have changed oil revenue by $221,505[199]. - A $1 increase or decrease in average gas price for fiscal 2020 would have changed natural gas revenue by $294,007[199]. - Oil and natural gas prices are expected to remain volatile due to various factors affecting supply and demand[195]. - Temporary pipeline capacity constraints in the Permian Basin have adversely affected natural gas prices[196]. - Declines in oil and natural gas prices can materially adversely affect the company's financial condition and liquidity[198]. - Improvements in oil and gas prices can have a favorable impact on the company's financial condition and results of operations[199]. Capital Expenditures - The company did not incur any material capital expenditures for remediation or pollution control activities for the year ended March 31, 2020[40]. Drilling Activities - The company has 13 drilled but uncompleted wells in the Delaware Basin with an aggregate drilling cost of approximately $200,000 and anticipated completion costs of approximately $300,000[25].

Financial Performance - For the first nine months of fiscal 2020, cash flow from operations was $543,584, a 34% decrease compared to the same period in fiscal 2019, primarily due to a 43% decrease in natural gas prices [58]. - Revenue from oil and gas sales for the third quarter of fiscal 2020 was $766,223, a 20% increase from $640,143 for the same period in fiscal 2019, driven by increased production volumes and oil prices [71]. - For the nine months ended December 31, 2019, revenue from oil and gas sales was $2,083,667, a 0.3% increase from $2,076,742 for the same period in fiscal 2019 [78]. - Production costs for the third quarter of fiscal 2020 were $249,921, an 18% increase from $211,788 for the same period in fiscal 2019 [72]. - General and administrative expenses for the nine months ended December 31, 2019, were $805,701, a 13% increase from $710,194 for the same period in fiscal 2018 [81]. - Interest expense for the nine months ended December 31, 2019, was $25,054, a 37% increase from $18,318 for the same period in fiscal 2018 [82]. - The average price per barrel of oil for the nine months ended December 31, 2019, was $54.73, a 2.3% decrease from $56.04 for the same period in fiscal 2018 [79]. - As of December 31, 2019, the company had working capital of $324,391, a decrease of $71,504 compared to $395,895 at March 31, 2019 [59]. Operational Plans - The company plans to participate in the drilling and completion of approximately 50 horizontal wells at an estimated aggregate cost of $1,500,000 for the fiscal year ending March 31, 2020 [60]. Market Risks - Oil and natural gas prices are highly volatile, significantly impacting the company's financial condition and operations [86]. - Price fluctuations are influenced by global demand, supply levels, production quotas, weather conditions, and political and economic factors in oil-producing countries [88]. - Declines in oil and natural gas prices can adversely affect financial condition, liquidity, and cash flow available for capital expenditures [89]. - A noncash write-down of oil and gas properties may be required under full cost accounting rules if prices decline significantly [89]. - An increase or decrease of $10 per barrel in average oil price could change pretax income or loss by $322,060 for the first nine months of fiscal 2020 [90]. - An increase or decrease of $1 per mcf in average gas price could change pretax income or loss by $221,116 for the first nine months of fiscal 2020 [90]. Credit and Debt - The largest credit risk associated with any single purchaser was $220,707, representing 56% of total oil and gas receivables as of December 31, 2019 [85]. - The company has no off-balance sheet debt or unrecorded obligations as of December 31, 2019 [68]. Infrastructure Developments - A new 42-inch natural gas pipeline began operations in September 2019, capable of transporting 2 Bcf per day to the Gulf Coast, alleviating previous capacity constraints [87].