Mexco Energy (MXC) 10-Q 2025 Q3 Quarterly report

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 December 31, 2024

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	(IRS Employer
incorporation or organization)	Identification Number)

415 West Wall Street, Suite 475
Midland, Texas	79701
(Address of principal executive offices)	(Zip code)

(432) 682-1119

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.50 per share	MXC	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☐	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares outstanding of the registrant’s common stock, par value $.50 per share, as of February 7, 2025 was 2,046,000.

MEXCO ENERGY CORPORATION AND SUBSIDIARIES

Table of Contents

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of December 31, 2024 (Unaudited) and March 31, 2024	3
		Consolidated Statements of Operations (Unaudited) for the three months and nine months ended December 31, 2024 and December 31, 2023	4
		Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and nine months ended December 31, 2024 and December 31, 2023	5
		Consolidated Statements of Cash Flows (Unaudited) for the nine months ended December 31, 2024 and December 31, 2023	6
		Notes to Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
	Item 4.	Controls and Procedures	18
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	19
	Item 1A.	Risk Factors	19
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
	Item 6.	Exhibits	19
SIGNATURES			20
CERTIFICATIONS			19

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2024			2024
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	910,005		$	2,473,484
Accounts receivable:
Oil and natural gas sales		1,037,754			1,001,709
Trade		48,759			9,186
Prepaid costs and expenses		26,050			56,193
Prepaid drilling		29,085			148,748
Total current assets		2,051,653			3,689,320
Property and equipment, at cost
Oil and gas properties, using the full cost method		51,263,675			48,304,585
Other		121,926			121,926
Accumulated depreciation, depletion and amortization		(35,945,246	)		(34,184,837	)
Property and equipment, net		15,440,355			14,241,674
Investments – cost basis		1,900,000			1,100,000
Operating lease, right-of-use asset		138,577			19,263
Other noncurrent assets		5,373			8,597
Total assets	$	19,535,958		$	19,058,854
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	220,550		$	221,603
Income tax payable		312,036			189,254
Operating lease liability, current		49,872			19,263
Total current liabilities		582,458			430,120
Long-term liabilities
Operating lease liability, long-term		88,705			-
Asset retirement obligations		682,061			688,808
Deferred income tax liabilities		155,975			311,661
Total long-term liabilities		926,741			1,000,469
Total liabilities		1,509,199			1,430,589
Commitments and contingencies		-			-
Stockholders’ equity
Preferred stock - $1.00 par value; 10,000,000 shares authorized; none outstanding		-			-
Common stock - $0.50 par value; 40,000,000 shares authorized; 2,239,283 and 2,226,916 shares issued; 2,046,000 and 2,091,399 shares outstanding as of December 31, 2024 and March 31, 2024, respectively		1,119,641			1,113,458
Additional paid-in capital		8,795,013			8,567,856
Retained earnings		9,990,851			9,122,481
Treasury stock, at cost (193,283 and 135,517 shares, respectively)		(1,878,746	)		(1,175,530	)
Total stockholders’ equity		18,026,759			17,628,265
Total liabilities and stockholders’ equity	$	19,535,958		$	19,058,854

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

3

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2024			2023			2024			2023
	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2024			2023			2024			2023
Operating revenue:
Oil sales	$	1,563,663		$	1,387,008		$	4,595,585		$	3,916,492
Natural gas sales		264,741			223,587			616,728			789,903
Other		62,861			45,848			156,014			105,077
Total operating revenues		1,891,265			1,656,443			5,368,327			4,811,472
Operating expenses:
Production		460,241			401,035			1,311,066			1,143,116
Accretion of asset retirement obligation		7,705			7,225			23,229			22,121
Depreciation, depletion, and amortization		636,424			400,337			1,760,409			1,268,703
General and administrative		340,514			335,152			1,042,084			981,664
Total operating expenses		1,444,884			1,143,749			4,136,788			3,415,604
Operating income		446,381			512,694			1,231,539			1,395,868
Other income (expenses):
Interest income		7,315			36,936			50,891			86,995
Interest expense		(2,868	)		(1,075	)		(5,026	)		(3,235	)
Net other income (expense)		4,447			35,861			45,865			83,760
Income before provision for income taxes		450,828			548,555			1,277,404			1,479,628
(Benefit from) provision for income taxes		(18,305	)		202,945			200,034			398,971
Income tax expense (benefit):
Current		257,042			32,959			355,720			79,123
Deferred		(275,347	)		169,986			(155,686	)		319,848
Total income tax (benefit) expense		(18,305	)		202,945			200,034			398,971
Net income	$	469,133		$	345,610		$	1,077,370		$	1,080,657
Income per common share:
Basic:	$	0.23		$	0.16		$	0.52		$	0.51
Diluted:	$	0.22		$	0.16		$	0.51		$	0.50
Weighted average common shares outstanding:
Basic:		2,046,000			2,103,503			2,070,086			2,120,611
Diluted:		2,091,808			2,151,783			2,114,936			2,169,708
Dividends declared per share	$	-		$	-		$	0.10		$	0.10

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

4

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock Par Value		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance at April 1, 2024	$	1,113,458	$	8,567,856	$	9,122,481		$	(1,175,530	)	$	17,628,265
Net income		-		-		291,039			-			291,039
Dividends paid		-		-		(209,000	)		-			(209,000	)
Issuance of stock through options exercised		6,183		71,458		-			-			77,641
Purchase of stock		-		-		-			(188,637	)		(188,637	)
Stock based compensation		-		52,439		-			-			52,439
Balance at June 30, 2024	$	1,119,641	$	8,691,753	$	9,204,520		$	(1,364,167	)	$	17,651,747
Net income		-		-		317,198			-			317,198
Purchase of stock		-		-		-			(514,579	)		(514,579	)
Stock based compensation		-		51,630		-			-			51,630
Balance at September 30, 2024	$	1,119,641	$	8,743,383	$	9,521,718		$	(1,878,746	)	$	17,505,996
Net income		-		-		469,133			-			469,133
Stock based compensation		-		51,630		-			-			51,630
Balance at December 31, 2024	$	1,119,641	$	8,795,013	$	9,990,851		$	(1,878,746	)	$	18,026,759

	Common Stock Par Value		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance at April 1, 2023	$	1,110,708	$	8,321,145		$	7,991,129		$	(590,495	)	$	16,832,487
Net income		-		-			465,614			-			465,614
Dividends paid		-		-			(213,600	)		-			(213,600	)
Issuance of stock through options exercised		250		2,712			-			-			2,962
Stock based compensation		-		54,975			-			-			54,675
Balance at June 30, 2023	$	1,110,958	$	8,378,832		$	8,243,143		$	(590,495	)	$	17,142,438
Net income		-		-			269,433			-			269,433
Prurchase of stock		-		-			-			(325,256	)		(325,256	)
Stock based compensation		-		58,848			-			-			58,848
Balance at September 30, 2023	$	1,110,958	$	8,437,680		$	8,412,576		$	(915,751	)	$	17,145,463
Balance	$	1,110,958	$	8,437,680		$	8,412,576		$	(915,751	)	$	17,145,463
Net income		-		-			345,610			-			345,610
Stock based compensation		-		58,847			-			-			58,847
Purchase of stock		-		-			-			(129,876	)		(129,876	)
Balance at December 31, 2023	$	1,110,958	$	8,496,527		$	8,858,186		$	(1,045,627	)	$	17,420,044
Balance	$	1,110,958	$	8,496,527		$	8,858,186		$	(1,045,627	)	$	17,420,044
SHARE ACTIVITY
Common stock shares, issued:
Balance at April 1, 2024				2,226,916
Issued				12,367
Balance at December 31, 2024				2,239,283
Common stock shares, held in treasury:
Balance at April 1, 2024				(135,517	)
Acquisitions				(57,766	)
Balance at Dec. 31, 2024				(193,283	)
Common stock shares, outstanding at December 31, 2024				2,046,000

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

5

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31,

(Unaudited)

	2024			2023
Cash flows from operating activities:
Net income	$	1,077,370		$	1,080,657
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax (benefit) expense		(155,686	)		319,848
Stock-based compensation		155,699			172,670
Depreciation, depletion and amortization		1,760,409			1,268,703
Accretion of asset retirement obligations		23,229			22,121
Amortization of debt issuance costs		3,224			3,235
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(75,618	)		454,133
(Increase) decrease in right-of-use asset		(119,314	)		42,076
Decrease in prepaid expenses		30,143			36,023
Increase in accounts payable and accrued expenses		15,651			32,042
Settlement of asset retirement obligations		(16,088	)		(14,715	)
Increase in income taxes payable		122,782			-
Decrease (increase) in operating lease liability		119,314			(42,076	)
Net cash provided by operating activities		2,941,115			3,374,717
Cash flows from investing activities:
Additions to oil and gas properties		(3,072,589	)		(1,471,543	)
Investment in limited liability companies at cost		(800,000	)		(200,000	)
Proceeds from sale of oil and gas properties and equipment		202,570			306,513
Net cash used in investing activities		(3,670,019	)		(1,365,030	)
Cash flows from financing activities:
Proceeds from exercise of stock options		77,641			2,962
Debt issuance costs		-			(750	)
Proceeds from long-term debt		650,000			-
Reduction of long-term debt		(650,000	)		-
Dividends paid		(209,000	)		(213,600	)
Acquisition of treasury stock		(703,216	)		(455,132	)
Net cash used in financing activities		(834,575	)		(666,520	)
Net (decrease) increase in cash and cash equivalents		(1,563,479	)		1,343,167
Cash and cash equivalents at beginning of period		2,473,484			2,235,771
Cash and cash equivalents at end of period	$	910,005		$	3,578,938
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,802		$	-
Cash paid for income taxes	$	200,683		$	-
Accrued capital expenditures included in accounts payable	$	4,991		$	15,667
Non-cash investing and financing activities:
Asset retirement obligations	$	3,631		$	2,838

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

6

Mexco Energy Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations

Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”) are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas liquids (“NGLs”). Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico; however, the Company owns producing properties and undeveloped acreage in fifteen states. All of the Company’s oil and gas interests are operated by others.

2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.

Estimates and Assumptions. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.

Interim Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2024, and the results of its operations and cash flows for the interim periods ended December 31, 2024 and 2023. The consolidated financial statements as of December 31, 2024 and for the three and nine month periods ended December 31, 2024 and 2023 are unaudited. The consolidated balance sheet as of March 31, 2024 was derived from the audited balance sheet filed in the Company’s 2024 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

Oil and Natural Gas Properties. The Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all costs (direct and indirect) associated with acquisition, exploration, and development of oil and natural gas properties are capitalized. Costs capitalized include acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling and equipping productive and non-productive wells. Drilling costs include directly related overhead costs. All of the Company’s capitalized costs are subject to amortization.

In addition, capitalized costs less accumulated depletion and related deferred income taxes are not allowed to exceed an amount (the full cost ceiling) equal to the sum of: 1)the present value of estimated future net revenues discounted at ten percent computed in compliance with SEC guidelines; 2)plus the cost of properties not being amortized; 3)plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; 4)less income tax effects related to differences between the book and tax basis of the properties.

No impairments on oil and natural gas properties as a result of the ceiling test were recorded for the three and nine months ended December 31, 2024 and 2023.

Investments. The Company accounts for investments of less than 3% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations.

Segments. Based on the Company’s organizational structure, the Company has one operating segment, which is crude oil and natural gas development, exploration and production. In addition, the Company has a single, company-wide management team that allocates capital resources to maximize profitability and measures financial performance as a single enterprise.

3. Asset Retirement Obligations

The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The fair value of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. The ARO is included in the consolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses.

7

The following table provides a rollforward of the AROs for the first nine months of fiscal 2025:

 Schedule of Rollforward of Asset Retirement Obligations

Carrying amount of asset retirement obligations as of April 1, 2024	$	718,808
Liabilities incurred		3,631
Liabilities settled		(33,607	)
Accretion expense		23,229
Carrying amount of asset retirement obligations as of December 31, 2024		712,061
Less: Current portion		30,000
Non-Current asset retirement obligation	$	682,061

4. Stock-based Compensation

The Company recognized stock-based compensation expense of $51,630 and $58,847 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2024 and 2023, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2024 and 2023 was $155,699 and $172,670, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2024 totals $330,113 which is expected to be recognized over a weighted average of 1.78 years.

During the nine months ended December 31, 2024, no stock options were granted. During the nine months ended December 31, 2023, the Compensation Committee of the Board of Directors approved and the Company granted 32,000 stock options exercisable at $12.68 per share with an estimated fair value of $279,360. These options are exercisable at a price not less than the fair market value of the stock at the date of grant, have an exercise period of ten years and generally vest over four years.

Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted during the nine months ended December 31, 2024 and 2023. All such amounts represent the weighted average amounts.

 Schedule of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binominal Models

	Nine Months Ended
	December 31
	2024		2023
Grant-date fair value		-	$	8.73
Volatility factor		-		56.5	%
Dividend yield		-		-
Risk-free interest rate		-		3.44	%
Expected term (in years)		-		6.25

The following table is a summary of activity of stock options for the nine months ended December 31, 2024:

 Summary of Activity of Stock Options

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Life in Years		Intrinsic Value
Outstanding at April 1, 2024		165,750		$	9.36		6.62	$	103,275
Granted		-			-
Exercised		(12,367	)		6.28
Forfeited or Expired		(2,500	)		-
Outstanding at December 31, 2024		150,883		$	9.52		6.23	$	265,761
Vested at December 31, 2024		105,508		$	7.69		5.55	$	378,561
Exercisable at December 31, 2024		105,508		$	7.69		5.55	$	378,561

During the nine months ended December 31, 2024, stock options covering 12,367 shares were exercised with a total intrinsic value of $92,316. The Company received proceeds of $77,641 from these exercises. During the nine months ended December 31, 2023, stock options covering 500 shares were exercised with a total intrinsic value of $2,416. The Company received proceeds of $2,962 from these exercises.

8

During the nine months ended December 31, 2024, 1,875 unvested stock options and 625 vested stock options were forfeited due to the resignation of an employee. There were no stock options forfeited or expired during the nine months ended December 31, 2023. No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards.

Outstanding options at December 31, 2024 expire between September 2028 and April 2033 and have exercise prices ranging from $3.34 to $18.05.

5. Long Term Debt

On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which originally provided for a credit facility of $1,000,000 with a maturity date of December 28, 2021. The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

On February 28, 2020, the Agreement was amended to increase the credit facility to $2,500,000, extend the maturity date to March 28, 2023 and increase the borrowing base to $1,500,000. On March 28, 2023, the Agreement was amended to extend the maturity date to March 28, 2026.

Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of December 31, 2024, there was $1,500,000 available for borrowing by the Company on the facility.

No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2026. Upon closing the second amendment to the Agreement, the Company paid a loan origination fee of $9,000 plus legal and recording expenses totaling $12,950, which were deferred over the life of the credit facility.

Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter.

In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the special dividend on April 30, 2024 as discussed in Note 10. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.

There was no balance outstanding on the line of credit as of December 31, 2024.

6. Leases

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes 702 square feet of office space shared with and paid by our majority shareholder. In June 2024, the Company agreed to re-extend its lease at a flat (unescalated) rate for another 36 months. The amended lease now expires on July 31, 2027.

The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

9

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 9%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.

The balance sheets classification of lease assets and liabilities was as follows:

 Schedule of Operating Lease Assets and Liabilities

	December 31, 2024
Assets
Operating lease right-of-use asset, beginning balance	$	19,263
Current period amortization		(38,759	)
Lease extension		158,073
Total operating lease right-of-use asset	$	138,577
Liabilities
Operating lease liability, current	$	49,872
Operating lease liability, long term		88,705
Total lease liabilities	$	138,577

Future minimum lease payments as of December 31, 2024 under non-cancellable operating leases are as follows:

 Schedule of Future Minimum Lease Payments

	Lease Obligation
Fiscal Year Ended March 31, 2025	$	15,080
Fiscal Year Ended March 31, 2026		60,320
Fiscal Year Ended March 31, 2027		60,320
Fiscal Year Ended March 31, 2028		20,107
Total lease payments	$	155,827
Less: imputed interest		(17,250	)
Operating lease liability		138,577
Less: operating lease liability, current		(49,872	)
Operating lease liability, long term	$	88,705

Net cash paid for our operating lease for the nine months ended December 31, 2024 and 2023 was $35,116 and $32,001, respectively. Rent expense, less sublease income of $9,430 is included in general and administrative expenses.

7. Income Taxes

The income tax provision consists of the following for the nine months ended December 31, 2024 and 2023:

 Schedule of Income Tax Provision

	2024			2023
	Nine Months Ended
	December 31
	2024			2023
Current income tax expense:
Federal	$	322,708		$	-
State		33,012			79,123
Total current income tax expense		355,720			79,123
Deferred income tax (benefit) expense:
Federal		(94,746	)		319,848
State		(60,940	)		-
Total deferred income tax (benefit) expense		(155,686	)		319,848
Total income tax expense:	$	200,034		$	398,971

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The following table summarizes our income tax expense and effective income tax rate for the nine months ended December 31 follows:

 Schedule of Reconciliation of Provision for Income Taxes

	2024			2023
Income tax expense	$	200,034		$	398,971
Effective income tax rate (1)		16	%		27	%

(1) The federal statutory rate was 21% for nine months ended December 31, 2024 and 2023.

Total income tax expense from continuing operations for the nine months ended December 31, 2024 and 2023 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to state income taxes net of federal benefit and the impact of permanent differences between book and taxable income.

8. Related Party Transactions

Related party transactions for the Company primarily relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the three months ended December 31, 2024 and 2023 was $16,174 and $3,625, respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2024 and 2023 was $21,462 and $21,619, respectively. The principal stockholder pays for his share of the lease amount for the shared office space directly to the lessor. Amounts paid by the principal stockholder directly to the lessor for the three months ending December 31, 2024 and 2023 were $2,544 and $3,893, respectively. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2024 and 2023 were $9,430 and $11,679, respectively.

9. Income Per Common Share

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and nine month periods ended December 31, 2024 and 2023:

 Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share

	2024		2023		2024		2023
	Three Months Ended				Nine Months Ended
	December 31				December 31
	2024		2023		2024		2023
Net income	$	469,133	$	345,610	$	1,077,370	$	1,080,657
Shares outstanding:
Weighted avg. shares outstanding – basic		2,046,000		2,103,503		2,070,086		2,120,611
Effect of assumed exercise of dilutive stock options		45,808		48,280		44,850		49,097
Weighted avg. shares outstanding – dilutive		2,091,808		2,151,783		2,114,936		2,169,708
Income per common share:
Basic	$	0.23	$	0.16	$	0.52	$	0.51
Diluted	$	0.22	$	0.16	$	0.51	$	0.50

For the three and nine months ended December 31, 2024, 60,500 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $15.34 at December 31, 2024. For the three and nine months ended December 31, 2023, 63,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $15.32 at December 31, 2023.

10. Stockholders’ Equity

In April 2024, the Board of Directors authorized the use of up to $1,000,000 to repurchase shares of the Company’s common stock, par value $0.50, for the treasury account. This program does not have an expiration date and may be modified, suspended or terminated at any time by the board of directors. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions. The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow.

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During the nine months ended December 31, 2024, the Company repurchased 57,766 shares for the treasury at an aggregate cost of $703,216. During the nine months ended December 31, 2023, the Company repurchased 37,161 shares for the treasury at an aggregate cost of $455,133.

On April 30, 2024, the Board of Directors declared a regular annual dividend of $0.10 per common share. The Company paid the dividend of $209,000 on June 4, 2024 to the stockholders of record at the close of business on May 21, 2024. On April 10, 2023, the Board of Directors declared a special dividend of $0.10 per common share. The Company paid the dividend of $213,600 on May 15, 2023 to the stockholders of record at the close of business on May 1, 2023. The Company can provide no assurance that dividends will be declared in the future or as to the amount of any future dividend.

Dividends declared by the Board and stock repurchased during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows. Stock repurchases are included as treasury stock in the consolidated balance sheets.

11. Acquisitions

During the nine months ended December 31, 2024, the Company incurred approximately $2,000,000 in acquisition costs to acquire various royalty interests in approximately 700 wells located in Adams, Broomfield and Weld Counties, Colorado; DeSoto Parish, Louisiana; Eddy County, New Mexico; Karnes, Live Oak, Reagan, Reeves and Upton Counties, Texas; Laramie County, Wyoming; and multiple counties in Nebraska, North and South Dakota and Montana.

During the nine months ended December 31, 2023, the Company incurred approximately $490,000 in acquisition costs to acquire various royalty interests in approximately 60 producing wells in Crane, Ector, Howard, Midland, Reeves and Upton Counties, Texas.

12. Subsequent Events

In January 2025, the Company expended approximately $70,000 for the drilling of six horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico.

The Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if any such events must be reported and has determined that there are no other subsequent events to be disclosed.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, references to the “Company”, “Mexco”, “we”, “us” or “our” mean Mexco Energy Corporation and its consolidated subsidiaries.

Cautionary Statements Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding our plans, beliefs or current expectations and may be signified by the words “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “budget”, “plan”, “forecast”, “predict” and other similar expressions. Forward-looking statements appear throughout this Form 10-Q with respect to, among other things: profitability; planned capital expenditures; estimates of oil and gas production; future project dates; estimates of future oil and gas prices; estimates of oil and gas reserves; our future financial condition or results of operations; and our business strategy and other plans and objectives for future operations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement.

While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in the Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

Liquidity and Capital Resources. Historically, we have funded our operations, acquisitions, exploration and development expenditures from cash generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock. Our primary financial resource is our base of oil and gas reserves. We have pledged our producing oil and gas properties to secure our credit facility. We do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.

Our long-term strategy is on increasing profit margins while concentrating on obtaining reserves with low cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of royalties and working interests in non-operated properties in areas with significant development potential.

At December 31, 2024, we had working capital of $1,469,195 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $1,790,005 for the reasons set forth below.

Cash Flows

Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below:

	For the Nine Months Ended December 31,
	2024			2023			Change
Net cash provided by operating activities	$	2,941,115		$	3,374,717		$	(433,602	)
Net cash used in investing activities	$	(3,670,019	)	$	(1,365,030	)	$	2,304,989
Net cash used in financing activities	$	(834,575	)	$	(666,520	)	$	168,055

Cash Flow Provided by Operating Activities. Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset account balances. Cash flow provided by our operating activities for the nine months ended December 31, 2024 was $2,941,115 in comparison to $3,374,717 for the nine months ended December 31, 2023. This decrease of $433,602 in our cash flow operating activities consisted of an increase in our accounts receivable of $529,751; an increase of $106,391 of our accounts payable and accrued expenses and income tax payable; and, a decrease in our net income for the current nine months of $3,287. Variations in cash flow from operating activities may impact our level of exploration and development expenditures.

Our expenditures in operating activities consist primarily of drilling expenses, production expenses and engineering services. Our expenses also consist of employee compensation, accounting, insurance and other general and administrative expenses that we have incurred in order to address normal and necessary business activities of a public company in the crude oil and natural gas production industry.

Cash Flow Used in Investing Activities. Cash flow from investing activities is derived from changes in oil and gas property balances. For the nine months ended December 31, 2024, we had net cash of $3,670,019 used for additions to oil and gas properties compared to $1,365,030 for the nine months ended December 31, 2023.

Cash Flow Provided by Financing Activities. Cash flow from financing activities is derived from our changes in long-term debt and in equity account balances. Net cash flow used in our financing activities was $834,575 for the nine months ended December 31, 2024 compared to cash flow used in our financing activities of $666,520 for the nine months ended December 31, 2023. During the nine months ended December 31, 2024, we expended $209,000 to pay the regular annual dividend and $703,216 to purchase 57,766 shares of our stock for the treasury account and received $77,641 from the exercise of stock options.

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Accordingly, net cash decreased $1,563,479, leaving cash and cash equivalents on hand of $910,005 as of December 31, 2024.

Oil and Natural Gas Property Development

New Participations in Fiscal 2025. The Company currently plans to participate in the drilling and completion of 28 horizontal wells at an estimated cost of approximately $1,500,000 for the fiscal year ending March 31, 2025. Twenty-five of these wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico. The remaining 3 wells are in Grady County, Oklahoma.

During the first nine months of fiscal 2025, Mexco expended approximately $207,000 to participate in the drilling of five horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. In November 2024, these wells were completed with initial average production rates of 1,106 barrels of oil, 2,583 barrels of water and 1,165,000 cubic feet of gas per day, or 1,300 BOE per day.

During the first nine months of fiscal 2025, Mexco expended approximately $293,000 to drill and complete four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. In November 2024, these wells were completed with initial average production rates of 1,089 barrels of oil, 4,716 barrels of water and 3,601,000 cubic feet of gas per day, or 1,689 BOE per day.

In October 2024, the Company expended approximately $74,000 for the drilling of two horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .5%. Subsequently, in January 2025, the Company expended approximately $43,000 to complete these wells.

In November 2024, the Company expended approximately $78,000 for the drilling of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s average working interest in these wells is .5%.

In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000 of which $1,600,000 has been funded as of December 31, 2024. The limited liability company is capitalized at approximately $100 million to purchase mineral interests in the Utica and Marcellus areas in the state of Ohio. To date, this LLC has returned $182,767 or 11% of the total investment.

Completion of Wells Drilled in Fiscal 2024. The Company expended approximately $300,000 for the completion of 19 horizontal wells in which the Company participated during fiscal 2024.

The Company expended approximately $107,000 for the completion costs of two horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .53%. In July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil, 2,009 barrels of water and 2,168,000 cubic feet of gas per day, or 1,763 BOE per day.

Five horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico in which the Company participated during fiscal 2024 were completed in April 2024 with initial average production rates of 732 barrels of oil, 1,481 barrels of water and 657,000 cubic feet of gas per day, or 842 of oil equivalent per day. Mexco’s working interest in these wells is approximately 1.16%.

A horizontal well in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico was completed in May 2024 with the initial production rate of 964 barrels of oil, 2,441 barrels of water and 626,000 cubic feet of gas per day, or 1,068 of oil equivalent per day. Mexco’s working interest in this well is .165%.

The Company expended approximately $207,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .45%. In October 2024, these wells were completed with initial average production rates of 893 barrels of oil, 2,990 barrels of water and 1,161,000 cubic feet of gas per day, or 1,087 BOE per day.

Acquisitions. In April 2024, the Company acquired royalty interests in 21 producing wells operated by Anadarko Petroleum Corporation and Cimarex Energy Company and located in Reeves County, Texas for a purchase price of $158,000.

In August 2024, the Company acquired royalty interests in 6 producing wells operated by Marathon Oil and located in Karnes County, Texas for a purchase price of $50,000. This acquisition was effective August 1, 2024.

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In August 2024, the Company acquired royalty interests in 15 producing wells operated by Anadarko Petroleum Corporation and located in Weld County, Colorado for a purchase price of $118,000; and, royalty interests in approximately 250 producing wells operated by Samson Exploration, EOG Resources and others in Laramie County, Wyoming and Adams and Weld Counties, Colorado for a purchase price of $483,000. All of these acquisitions were effective September 1, 2024.

In September 2024, the Company acquired royalty interests in 20 producing wells operated by Marathon Oil and Murphy Exploration and located in Karnes County, Texas for a purchase price of $90,000 and effective August 1, 2024.

In October 2024, the Company acquired a .3% royalty interest in 15 producing wells operated by Civitas Resources, Inc. and located in Broomfield and Adams Counties, Colorado for a purchase price of $450,000. This acquisition was effective November 1, 2024.

In October 2024, the Company acquired a .5% royalty interest in 3 producing wells operated by Mewbourne Oil Company and located in Eddy County, New Mexico for a purchase price of $260,000. This acquisition was effective November 1, 2024 and includes acreage for further development.

In October 2024, the Company acquired royalty interests in 8 producing wells operated by Marathon Oil and located in Live Oak County, Texas for a purchase price of $20,000; royalty interests in 6 producing wells operated by SWN Production Company, LLC and located in DeSoto Parish, Louisiana for a purchase price of $25,000; royalty interests in 10 producing wells operated by Ovintiv, Inc. and located in Upton County, Texas for a purchase price of $65,000; and, royalty interests in 12 producing wells operated by Pioneer Natural Resources and located in Reagan and Upton Counties, Texas for a purchase price of $65,000. All of these acquisitions were effective November 1, 2024.

Also in October 2024 and effective November 1, 2024, the Company acquired various small royalty interests in over 300 producing wells operated by Petro-Hunt Corporation, Hess Bakken Investments II, LLC, Marathon Oil, WPX Energy and others in multiple counties throughout the states of Nebraska, North Dakota, South Dakota and Montana for a purchase price of $185,000.

Other Projects. We are participating in other projects and are reviewing projects in which we may participate. The cost of such projects would be funded, to the extent possible, from existing cash balances and cash flow from operations. The remainder may be funded through borrowings on the credit facility and, if appropriate, sales of non-core properties.

Sale of Properties. In November 2024, the Company conveyed its working and royalty interests in 13.5 net acres in Ward County, Texas. The Company received $15,000 per acre in the total amount of $202,500. The Company retained an overriding royalty interest equal to the positive difference between 25% and any existing burdens of record as of the effective date. The divestitures of this non-core oil and gas asset did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded the proceeds as sales proceeds, a reduction of its full cost pool, with no gain or loss recognized on the sale.

Pricing. Crude oil and natural gas prices generally remained volatile during the last year. The volatility of the energy markets makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.73 per bbl in September 2024 to a high of $82.89 per bbl in April 2024. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.21 per MMBtu in November 2024 to a high of $3.40 per MMBtu in December 2024.

On December 31, 2024, the WTI posted price for crude oil was $67.70 and the Henry Hub spot price for natural gas was $3.40 per MMBtu. See Results of Operations below for realized prices. Pipeline capacity constraints and maintenance in the Permian Basin area has contributed to a wider difference between the WaHa Hub and the Henry Hub and at times prices were negative.

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Contractual Obligations. We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party. The following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2024:

			Payments due in:
	Total		less than 1 year		1 - 3 years		over 3 years
Contractual obligations:
Leases (1)	$	155,827	$	60,320	$	95,507	$	-

⁽¹⁾ The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a 36-month lease agreement expiring July 31, 2027. Of this total obligation for the remainder of the lease, our majority shareholder will pay $10,175 less than 1 year and $16,110 1-3 years for his portion of the shared office space.

Results of Operations – Three Months Ended December 31, 2024 and 2023. For the quarter ended December 31, 2024, there was net income of $469,133 compared to $345,610 for the quarter ended December 31, 2023 as a result of an increase in operating revenues due to a increase in oil and gas production volumes partially offset by a decrease in oil and gas prices and an increase in operating expenses that is further explained below.

Oil and gas sales. Revenue from oil and gas sales was $1,828,404 for the third quarter of fiscal 2025, a 14% increase from $1,610,595 for the same period of fiscal 2024. This resulted from an increase in oil and natural gas production volumes partially offset by a decrease in oil and natural gas prices. Natural gas prices have been negatively impacted by limited pipeline capacity in the Permian Basin.

	2024		2023		% Difference
Oil:
Revenue	$	1,563,663	$	1,387,008		12.7	%
Volume (bbls)		22,451		17,636		27.3	%
Average Price (per bbl)	$	69.65	$	78.65		(11.4)	%
Gas:
Revenue	$	264,741	$	223,587		18.4	%
Volume (mcf)		149,945		122,794		22.1	%
Average Price (per mcf)	$	1.77	$	1.82		(2.7)	%

Other operating revenues. Other revenues increased to $62,861 for the three months ended December 31, 2024, from $45,848 for the three months ended December 31, 2023. This increase resulted from a settlement in a class action lawsuit from Contango Resources and an increase in income from one of our limited liability company investments.

Interest income. Interest income on corporate funds decreased to $7,315 for the three months ended December 31, 2024, from $36,936 for the three months ended December 31, 2023. This decrease resulted from using the corporate funds for property acquisitions.

Production and exploration. Production costs were $460,241 for the third quarter of fiscal 2025, a 15% increase from $401,035 for the same period of fiscal 2024. This is the result of an increase in production taxes due to an increase in oil revenues and an increase in marketing and other charges due to the current natural gas pricing environment from limited pipeline takeaway capacity in the Permian and an increase in lease operating expenses on new wells in which we own an interest.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $636,424 for the third quarter of fiscal 2025, a 59% increase from $400,337 for the same period of fiscal 2024, primarily due to an increase in the full cost amortization base, an increase in oil and gas production and a decrease in gas reserves partially offset by a increase in oil reserves.

General and administrative expenses. General and administrative expenses were $340,514 for the third quarter of fiscal 2025, a 2% increase from $335,152 for the same period of fiscal 2024. This was primarily due to an increase in contract services.

Income taxes. There was an income tax benefit of $18,305 for the three months ended December 31, 2024 compared to an expense of $202,945 for the three months ended December 31, 2023, primarily due to a decrease in state income taxes and a decrease in the deferred tax provision. The effective tax rate for state and federal taxes combined for the three months ended December 31, 2024 and 2023 was (4%) and 37%, respectively. The decrease in the effective tax rate is primarily the result of state income taxes net of federal benefit, primarily in New Mexico, and the impact of permanent differences between book and taxable income.

Results of Operations – Nine Months Ended December 31, 2024 and 2023. For the nine months ended December 31, 2024, there was a net income of $1,077,370 compared to net income of $1,080,657 for the nine months ended December 31, 2023. This was a result of an increase in operating revenues due to an increase in oil and gas production volumes partially offset by a decrease in oil and gas prices and an increase in operating expenses that is further explained below.

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Oil and gas sales. Revenue from oil and gas sales was $5,212,313 for the nine months ended December 31, 2024, an 11% increase from $4,706,395 for the same period of fiscal 2024. This resulted from a increase in oil and natural gas production partially offset by a decrease in oil and natural gas prices. Natural gas prices have been negatively impacted by pipeline capacity in the Permian Basin.

	2024		2023		% Difference
Oil:
Revenue	$	4,595,585	$	3,916,792		17.3	%
Volume (bbls)		61,685		50,826		21.4	%
Average Price (per bbl)	$	74.50	$	77.06		(3.3)	%
Gas:
Revenue	$	616,728	$	789,903		(21.9)	%
Volume (mcf)		420,236		372,459		12.8	%
Average Price (per mcf)	$	1.47	$	2.12		(30.7)	%

Other operating revenues. Other revenues increased to $156,014 for the nine months ended December 31, 2024, from $105,077 for the nine months ended December 31, 2023. This increase resulted from a settlement in a class action lawsuit from Contango Resources and an increase in income from one of our limited liability company investments.

Interest income. Interest income on corporate funds decreased to $50,891 for the nine months ended December 31, 2024, from $86,995 for the nine months ended December 31, 2023. This decrease resulted from using the corporate funds for property acquisitions and purchase of treasury stock.

Production and exploration. Production costs were $1,311,066 for the nine months ended December 31, 2024, a 15% increase from $1,143,116 for the nine months ended December 31, 2023. This is the result of an increase in production taxes due to an increase in oil revenues and an increase in marketing and other charges due to the current natural gas pricing environment from limited pipeline takeaway capacity in the Permian and an increase in lease operating expenses on new wells in which we own an interest.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $1,760,409 for the nine months ended December 31, 2024, a 39% increase from $1,268,703 for the nine months ended December 31, 2023, primarily due to an increase in the full cost amortization base, an increase in oil and gas production and a decrease in gas reserves partially offset by an increase in oil reserves.

General and administrative expenses. General and administrative expenses were $1,042,084 for the nine months ended December 31, 2024, a 6% increase from $981,664 for the nine months ended December 31, 2023. This was primarily due to an increase in contract and engineering services partially offset by a decrease in salaries and stock option compensation.

Income taxes. Income taxes for the nine months ended December 31, 2024 was $200,034 compared to $398,971 for the nine months ended December 31, 2023, primarily due a decrease in state income taxes and a decrease in the deferred tax provision. The effective tax rate for state and federal taxes combined for the nine months ended December 31, 2024 and 2023 was 16% and 27%, respectively. The decrease in the effective tax rate is primarily the result of state income taxes net of federal benefit, primarily in New Mexico, and the impact of permanent differences between book and taxable income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary sources of market risk for us include fluctuations in commodity prices and interest rates. All of our financial instruments are for purposes other than trading.

Credit Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At December 31, 2024, our largest credit risk associated with any single purchaser was $520,794 or 50% of our total oil and gas receivables. We have not experienced any significant credit losses.

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Energy Price Risk. Our most significant market risk is the pricing applicable to our crude oil and natural gas production. Our financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. Prices for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future.

Pipeline capacity constraints and maintenance in the Permian Basin area has contributed to a wider difference between the WaHa Hub and the Henry Hub and at times prices were negative.

Factors that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability of alternative fuels and overall political and economic conditions in oil producing and consuming countries.

For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.73 per bbl in September 2024 to a high of $82.89 per bbl in April 2024. The Henry Hub Spot Market Price (“Henry Hub”) posted price for natural gas has ranged from a low of $1.21 per MMBtu in November 2024 to a high of $3.40 per MMBtu in December 2024. On December 31, 2024, the WTI posted price for crude oil was $67.70 and the Henry Hub posted price for natural gas was $3.40. See Results of Operations above for the Company’s realized prices during the three and nine months. Subsequently, on January 27, 2025, the WTI posted price for crude oil was $69.15 and the Henry Hub posted price for natural gas was $3.71.

Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves. Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration and development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of time. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance.

Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources. If the average oil price had increased or decreased by ten dollars per barrel for the first nine months of fiscal 2025, our operating revenues would have increased or decreased $616,850. If the average gas price had increased or decreased by one dollar per mcf for the first nine months of fiscal 2025, our operating revenues would have increased or decreased $420,236.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis. At the end of the period covered by this report, our principal executive officer and principal financial officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on such evaluation, such officers concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. No changes in our internal control over financial reporting occurred during the nine months ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. We are not aware of any legal or governmental proceedings against us, or contemplated to be brought against us, under various environmental protection statutes or other regulations to which we are subject.

Item 1A.Risk Factors

There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 2024 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

c. Issuer Purchases of Equity Securities

The following table provides information related to repurchases of our common stock for the treasury account during the nine months ended December 31, 2024:

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
April 1-30, 2024		13,766	$	13.70		13,766	$	811,363
May 1-31, 2024		-		-		-	$	811,363
June 1-30, 2024		-		-		-	$	811,363
July 1-31, 2024		4,557	$	11.78		4,557	$	757,679
August 1-31, 2024		17,743	$	11.95		17,743	$	545,734
September 1-30, 2024		21,700	$	11.47		21,700	$	296,784
October 1-31, 2024		-		-		-	$	296,784
November 1-30, 2024		-		-		-	$	296,784
December 1-31, 2024		-		-		-	$	296,784

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer of Mexco Energy Corporation
31.2	Certification of the Chief Financial Officer of Mexco Energy Corporation
32.1	Certification of the Chief Executive Officer and Chief Financial Officer of Mexco Energy Corporation pursuant to 18 U.S.C. §1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extenstion Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEXCO ENERGY CORPORATION
	(Registrant)
Dated: February 7, 2025	/s/ Nicholas C. Taylor
	Nicholas C. Taylor
	Chairman of the Board and Chief Executive Officer
Dated: February 7, 2025	/s/ Tamala L. McComic
	Tamala L. McComic
	President, Chief Financial Officer, Treasurer and Assistant Secretary

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