What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-10 compared with 2020-11-05 · 391 added, 347 removed, 431 unchanged (63% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30,

Current assets

and cash equivalents

Cash and cash equivalents

Accounts receivable:

Oil and natural

costs and expenses

Oil and natural gas sales

Prepaid costs and expenses

Total current assets

Property and equipment,

Oil and gas properties,

using the full cost method

depreciation, depletion and amortization

Property and equipment, at cost

Oil and gas properties, using the full cost method

Accumulated depreciation, depletion and amortization

(28,806,949 )

(28,109,252 )

Property and equipment,

Property and equipment, net

Investment –

Operating lease,

right-of-use asset

noncurrent assets

Operating lease, right-of-use asset

Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’

Current liabilities

Accounts payable

and accrued expenses

lease liability, current

Accounts payable and accrued expenses

Operating lease liability, current

Total current liabilities

Long-term liabilities

Long-term liabilites

Long-term debt

PPP loan payable

Operating lease

liability, long-term

retirement obligations

long-term liabilities

Operating lease liability, long-term

Asset retirement obligations

Total long-term liabilities

Total liabilities

Commitments and

contingencies

Commitments and contingencies

Stockholders’

5 unchanged sentences

2,118,866 and 2,107,166 shares issued;

2,041,666 and 2,040,166 shares outstanding as of September 30, 2020 and March 31, 2020, respectively

Additional paid-in

Retained (losses)

stock, at cost (67,000 shares)

2,051,866 and 2,040,166 shares outstanding as of December 31, 2020 and March 31, 2020, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost (67,000 shares)

Total stockholders’

liabilities and stockholders’

Total liabilities and stockholders’

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

1 unchanged sentence

STATEMENTS OF OPERATIONS

operating revenues

of asset retirement obligations

Depreciation,

depletion, and amortization

and administrative

Three Months Ended

Nine Months Ended

Operating revenue:

Natural gas sales

Total operating revenues

Operating expenses:

income (expenses):

on derivative instruments

other expense

before income taxes

per common share:

average common shares outstanding:

Accretion of asset retirement obligation

Depreciation, depletion, and amortization

General and administrative

Total operating expenses

Operating income (loss)

Other income (expenses):

Interest income

Interest expense

PPP loan forgiveness

Loss on derivative instruments

Net other income (expense)

Income (loss) before income taxes

Net income (loss)

Income (loss) per common share:

Weighted average common shares outstanding:

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

1 unchanged sentence

STATEMENTS OF CHANGES IN STOCKHOLDERS’

Stock Par Value

Paid-In Capital

Earnings (Losses)

Stockholders’

Common Stock Par Value

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Total Stockholders’

Balance at April 1, 2020

Issuance of stock

through options exercised

based compensation

Balance at September 30, 2020

Stock Par Value

Paid-In Capital

Earnings (Losses)

Stockholders’

Balance at June 30, 2020

Issuance of stock

through options exercised

based compensation

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2020

Common Stock Par Value

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Total Stockholders’

Balance at September 30, 2020

Stock Par Value

Paid-In Capital

Stockholders’

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2020

Common Stock Par Value

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Total Stockholders’

Balance at April 1, 2019

based compensation

Balance at September 30, 2019

Stock Par Value

Paid-In Capital

Stockholders’

Balance at June 30, 2019

based compensation

Stock based compensation

Balance at December 31, 2019

Common Stock Par Value

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Total Stockholders’

Balance at September 30, 2019

Stock based compensation

Balance at December 31, 2019

SHARE ACTIVITY

1 unchanged sentence

Balance at April 1, 2020

Balance at September 30, 2020

Balance at Dec.

Common stock shares, held in treasury:

Balance at April 1, 2020

Balance at September 30, 2020

Common stock shares, outstanding at

September 30, 2020

Balance at Dec.

Common stock shares, outstanding at December 31, 2020

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

1 unchanged sentence

STATEMENTS OF CASH FLOWS

the Six Months Ended September 30,

Cash flows from

operating activities:

the Nine Months Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation

Depreciation,

depletion and amortization

asset retirement obligations

of debt issuance costs

Changes in operating

assets and liabilities:

(Increase) decrease

in accounts receivable

Decrease in right-of-use

Decrease in prepaid

Decrease in other

Increase (decrease)

in accounts payable and accrued expenses

Settlement of

asset retirement obligations

in operating lease liability

Net cash provided

by operating activities

Cash flows from

investing activities:

oil and gas properties

Drilling refunds

Depreciation, depletion and amortization

Accretion of asset retirement obligations

loan forgiveness

Amortization of debt issuance costs

Changes in operating assets and liabilities:

Increase in accounts receivable

Decrease in right-of-use asset

Decrease in prepaid expenses

Decrease in other assets

Decrease in accounts payable and accrued expenses

Settlement of asset retirement obligations

Decrease in operating lease liability

Net cash provided by operating activities

Cash flows from investing activities:

Additions to oil and gas properties

Additions to other property and equipment

Drilling refund

Investment –

Proceeds from

sale of oil and gas properties and equipment

to other property and equipment

Net cash used

in investing activities

Cash flows from

financing activities:

Proceeds from

exercise of stock options

Proceeds from

long-term debt

of long-term debt

cash provided by financing activities

Net increase (decrease) in cash and

cash equivalents

Cash and cash

equivalents at beginning of period

and cash equivalents at end of period

Supplemental disclosure of cash flow

Cash paid for

Non-cash investing and financing

Asset retirement

Operating lease

Proceeds from sale of oil and gas properties and equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from exercise of stock options

Proceeds from long-term debt

Proceeds from PPP loan

Reduction of long-term debt

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Cash paid for interest

Non-cash investing and financing activities:

Asset retirement obligations

Operating lease –

right of use asset and associated liabilities

7 unchanged sentences

natural gas liquids (“NGLs”).

Most of the Company’s oil and gas interests are centered in the West Texas and

Southeastern New Mexico;

Most of the Company’s oil and gas interests are centered in West Texas and Southeastern

however, the Company owns producing properties and undeveloped acreage in fourteen states.

Company’s oil and gas interests are operated by others.

All of the Company’s

oil and gas interests are operated by others.

outbreak of the novel coronavirus (“COVID-19”) in the first calendar quarter of 2020 and its continued spread across

16 unchanged sentences

At the time of this filing, cases of COVID-19 in the U.S.

remain high, including in Texas, where we conduct significant

remain high, including in Texas, where we are involved

in significant operations.

severe drop in economic activity, travel restrictions and other restrictions due to COVID-19 have had a significant negative impact

24 unchanged sentences

adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as

of September 30, 2020, and the results of its operations and cash flows for the interim periods ended September 30, 2020 and 2019.

The consolidated financial statements as of September 30, 2020 and for the three and six month periods ended September 30, 2020

of December 31, 2020, and the results of its operations and cash flows for the interim periods ended December 31, 2020 and 2019.

The consolidated financial statements as of December 31, 2020 and for the three and nine month periods ended December 31, 2020

and 2019 are unaudited.

10 unchanged sentences

presented not misleading.

It is suggested that these financial statements be read in conjunction with the consolidated financial

statements and notes thereto included in the Form 10-K.

The Company accounts for investments of less than 1% in limited liability companies using the cost method.

It is suggested that these financial statements be read in conjunction with the financial statements

and notes thereto included in the Form 10-K.

The Company accounts for investments of less than 1% of any limited liability company using the cost method.

The cost of the

11 unchanged sentences

The Company only offsets derivative

assets and liabilities for arrangements with the same counterparty when right of setoff exists.

assets and liabilities for arrangements with the same counterparty when right of offset exists.

Derivative assets and liabilities

7 unchanged sentences

from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active

Accounting Pronouncements.

Adopted Accounting Pronouncements.

In December 2019, the FASB issued ASU No.

25 unchanged sentences

The fair value of a liability for an ARO is recorded in the period

in which it is initially incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding

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.

3 unchanged sentences

as part of the carrying amount of our oil and natural gas properties.

The ARO is included on the consolidated balance sheets with

The ARO is included in the consolidated balance sheets with

the current portion being included in the accounts payable and other accrued expenses.

following table provides a rollforward of the AROs for the first six months of fiscal 2021:

Carrying amount of asset retirement obligations

as of April 1, 2020

following table provides a rollforward of the AROs for the first nine months of fiscal 2021:

Carrying amount of asset retirement obligations as of April 1, 2020

Liabilities incurred

1 unchanged sentence

Accretion expense

Carrying amount of asset retirement obligations as of September

Non-Current asset

retirement obligation

Carrying amount of asset retirement obligations as of December 31, 2020

Current portion

Non-Current asset retirement obligation

Stock-based Compensation

Company recognized stock-based compensation expense of $13,865 and $8,125 in general and administrative expense in the Consolidated

Statements of Operations for the three months ended December 31, 2020 and 2019, respectively.

Stock-based compensation expense

recognized for the nine months ended December 31, 2020 and 2019 was $41,813 and $24,375, respectively.

The total cost related

to non-vested awards not yet recognized at December 31, 2020 totals approximately $127,996 which is expected to be recognized

over a weighted average of 2.70 years.

following table is a summary of activity of stock options for the nine months ended December 31, 2020:

Exercise Price

Weighted Average

Remaining Contract

Life in Years

Outstanding at April 1, 2020

Forfeited or Expired

Outstanding at December 31, 2020

Vested at December 31, 2020

Exercisable at December 31, 2020

the nine months ended December 31, 2020 and 2019, no stock options were granted.

the nine months ended December 31, 2020, stock options covering 11,700 shares were exercised with a total intrinsic value of $12,217.

The Company received proceeds of $78,795 from these exercises.

During the nine months ended December 31, 2019, no stock options

were exercised.

the nine months ended December 31, 2020, 1,000 unvested stock options were forfeited due to the resignation of an employee and

34,200 vested stock options expired unexercised.

There were no stock options forfeited or expired during the nine months ended

December 31, 2019.

No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate

history of these types of awards.

options at December 31, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.

Subsequently,

in January 2021, stock options covering 19,800 shares were exercised with a total intrinsic value of $53,751.

The Company received

proceeds of $134,640 from these exercises.

Long Term Debt

1 unchanged sentence

Credit facility

Unamortized debt

issuance costs

long-term debt

Unamortized debt issuance costs

Total long-term debt

December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”),

4 unchanged sentences

28, 2023 and increase the borrowing base to $1,500,000.

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.

the Agreement, interest on the credit 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.

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

As of September 30, 2020, there was $325,000 available on the facility.

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, 2020, there was $400,000 available on the credit facility.

principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2023.

with WTNB on the original Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording

expenses totaling $34,532, which were deferred over the life of the credit facility.

Upon closing the amendment to the Agreement,

the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses totaling

$12,266, which were also deferred over the life of the credit facility.

expenses totaling $34,532, which were deferred over the original life of the credit facility.

Upon closing the amendment to the

Agreement, the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses

totaling $12,266, which were also deferred over the new remaining life of the credit facility.

borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially

6 unchanged sentences

ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter.

The Company is in compliance with all covenants as of September

The Company is in compliance with all covenants as of December

31, 2020 and believes it will remain in compliance for the next fiscal year.

addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB.

1 unchanged sentence

WTNB approval.

The Company obtained written permission prior to entering into the current hedge agreement discussed in Note 7.

balance outstanding on the line of credit as of September 30, 2020 was $1,175,000.

The Company obtained written permission from WTNB prior to entering into the current hedge agreement discussed

balance outstanding on the line of credit as of December 31, 2020 was $1,100,000.

The following table is a summary of activity

on the WTNB line of credit for the six months ended September 30, 2020:

on the WTNB line of credit for the nine months ended December 31, 2020:

Balance at April 1, 2020:

Balance at September 30, 2020:

Balance at December 31, 2020:

Subsequently,

on October 16, 2020, the Company made a payment of $75,000 on the WTNB line of credit leaving a balance of $1,100,000.

on January 11, 2021, the Company borrowed $75,000 on the WTNB credit facility and on January 15, 2021, made a payment of $75,000

on the credit facility, leaving a balance of $1,100,000.

Company also maintained a Certificate of Deposit Account at WTNB to collateralize one outstanding letter of credit for $25,000

4 unchanged sentences

was terminated and the funds deposited into the Company’s operating account.

Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office

Paycheck Protection Program (PPP) Loan.

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act became effective.

One component of the CARES Act was the paycheck protection program (“PPP”) which provides small businesses with the

resources needed to maintain their payroll and cover applicable overhead.

The PPP is implemented by the United States Small Business

Administration (“SBA”) with support from the Department of the Treasury.

The PPP provides funds to pay up to 24 weeks

of payroll costs including benefits.

Funds can also be used to pay interest on mortgages, rent, and utilities.

The Company applied

for, and was accepted to participate in this program.

On May 5, 2020, the Company received funding for approximately $68,600.

loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six

monthly payments deferred.

The Company applied for and on November 25, 2020 was approved for loan forgiveness in the amount of

$68,957 under the provisions of Section 1106 of the CARES Act.

This was for the forgiveness of our PPP loan in the amount of $68,574

and $383 in accrued interest expense.

The Company was eligible for loan forgiveness because the Company used all loan proceeds

to partially subsidize direct payroll expenses.

Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for the corporate office

located in Midland, Texas.

This includes 1,021 square feet of office space shared with and reimbursed by our majority shareholder.

This includes 1,021 square feet of office space shared with and reimbursed by the majority shareholder.

The lease is a 36-month lease that expires in May 2021 and does not include an option to renew.

18 unchanged sentences

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

lease right-of-use asset, beginning balance

Operating lease right-of-use asset, beginning balance

Current period amortization

Lease amendment

operating lease right-of-use asset

Operating lease

liability, current

lease liability, long term

lease liabilities

minimum lease payments as of September 30, 2020 under non-cancellable operating leases are as follows:

Lease extension

Total operating lease right-of-use asset, ending balance

Operating lease liability, current

Operating lease liability, long term

Total lease liabilities

minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:

Fiscal Year Ended March 31, 2021

1 unchanged sentence

Total lease payments

imputed interest

Operating lease liability

lease liability, current

Operating lease

liability, long term

cash paid for our operating lease for the six months ended September 30, 2020 and 2019 was $21,693 and $24,173, respectively.

operating lease liability, current

Operating lease liability, long term

cash paid for our operating lease for the nine months ended December 31, 2020 and 2019 was $34,121 and $35,300, respectively.

Rent expense, less sublease income of $14,315 and $13,167, respectively, is included in general and administrative expenses.

39 unchanged sentences

of either party as well as market constraints on liquidity.

Any such adjustment was not material as of September 30, 2020.

There was no adjustment as of December 31, 2020.

Value Measurements on a Nonrecurring Basis

13 unchanged sentences

Derivatives and Hedging (ASC Topic 815), to account for its derivative financial instruments.

Company’s crude oil derivative positions consist of put options.

Company’s crude oil derivative positions consisted of put options.

The Company has elected not to designate any of its derivative

5 unchanged sentences

market value and included in the consolidated balance sheets as assets or liabilities.

As of December 31, 2020, the Company has

no derivative contracts.

Company may have multiple hedge positions that span a several-month time period and result in fair value asset and liability positions.

4 unchanged sentences

expired in July and August 2020.

following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts in the Company’s

consolidated statements of operations for the six months ended September 30, 2020.

Realized loss on oil

price hedging contracts

gain (loss) on oil price hedging contracts

and unrealized loss on derivative contracts

Stock-based Compensation

Company recognized stock-based compensation expense of $13,943 and $8,125 in general and administrative expense in the Consolidated

Statements of Operations for the three months ended September 30, 2020 and 2019, respectively.

Stock-based compensation expense

recognized for the six months ended September 30, 2020 and 2019 was $27,948 and $16,250, respectively.

The total cost related

to non-vested awards not yet recognized at September 30, 2020 totals $141,861 which is expected to be recognized over a weighted

average of 2.94 years.

following table is a summary of activity of stock options for the six months ended September 30, 2020:

Average Exercise Price

Average Remaining Contract Life in Years

Outstanding at April 1, 2020

Outstanding at September 30, 2018

Vested at September 30, 2020

Exercisable at September 30, 2020

the six months ended September 30, 2020, stock options covering 1,500 shares were exercised with a total intrinsic value of $135.

The Company received proceeds of $9,435 from these exercises.

During the six months ended September 30, 2019, no stock options

were exercised.

the six months ended September 30, 2020, 1,000 unvested stock options were forfeited due to the resignation of an employee and

34,200 vested stock options expired unexercised.

There were no stock options forfeited or expired during the six months ended

September 30, 2019.

No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate

history of these types of awards.

options at September 30, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.

following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as

loss on derivative instruments in the Company’s consolidated statements of operations for the nine months ended December

Loss Recognized

Realized loss on oil price hedging contracts

Unrealized gain (loss) on oil price hedging contracts

Net realized and unrealized loss on derivative contracts

valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that

7 unchanged sentences

on the material write-downs of the carrying value of our oil and natural gas properties during fiscal 2016, we are in a net deferred

tax asset position as of September 30, 2020.

Our deferred tax asset is $1,389,101 as of September 30, 2020 with a valuation amount

tax asset position as of December 31, 2020.

Our deferred tax asset is $1,312,129 as of December 31, 2020 with a valuation amount

of $1,312,129.

9 unchanged sentences

on behalf of the principal stockholder.

The total billed to and reimbursed by the stockholder for the quarters ended September

The total billed to and reimbursed by the stockholder for the three months ended December

31, 2020 and 2019 was $9,122 and $12,289, respectively.

The total billed to and reimbursed by the stockholder for the six months

ended September 30, 2020 and 2019 was $18,321 and $19,943, respectively.

The total billed to and reimbursed by the stockholder for the nine months

ended December 31, 2020 and 2019 was $27,443 and $32,232, respectively.

The principal stockholder pays for his share of the lease

1 unchanged sentence

Amounts paid by the principal stockholder directly to the lessor for

the three months ending September 30, 2020 and 2019 were $3,846 and $3,981, respectively.

the three months ending December 31, 2020 and 2019 were $4,045 and $3,981, respectively.

Amounts paid by the principal stockholder

directly to the lessor for the six months ending September 30, 2020 and 2019 were $7,649 and $7,919, respectively.

Loss Per Common Share

Company’s basic net loss per share has been computed based on the weighted average number of common shares outstanding during

Diluted net loss per share assumes the exercise of all stock options having exercise prices less than the average

market price of the common stock during the period using the treasury stock method and is computed by dividing net loss by the

weighted average number of common shares and dilutive potential common shares (stock options) outstanding during the period.

periods where losses are reported, the weighted-average number of common shares outstanding excludes potential common shares,

because their inclusion would be anti-dilutive.

following is a reconciliation of the number of shares used in the calculation of basic and diluted net loss per share for the

three and six month periods ended September 30, 2020 and 2019.

directly to the lessor for the nine months ending December 31, 2020 and 2019 were $11,694 and $11,900, respectively.

Income (loss) Per Common Share

Company’s basic net income (loss) per share has been computed based on the weighted average number of common shares outstanding

during the period.

Diluted net income (loss) per share assumes the exercise of all stock options having exercise prices less than

the average market price of the common stock during the period using the treasury stock method and is computed by dividing net

income (loss) by the weighted average number of common shares and dilutive potential common shares (stock options) outstanding

during the period.

In periods where losses are reported, the weighted-average number of common shares outstanding excludes potential

common shares, because their inclusion would be anti-dilutive.

following is a reconciliation of the number of shares used in the calculation of basic and diluted net income (loss) per share

for the three and nine month periods ended December 31, 2020 and 2019:

Three Months Ended

Six Months Ended

Nine Months Ended

Net income (loss)

Shares outstanding:

1 unchanged sentence

shares outstanding –

Effect of assumed

exercise of dilutive stock options

Effect of assumed exercise of dilutive stock options

Weighted avg.

shares outstanding

Loss per common share:

to a net loss for the for the three and six months ended September 30, 2020, the weighted average number of common shares outstanding

excludes common stock equivalents because their inclusion would be anti-dilutive.

shares outstanding –

Income (loss) per common share:

the three months ended December 31, 2019, 139,800 potential common shares relating to stock options were excluded in the computation

of diluted net income per share because the price of the options was greater than the average market price of the common shares

and therefore, the effect would be anti-dilutive.

Anti-dilutive stock options have a weighted average exercise price of $6.12

at December 31, 2020.

to a net loss for the nine months ended December 31, 2020 and 2019, the weighted average number of common shares outstanding excludes

common stock equivalents because their inclusion would be anti-dilutive.

Subsequent Events

October 16, 2020, the Company made a payment of $75,000 on the WTNB line of credit leaving a balance of $1,100,000.

October 13, 2020, the Company expended $10,200 for its share to participate in 2 horizontal wells in the Bone Spring formation

of the Delaware Basin located in Lea County, New Mexico.

October 9, 2020, stock options covering 10,200 shares were exercised with a total intrinsic value of $12,083.

The Company received

proceeds of $69,360 from these exercises.

Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if

28 unchanged sentences

upon information that is currently available and is subject to change.

All forward-looking statements in this Form 10-Q are qualified

All forward-looking statements in the Form 10-Q are qualified

in their entirety by the cautionary statement contained in this section.

1 unchanged sentence

of the forward-looking information.

It is suggested that these financial statements be read in conjunction with the consolidated

financial statements and notes thereto included in the Form 10-K.

It is suggested that these financial statements be read in conjunction with the financial

statements and notes thereto included in the Form 10-K.

and Capital Resources.

13 unchanged sentences

and working interests and non-operated properties in areas with significant development potential.

the first six months of fiscal 2021, cash flow from operations was $164,237, a 52% decrease when compared to the corresponding

period of fiscal 2020 as a result of a 25% decrease in crude oil and natural gas sales primarily due to a 41% decrease in crude

oil price and a 10% decrease in natural gas price partially offset by a 19% increase in crude oil production and a 17% increase

in natural gas production.

Net cash of $449,000 was received from the line of credit, net cash of $566,000 was used for additions

to oil and gas properties and cash of $25,000 was used for an investment at cost basis.

Accordingly, net cash increased $28,297,

leaving cash and cash equivalents on hand of $62,678 as of September 30, 2020.

September 30, 2020, we had working capital of $240,743 compared to working capital of $186,785 at March 31, 2020, an increase

of $53,958 primarily due to the reasons set forth below.

the first nine months of fiscal 2021, cash flow from operations was $372,863, a 31% decrease when compared to the

corresponding period of fiscal 2020 primarily as a result of a 19% decrease in crude oil and natural gas sales primarily due to

a 37% decrease in crude oil price partially offset by a 4% increase in natural gas price, a 17% increase in crude oil production

and a 14% increase in natural gas production.

Net cash of $305,000 was received from the line of credit, cash of $78,795 was received

from the exercise of stock options, net cash of $793,597 was used for additions to oil and gas properties, and cash of $25,000

was used for an investment at cost basis.

Accordingly, net cash increased $6,635, leaving cash and cash equivalents on hand of

$41,016 as of December 31, 2020.

December 31, 2020, we had working capital of $296,172 compared to working capital of $186,785 at March 31, 2020, an increase of

$109,387 primarily due to the reasons set forth below.

and Natural Gas Property Development.

The Company currently plans to participate in the drilling and completion of 20 horizontal

wells at an estimated aggregate cost of approximately $1,200,000 for the fiscal year ending March 31, 2021 of which, $538,000

has already been expended.

The operators of these wells include Concho Resources, Inc., Marathon Oil Company, Mewbourne Oil Company,

the first six months of fiscal 2021, Mexco participated in the drilling and completion of 2 horizontal wells in the Wolfcamp formation

of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately

These wells were completed in September 2020 with initial average production rates of 1,224 barrels of oil, 4,881 barrels

of water and 3,422,000 cubic feet of gas per day, or 1,794 barrels of oil equivalent per day.

Mexco’s working interest in

these wells is 1.2%.

the second quarter of fiscal 2021, Mexco participated in the drilling of 4 horizontal wells in the Wolfcamp formation of the Delaware

Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $202,000.

Mexco’s working interest in these wells is 1.2%.

during the first quarter of fiscal 2021, Mexco expended $99,000 to participate in the drilling of 5 horizontal wells in the Upper

Avalon formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.

The Company’s working interests in the following mentioned 42 wells range from

.03% to 1.2% with a total capital expenditure of approximately $1,295,000 through February 10, 2021, which includes subsequent

events listed herein.

Company planned to participate in the drilling and completion of 20 horizontal wells at an estimated aggregate cost of approximately

$1,200,000 for the fiscal year ending March 31, 2021, of which, $600,000 has already been expended during the nine months ending

December 31, 2020.

The operators of these wells include Concho Resources, Inc., Marathon Oil Company, Mewbourne Oil Company, and

the first six months of fiscal 2021, Mexco participated in the drilling and completion of two horizontal wells in the Wolfcamp

formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs

of approximately $233,000.

These wells were completed in September 2020 with initial average production rates of 1,224 barrels

of oil, 4,881 barrels of water and 3,422,000 cubic feet of gas per day, or 1,794 barrels of oil equivalent per day.

Mexco’s

working interest in these wells is 1.2%.

Company also expended $5,000 during the first quarter of fiscal 2021 for its share to participate in 1 horizontal well in the

Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.

Mexco’s

working interest in this well is .14%.

addition to the above investments, the Company plans to expend approximately $280,000 for additional completion costs of 22 horizontal

wells located in Eddy and Lea Counties, New Mexico which were drilled during fiscal 2020.

To date, $97,000 has already been expended.

Of these wells, 7 wells were completed during Mexco’s first quarter of fiscal 2021.

In August 2020, 4 more of these wells

were completed and are currently producing at an average production rate of 1,160 barrels of oil;

4,400 barrels of water;

2,166,000 cubic feet of gas per day, or 1,521 barrels of oil equivalent per day.

Mexco’s working interest in these wells

Another 2 of these wells were also completed in August 2020 and are currently producing at an average production rate

of 2,026 barrels of oil;

the second quarter of fiscal 2021, Mexco participated in the drilling of four horizontal wells in the Wolfcamp formation

of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately

Mexco’s working interest in these wells is 1.2%.

Subsequently, in January 2021, Mexco expended $168,000 to complete

during the first quarter of fiscal 2021, Mexco expended $99,000 to participate in the drilling of five horizontal wells

in the Upper Avalon formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .5%.

Subsequently, in January 2021, Mexco expended $172,000 to complete these

the third quarter of fiscal 2021, Mexco participated in the drilling of two horizontal wells in the Wolfcamp formation

of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico at an initial cost of $37,200.

Subsequently, in January 2021, Mexco expended another $37,200 for an increased interest in these wells.

Mexco’s working

interest in these wells is 1.2%.

October 2020, the Company also expended $10,200 for its share to participate in the drilling of two horizontal wells in

the 3 rd Bone Spring Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea

County, New Mexico.

Mexco’s working interest in this well is .1%.

Company has expended approximately $270,000 which is the balance of the completion costs of 22 horizontal wells located

in Eddy and Lea Counties, New Mexico which were drilled during fiscal 2020.

Of these wells, thirteen wells were completed

during Mexco’s first six months of fiscal 2021.

In December 2020, four more of these wells were completed and initially

produced at an average production rate of 1,171 barrels of oil;

4,004 barrels of water;

and 2,514,000 cubic feet of gas per day, or 2,445 barrels of oil equivalent per

Mexco’s interest in these wells is .104%.

and 2,517,000 cubic feet of gas per day,

or 1,591 barrels of oil equivalent per day.

Mexco’s working interest in these wells is .36%.

Another three of these wells

were also completed in December 2020 and the remaining two wells were completed in January 2021.

Subsequently,

in January 2021, Mexco expended approximately $49,000 to participate in the drilling of four horizontal wells in the Upper

and Middle Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .36%.

July 1, 2020, the Company sold its interest in the deep rights of a property in Martin County, Texas for a cash payment of $100,000.

7 unchanged sentences

makes it extremely difficult to predict future oil and natural gas price movements with any certainty.

For example, the NYMEX

West Texas Intermediate (“WTI”) posted price for crude oil on March 31, 2020 was $16.75 per bbl and averaged $14.68

and $24.67 per bbl for the months of April and May, respectively.

The WTI posted price for crude oil was $36.25 on September 30,

The Henry Hub Spot Market Price (“Henry Hub”) posted price for natural gas on March 31, 2020 was $1.71 per MMBtu

and averaged $1.74 and $1.75 per MMBtu for the months of April and May, respectively.

The Henry Hub posted price for natural gas

was $1.66 on September 30, 2020.

See Results of Operations below for realized prices which are substantially below the Henry Hub

Spot Market Price.

For example, in the last

twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of negative

$41.25 per bbl in April 2020 to a high of $59.75 per bbl in January 2020.

The Henry Hub Spot Market Price (“Henry Hub”)

for natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $3.14 per MMBtu in October 2020.

31, 2020 the WTI posted price for crude oil was $44.50 per bbl and the Henry Hub spot price for natural gas was $2.36 per MMBtu.

See Results of Operations below for realized prices which are substantially below the Henry Hub Spot Market Price.

Protection Program (PPP) Loan.

10 unchanged sentences

On May 5, 2020, the Company received

funding for approximately $68,600.

loan is a two-year loan with a maturity date of May 5, 2022.

The loan bears an annual interest rate of 1%.

The loan shall be payable

monthly with the first six monthly payments deferred.

The Company’s has applied for loan forgiveness under the provisions

funding for $68,574.

loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six

monthly payments deferred.

The Company applied for and on November 25, 2020 was approved for loan forgiveness under the provisions

of Section 1106 of the CARES Act.

Loan forgiveness is subject to the sole approval of the SBA.

The Company is eligible for loan

forgiveness in an amount equal to payments made during the 24-week period beginning on the Loan date, with the exception that

no more than 40.0% of the amount of loan forgiveness may be for expenses other than payroll expenses.

The Company used all loan

proceeds to partially subsidize direct payroll expenses and rent for our corporate office space.

The Company was eligible for loan forgiveness because the Company used all loan proceeds to

partially subsidize direct payroll expenses.

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 September 30, 2020:

bank line of credit (1)

amounts represent the balances outstanding under the bank line of credit.

This repayment assumes that interest will be paid

on a monthly basis, no additional funds will be drawn and does not include estimated interest of $44,063 less than 1 year,

and $66,094 1-3 years.

lease amount represents the monthly rent amount for our principal office space in Midland, Texas under one three year lease

agreement effective May 15, 2018.

Of this total obligation for the remainder of the lease, our majority shareholder will pay

$13,483 his portion of the shared office space.

The following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2020:

Payments due in:

less than 1 year

Contractual obligations:

Secured bank line of credit (1)

These amounts represent the balances outstanding under

the bank line of credit.

This repayment assumes that interest will be paid on a monthly basis, no additional funds will be drawn

and does not include estimated interest of $41,250 less than 1 year, and $51,563 1-3 years.

The lease amount represents the monthly rent amount

for our principal office space in Midland, Texas under a three-year lease agreement effective May 15, 2018.

Of this total obligation

for the remainder of the lease, our majority shareholder will pay $9,438 for his portion of the shared office space.

of Operations –

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019.

net loss of $41,970 for the quarter ended September 30, 2020 compared to a net loss of $82,787 for the quarter ended September

This was a result of an increase in operating revenues and a decrease in operating expenses that is further explained

Three Months Ended December 31, 2020 and 2019.

For the quarter ended December 31, 2020, there was net

income of $80,497 compared to $35,196 for the quarter ended December 31, 2019, a 129% increase primarily as a result of a decrease

in operating expenses that is further explained below.

and gas sales .

Revenue from oil and gas sales was $629,964 for the second quarter of fiscal 2021, a 1% increase from $625,750

Revenue from oil and gas sales was $692,243 for the third quarter of fiscal 2021, a 10% decrease from $766,223

for the same period of fiscal 2020.

This resulted from an increase in oil and gas production and an increase in gas prices partially

offset by a decrease in oil prices.

This resulted from a decrease in oil prices partially offset by an increase in oil and gas

production volumes and an increase in gas prices.

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $217,117 for the second quarter of fiscal 2021, a 5% decrease from $229,042 for the

Production costs were $235,958 for the third quarter of fiscal 2021, a 6% decrease from $249,921 for the

same period of fiscal 2020.

3 unchanged sentences

depletion and amortization.

Depreciation, depletion and amortization expense was $236,134 for the second quarter of fiscal

2021, a 13% increase from $209,729 for the same period of fiscal 2020, primarily due to an increase in oil and gas production

and a decrease oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

Depreciation, depletion and amortization expense was $237,459 for the third quarter of fiscal

2021, a 4% increase from $228,762 for the same period of fiscal 2020, primarily due to an increase in oil and gas production and

a decrease in oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

and administrative expenses.

General and administrative expenses were $192,360 for the second quarter of fiscal 2021, a 25%

General and administrative expenses were $193,288 for the third quarter of fiscal 2021, a 19%

decrease from $239,346 for the same period of fiscal 2020.

This was primarily due to a decrease in salaries, legal fees and insurance

Interest expense was $13,515 for the second quarter of fiscal 2021, a 59% increase from $8,495 for the same period

This was primarily due to a decrease in salaries, contract services

and employee insurance expense.

Interest expense was $14,604 for the third quarter of fiscal 2021, a 43% increase from $10,203 for the same period

of fiscal 2020, due to an increase in borrowings partially offset by a decrease in interest rates.

There was no income tax expense for the three months ended September 30, 2020 and for the three months ended September

The effective tax rate for the three months ended September 30, 2020 and September 30, 2019 was 0%.

We are in a net

deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.

loan forgiveness.

PPP loan forgiveness in the amount of $68,957 for the three months ended December 31, 2020 was for the forgiveness

of our PPP loan in the amount of $68,574 and $383 in accrued interest expense.

The Company received the proceeds for this loan

in May 2020 and applied for and received loan forgiveness in November 2020.

There was no income tax expense for the quarter ended December 31, 2020 and the quarter ended December 31, 2019.

effective tax rate for the three months ended December 31, 2020 and December 31, 2019 was 0%.

We are in a net deferred tax asset

position and believe it is more likely than not that these deferred tax assets will not be realized.

of Operations –

Six Months Ended September 30, 2020 Compared to Six Months Ended September 30, 2019.

For the six months

ended September 30, 2020, there was a net loss of $341,640 compared to a net loss of $136,973 for the six months ended September

This was a result of a decrease in operating revenues partially offset by a decrease in operating expenses that is further

explained below.

Nine Months Ended December 31, 2020 and 2019.

For the nine months ended December 31, 2020, there was

a net loss of $261,143 compared to a net loss of $101,777 for the nine months ended December 31, 2019.

This was a result of a

decrease in operating revenues partially offset by a decrease in operating expenses that is further explained below.

and gas sales .

Revenue from oil and gas sales was $994,143 for the six months ended September 30, 2020, a 25% decrease from

Revenue from oil and gas sales was $1,686,386 for the nine months ended December 31, 2020, a 19% decrease from

$2,083,667 for the same period of fiscal 2020.

This resulted from a decrease in oil and gas prices partially offset by an increase

in oil and gas production.

This resulted from a decrease in oil prices partially offset by an increase in

oil and gas production volumes and an increase in gas prices.

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $388,783 for the six months ended September 30, 2020, a 13% decrease from $448,437

for the six months ended September 30, 2019.

Production costs were $624,741 for the nine months ended December 31, 2020, an 11% decrease from $698,358

for the nine months ended December 31, 2019.

This decrease is primarily the result of a decrease in production taxes as a result

of a decrease in oil revenues and a decrease in lease operating expenses due to numerous wells being shut-in during the month

of May 2020 as well as cost cutting measures being implemented by the operators because of the depressed oil and gas prices.

of May 2020 as well as cost cutting measures being implemented by the operators because of the depressed oil prices.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $460,239 for the six months ended September

30, 2020, a 10% increase from $419,967 for the six months ended September 30, 2019, due to an increase in oil and gas production

and a decrease of oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

Depreciation, depletion and amortization expense was $697,698 for the nine months ended December

31, 2020, an 8% increase from $648,729 for the nine months ended December 31, 2019, primarily due to an increase in oil and gas

production and a decrease in oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

and administrative expenses.

General and administrative expenses were $441,238 for the six months ended September 30, 2020,

a 22% decrease from $566,355 for the six months ended September 30, 2019.

General and administrative expenses were $634,526 for the nine months ended December 31, 2020,

a 21% decrease from $805,701 for the nine months ended December 31, 2019.

This was primarily due to a decrease in salaries, engineering

fees and accounting fees.

Interest expense was $24,570 for the six months ended September 30, 2020, a 65% increase from $14,851 for the same

period fiscal 2020 due to an increase in borrowings partially offset by a decrease in interest rate.

There was no income tax expense for the six months ended September 30, 2020 and for the six months ended September

The effective tax rate for the six months ended September 30, 2020 and September 30, 2019 was 0%.

We are in a net deferred

tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.

Interest expense was $39,174 for the nine months ended December 31, 2020, a 56% increase from $25,054 for the nine

months ended December 31, 2019 due to an increase in borrowings partially offset by an decrease in interest rates.

loan forgiveness.

PPP loan forgiveness in the amount of $68,957 for the three months ended December 31, 2020 was for the forgiveness

of our PPP loan in the amount of $68,574 and $383 in accrued interest expense.

The Company received the proceeds for this loan

in May 2020 and applied for and received loan forgiveness in November 2020.

There was no income tax for the nine months ended December 31, 2020 and for the nine months ended December 31, 2019.

The effective tax rate for the nine months ended December 31, 2020 and December 31, 2019 was 0%.

We are in a net deferred tax

asset position and believe it is more likely than not that these deferred tax assets will not be realized.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements