What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-02-08 · 214 added, 298 removed, 158 unchanged (76% of the section changed)

3 unchanged sentences

Current assets

Cash and cash equivalents

Cash and cash

Accounts receivable:

Oil and natural gas sales

Prepaid costs and expenses

costs and expenses

Total current assets

Property and equipment, at cost

Oil and gas properties, using the full cost method

Accumulated depreciation, depletion and amortization

Property and equipment,

Oil and gas properties,

using the full cost method

depreciation, depletion and amortization

( 30,748,176 )

( 30,361,047 )

Property and equipment, net

Investment – cost basis

Operating lease, right-of-use asset

Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Property and equipment,

Investment in limited liability

company at cost

Operating lease, right-of-use

noncurrent assets

LIABILITIES AND STOCKHOLDERS’

Current liabilities

Accounts payable and accrued expenses

Operating lease liability, current

Accounts payable and accrued

lease liability, current

Total current liabilities

Long-term liabilities

Long-term debt

Operating lease liability, long-term

Asset retirement obligations

Total long-term liabilities

Operating lease liability,

retirement obligations

long-term liabilities

Total liabilities

1 unchanged sentence

Stockholders’ equity

Preferred stock - $ 1.00 par value;

Preferred stock - $ 1.00

10,000,000 shares authorized;

Common stock - $ 0.50 par value;

none outstanding

Common stock - $ 0.50

40,000,000 shares authorized;

2,188,666 and 2,143,666 shares issued;

2,121,666 and 2,076,666 shares outstanding as of December 31, 2021 and March 31, 2021, respectively

2,216,416 shares issued and 2,149,416 shares outstanding

as of June 30, 2022 and March

31, 2022, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost ( 67,000 shares)

Total stockholders’ equity

Total liabilities and stockholders’ equity

stock, at cost ( 67,000 shares)

stockholders’ equity

liabilities and stockholders’ equity

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

1 unchanged sentence

STATEMENTS OF OPERATIONS

Three Months Ended

Nine Months Ended

Operating revenue:

the Three Months Ended June 30,

Operating revenues:

Natural gas sales

1 unchanged sentence

Operating expenses:

Accretion of asset retirement obligation

Depreciation, depletion, and amortization

General and administrative

Total operating expenses

Operating income (loss)

Other income (expenses):

Accretion of asset retirement

Depreciation, depletion

and amortization

and administrative

operating expenses

Operating income

Other income (expense):

Interest income

Interest expense

PPP loan forgiveness

Loss on derivative instruments

Net other (expense) income

Income (loss) before income taxes

Net income (loss)

$ ( 261,143 )

Income (loss) per common share:

other expense

Income before provision for income taxes

Income per common share:

Weighted average common shares outstanding:

accompanying notes are an integral part of

consolidated financial statements.

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

Energy Corporation and Subsidiaries

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Stockholders’

Stock Par Value

Paid-In Capital

Stockholders’ Equity

Balance at April 1, 2022

$ ( 346,001 )

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2021

$ ( 346,001 )

Stockholders’

Balance at September 30, 2021

$ ( 346,001 )

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2021

based compensation

Balance at June 30, 2022

$ ( 346,001 )

Stockholders’

Stock Par Value

Paid-In Capital

Stockholders’ Equity

Balance at April 1, 2021

$ ( 346,001 )

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2020

$ ( 346,001 )

Stockholders’

Balance at September 30, 2020

$ ( 346,001 )

Net income (loss)

Issuance of stock through options exercised

Stock based compensation

Balance at December 31, 2020

Issuance of stock through

options exercised

based compensation

Balance at June 30, 2021

$ ( 346,001 )

2 unchanged sentences

Balance at April 1, 2022

Balance at Dec.

Balance at June 30, 2022

Common stock shares, held in treasury:

Balance at April 1, 2022

Balance at Dec.

Common stock shares, outstanding at December 31, 2021

Balance at June 30,

Common stock shares, outstanding at June

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

1 unchanged sentence

STATEMENTS OF CASH FLOWS

the Nine Months Ended December 31,

Cash flows from operating activities:

Net income (loss)

$ ( 261,143 )

Adjustments to reconcile net income (loss) to net cash provided by operating

the Three Months Ended June 30,

Cash flows from operating

Adjustments to reconcile

net income to net cash provided by operating activities:

Stock-based compensation

Depreciation, depletion and amortization

Accretion of asset retirement obligations

Non-cash lease expense

PPP loan forgiveness

Amortization of debt issuance costs

Changes in operating assets and liabilities:

Increase in accounts receivable

Decrease in prepaid expenses

Increase (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

( 1,213,618 )

Depreciation, depletion

and amortization

Accretion of asset retirement

Amortization of debt

issuance costs

Changes in operating

assets and liabilities

Increase in accounts

Decrease in prepaid

Decrease (increase)

in right-of-use asset

(Decrease) increase

in accounts payable and accrued expenses

Settlement of asset

retirement obligations

increase in operating lease liability

Net cash provided by

operating activities

Cash flows from investing

Additions to oil and

gas properties

( 2,320,974 )

Additions to other property and equipment

Additions to other property

and equipment

Investment in limited

liability company at cost

Drilling refund

Investment in limited liability company at cost

Proceeds from sale of oil and gas properties and equipment

Net cash used in investing activities

( 1,021,849 )

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

from sale of oil and gas properties and equipment

Net cash used in investing

( 2,329,363 )

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Cash flows from financing

Proceeds from exercise

of stock options

Reduction of long-term

from long-term debt

cash used in financing activities

Net (decrease) increase in cash and cash

Cash and cash equivalents

at beginning of period

Cash and cash equivalents

at end of period

Supplemental disclosure of cash flow information:

2 unchanged sentences

Asset retirement obligations

Operating lease – right of use asset and associated liabilities

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

Operating lease –

right of use asset and associated liabilities

accompanying notes are an integral part of the consolidated financial

Energy Corporation and Subsidiaries

3 unchanged sentences

Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”)

are engaged in the exploration, development and production of natural gas, crude oil, condensate and natural gas liquids (“NGLs”).

are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas liquids

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 fourteen states.

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

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

All of Company’s oil and gas interests are operated

Basis of Presentation and Significant Accounting Policies

5 unchanged sentences

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 financial statements and affect the reported amounts of revenues and expenses

during the reporting period.

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.

management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates.

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.

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, 2021,

and the results of its operations and cash flows for the interim periods ended December 31, 2021 and 2020.

The consolidated financial

statements as of December 31, 2021 and for the three and nine month periods ended December 31, 2021 and 2020 are unaudited.

The consolidated

balance sheet as of March 31, 2021 was derived from the audited balance sheet filed in the Company’s 2021 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.

(consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of June 30, 2022,

and the results of its operations and cash flows for the interim periods ended June 30, 2022 and 2021.

The consolidated financial statements

as of June 30, 2022 and for the three-month periods ended June 30, 2022 and 2021 are unaudited.

The consolidated balance sheet as of

March 31, 2022 was derived from the audited balance sheet filed in the Company’s 2022 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 consolidated financial statements be read in conjunction

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

Investments .

The Company accounts for investments of less than 1% 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.

Financial Instruments .

The Company’s derivative financial instruments are used to manage commodity price risk attributable

to expected oil and gas production.

While there is risk the financial benefit of rising oil and gas prices may not be captured, the Company

believes the benefits of stable and predictable cash flows outweigh the potential risks.

Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during

the period in which they occur.

Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either

a current or non-current asset or a liability measured at its fair value.

The Company only offsets derivative assets and liabilities

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

Derivative assets and liabilities with different counterparties

are recorded gross in the consolidated balance sheets.

Derivative contract settlements are reflected in operating activities in the accompanying

consolidated statements of cash flows.

of December 31, 2021, the Company had no derivative contracts.

During the nine months ended December 31, 2020, the Company entered into

a series of crude oil put option contracts.

All of these such contracts expired in July and August 2020.

The Company accounts for investments of less than 1% in 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.

Asset Retirement Obligations

8 unchanged sentences

oil and natural gas properties.

The ARO is included in the consolidated balance sheets with the current portion being included in the

The ARO is included on 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 nine months of fiscal 2022:

following table provides a rollforward of the AROs for the first three months of fiscal 2022:

Schedule of Rollforward of Asset Retirement Obligations

Carrying amount of asset retirement obligations as of April 1, 2021

Carrying amount of asset retirement obligations as

of April 1, 2022

Liabilities incurred

1 unchanged sentence

Accretion expense

Carrying amount of asset retirement obligations as of December 31, 2021

Carrying amount of asset retirement obligations as of June 30, 2022

Current portion

Non-Current asset retirement obligation

Stock-based Compensation

Company recognized stock-based compensation expense of $ 25,570 and $ 13,865 in general and administrative expense in the Consolidated

Statements of Operations for the three months ended December 31, 2021 and 2020, respectively.

Stock-based compensation expense recognized

for the nine months ended December 31, 2021 and 2020 was $ 62,003 and $ 41,813 , respectively.

The total cost related to non-vested awards

not yet recognized at December 31, 2021 totals approximately $ 239,677 which is expected to be recognized over a weighted average of 2.57

the nine months ended December 31, 2021, the Compensation Committee of the Board of Directors approved and the Company granted 31,000

stock options exercisable at $ 8.51 per share with an estimated fair value of $ 187,550 .

During the nine months ended December 31, 2020,

no stock options were granted.

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 .

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, 2021 and 2020.

All such amounts represent the weighted average

Summary of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binomial Models

NIne Months Ended

Grant-date fair value

Volatility factor

Dividend yield

Risk-free interest rate

Expected term (in years)

following table is a summary of activity of stock options for the nine months ended December 31, 2021:

Summary of Activity of Stock Options

Weighted Average

Contract Life in Years

Outstanding at April 1, 2021

Forfeited or Expired

Outstanding at December 31, 2021

Vested at December 31, 2021

Exercisable at December 31, 2021

the nine months ended December 31, 2021, stock options covering 45,000 shares were exercised with a total intrinsic value of $ 241,226 .

The Company received proceeds of $ 295,640 from these exercises.

During the nine months ended December 31, 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.

were no stock options forfeited or expired during the nine months ended December 31, 2021.

During 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.

No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of

options at December 31, 2021 expire between April 2023 and July 2031 and have exercise prices ranging from $ 3.34 to $ 8.51 .

Non-Current asset retirement

Long Term Debt

debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:

Schedule of Long-Term Debt

Credit facility

Unamortized debt issuance costs (1)

Total long-term debt

For the current period, since the Company has no long-term debt outstanding, unamortized debt issuance costs in the amount of $ 15,657

are included in Other noncurrent assets.

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

4 unchanged sentences

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

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

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.

4 unchanged sentences

The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter.

As of December

31, 2021, there was $ 1,500,000 available for borrowing by the Company on the facility.

As of June 30,

2022, there was $ 1,500,000 available on the facility.

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

1 unchanged sentence

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 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 life of the credit facility.

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.

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

6 unchanged sentences

Expense) of 2.00 to 1.00 for each quarter.

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

Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.

was no balance outstanding on the line of credit as of December 31, 2021.

The following table is a summary of activity on the WTNB line

of credit for the nine months ended December 31, 2021:

Summary of Line of Credit Activity

Balance at April 1, 2021:

( 1,455,000 )

Balance at December 31, 2021:

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

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

The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB

was no balance outstanding on the credit facility as of June 30, 2022.

Stock-based Compensation

Company recognized compensation expense of $ 25,571 and $ 13,865 related to vesting stock options in general and administrative expense

in the Consolidated Statements of Operations for the first quarter of fiscal 2023 and 2022, respectively.

The total cost related to non-vested

awards not yet recognized at June 30, 2022 totals $ 188,537 , which is expected to be recognized over a weighted average of 2.14 years.

following table is a summary of stock options activity for the three months ended June 30, 2022:

Summary of Activity of Stock Options

Average Exercise Price Per Share

Aggregate Average Remaining Contract Life

Outstanding at April 1, 2022

Outstanding at June

Vested at June 30, 2022

Exercisable at June 30, 2022

the three months ended June 30, 2022 and 2021, no stock options were granted.

the three months ended June 30, 2022, no stock options were exercised.

During the three months ended June 30, 2021, stock options covering

5,000 shares were exercised with a total intrinsic value of $ 15,036 .

The Company received proceeds of $ 34,000 from these exercises.

forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history for these types of

During the three months ended June 30, 2022 and 2021, there were no stock options forfeited or expired.

options at June 30, 2022 expire between August 2024 and July 2031 and have exercise prices ranging from $ 3.34 to $ 8.51 .

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 1,112 square feet of office space shared with and reimbursed by the majority shareholder.

This includes 1,112 square feet of office space shared with and reimbursed by our majority shareholder.

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

21 unchanged sentences

Schedule of Operating Lease Assets and Liabilities

Operating lease right-of-use asset, beginning balance

Operating lease right-of-use

asset, beginning balance

Current period amortization

Lease amendment

Total operating lease right-of-use asset

Operating lease liability, current

Operating lease liability, long term

Total lease liabilities

minimum lease payments as of December 31, 2021 under non-cancellable operating leases are as follows:

operating lease right-of-use asset

Operating lease liability,

lease liability, long term

lease liabilities

minimum lease payments as of June 30, 2022 under non-cancellable operating leases are as follows:

Schedule of Future Minimum Lease Payments

Lease Obligation

Fiscal Year Ended March 31, 2023

1 unchanged sentence

Fiscal Year Ended March 31, 2025

Total lease payments

1 unchanged sentence

Operating lease liability

operating lease liability, current

Operating lease liability, long term

cash paid for our operating lease for the nine months ended December 31, 2021 and 2020 was $ 31,570 and $ 34,121 , respectively.

operating lease

liability, current

Operating lease liability,

cash paid for our operating lease for the three months ended June 30, 2022 and 2021 was $ 10,667 and $ 10,929 , respectively.

Rent expense,

9 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 December 31, 2021.

Our deferred tax asset is $ 887,701 as of December 31, 2021 with a valuation amount of $ 887,701 .

tax asset position as of June 30, 2022.

Our deferred tax asset is $ 526,846 as of June 30, 2022 with a valuation amount of $ 526,846 .

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

Management assesses the available positive

and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are reduced

or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to

subjective evidence such as future expected growth.

Related Party

party transactions for the Company 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, 2021

and 2020 was $ 12,276 and $ 9,122 , respectively.

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

Management considers the likelihood that the

Company’s net operating losses and other deferred tax attributes will be utilized prior to their expiration, if applicable.

determination to record a valuation allowance was based on management’s assessment of all available evidence, both positive and

negative, supporting realizability of the Company deferred tax asset as required by applicable accounting standards.

In light of those

criteria for recognizing the tax benefit of deferred tax assets, the Company’s assessment resulted in application of a valuation

allowance against the deferred tax asset as of June 30, 2022.

Related Party Transactions

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 quarters ended June 30, 2022

and 2021 was $ 10,085 and $ 12,768 , 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, 2021 and 2020 were $ 3,893 and $ 4,045 , respectively.

Amounts paid by the principal stockholder directly to the lessor for the nine

months ending December 31, 2021 and 2020 were $ 11,882 and $ 11,694 , 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.

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, 2021 and 2020:

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 less sublease income for the three months

ending June 30, 2022 and 2021 were $ 3,893 and $ 4,045 , respectively.

Income Per Common Share

following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three-month

periods ended June 30, 2022 and 2021.

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

Three Months Ended

Nine Months Ended

Net income (loss)

$ ( 261,143 )

Shares outstanding:

Weighted avg.

shares outstanding – basic

Effect of assumed exercise of dilutive stock options

Weighted avg.

Weighted average common shares outstanding

of the assumed exercise of dilutive stock options

Weighted average common

shares outstanding – dilutive

Income (loss) per common share:

the three and nine months ended December 31, 2021, 31,000 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 $ 8.51

at December 31, 2021.

the three ended December 31, 2020, 139,800 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 $ 6.12 at December

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

equivalents because their inclusion would be anti-dilutive.

January 2022, the Company expended $ 25,000 to exercise its option to participate in the first of two optional cash calls increasing the

capitalized investment of 10 % of the interest in a limited liability company in which the Company has previously invested $ 250,000 .

Company’s interest in this partnership is less than 1 % of the partnership at cost basis.

The purpose of the partnership is to purchase

mineral interests located in the state of Ohio.

February 1, 2022 the Company entered into a Purchase and Sale Agreement to acquire various overriding royalty interests in approximately

75 wells primarily operated by XTO Energy, Inc.

and located in the Eagleford area of Atascosa and Karnes Counties, Texas for a purchase

price of $ 567,000 with an effective date of January 1, 2022.

Income per common share:

the three months ended June 30, 2022 and 2021, no anti-dilutive shares relating to stock options were excluded from the computation of

diluted net income.

Subsequent Events

July 2022, Mexco expended approximately $ 300,000 for the remaining balance in the drilling and completion of four horizontal wells Eddy

County, New Mexico.

July and August 2022, Mexco expended approximately $ 768,000 to purchase additional working interests and to complete three horizontal

wells in Reagan County, Texas.

July and August 2022, Mexco expended approximately $ 377,000 to purchase additional working interests and to complete a horizontal well

in Reagan County, Texas.

August 2022, Mexco expended approximately $ 33,000 to participate in the drilling of two horizontal wells in Lea County, New Mexico.

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

1 unchanged sentence

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