What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-02-08 · 112 added, 171 removed, 71 unchanged (80% of the section changed)

27 unchanged sentences

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

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.

and Capital Resources.

4 unchanged sentences

We have pledged our producing oil and gas properties to secure our credit facility.

do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.

do not have any delivery commitments to provide a fixed and determinable quantity of our oil and gas under any existing contract or agreement.

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

December 31, 2021, we had working capital of $1,443,678 compared to working capital of $618,960 at March 31, 2021, an increase of $824,718

primarily due to the reasons set forth below.

We focus our efforts on the acquisition of royalty and working

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

June 30, 2022, we had working capital of $1,769,009 compared to working capital of $2,469,776 at March 31, 2022, a decrease of $700,767

for the reasons set forth below.

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

Net cash provided by operating activities

the Three Months Ended

Net cash provided by operating

Net cash used in investing activities

Net cash (used in) provided by financing activities

$ (2,329,363 )

Net cash used in financing activities

Flow Provided by Operating Activities.

2 unchanged sentences

account balances.

Cash flow provided by our operating activities for the nine months ended December 31, 2021 was $2,728,586 in comparison

to $372,863 for the nine months ended December 31, 2020.

This increase of $2,355,723 in our cash flow operating activities consisted

of an increase in our non-cash expenses of $197,738;

Cash flow provided by our operating activities for the three months ended June 30, 2022 was $1,495,598 in comparison

to $666,054 for the three months ended June 30, 2021.

This increase of $829,544 in our cash flow operating activities consisted of an

increase in our non-cash expenses of $134,975;

an increase in our accounts receivable of $154,113;

and, an increase in our

net income for the current nine months of $2,118,279 compared to a net loss the same nine month period of the prior year.

in cash flow from operating activities may impact our level of exploration and development expenditures.

expenditures in operating activities consist primarily of lease operating expenses and production expenses.

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.

a decrease of $53,282 in our accounts

payable and accrued expenses;

and, an increase in our net income for the current quarter of $903,666.

Variations in cash flow from operating

activities may impact our level of exploration and development expenditures.

expenditures in operating activities consist primarily of drilling expenses, production expenses and engineering services.

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.

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, 2021, we had net cash of $1,021,849 used for additions to oil and gas properties compared to $818,597

for the nine months ended December 31, 2020.

For the three months ended June 30, 2022, we had net cash of $2,329,363 used for additions to oil and gas properties compared to $297,113

for the three months ended June 30, 2021.

Flow Provided by Financing Activities.

1 unchanged sentence

account balances.

Cash flow used in our financing activities was $884,360 for the nine months ended December 31, 2021 compared to cash

flow provided by our financing activities of $452,369 for the nine months ended December 31, 2020.

During the nine months ended December

31, 2021 and 2020, we received advances of $275,000 and $680,000, respectively, from our credit facility.

During the nine months ended

December 31, 2021 and 2020, we made payments of $1,455,000 and $375,000, respectively, on the credit facility.

For the nine months ended

December 31, 2021 and 2020, we received proceeds of $295,640 and $78,795, respectively, from the exercise of employee and director stock

For the nine months ended December 31, 2020, we received $68,574 under the paycheck protection program (PPP).

net cash increased $822,377, leaving cash and cash equivalents on hand of $880,190 as of December 31, 2021.

Cash flow used in our financing activities was $0 for the three months ended June 30, 2022 compared to cash flow provided

by our financing activities of $346,000 for the three months ended June 30, 2021.

During the three months ended June 30, 2021, we received

advances of $100,000 from our credit facility, received proceeds of $34,000 for the exercise of director stock options and made payments

of $480,000 on the credit facility.

net cash decreased $833,765, leaving cash and cash equivalents on hand of $537,001 as of June 30, 2022.

and Natural Gas Property Development

3 unchanged sentences

All of these horizontal wells are

in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico and Reeves County, Texas.

November 2021, Mexco expended approximately $92,000 to participate in the completion of four horizontal wells in the Wolfcamp Sand formation

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

These wells were subsequently completed

in January 2022 with initial average production rates of 1,204 barrels of oil, 3,369 barrels of water and 3,141,000 cubic feet of gas

per day, or, 1,728 barrels of oil equivalent per day.

in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico or in the Midland Basin

located in the eastern portion of the Permian Basin in Reagan County, Texas.

April 2022, Mexco expended approximately $140,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation

of the Delaware Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .52%.

in November 2021, Mexco expended approximately $59,000 to participate in the drilling of two horizontal wells in the 3 rd Bone

Spring formation and two horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the

Permian Basin in Lea County, New Mexico.

in April 2022, Mexco expended approximately $427,000 to participate in the drilling of three horizontal wells in the Wolfcamp Sand formation

of the Midland Basin located in the eastern portion of the Permian Basin in Reagan County, Texas.

Subsequently, during the second quarter

of fiscal 2023, Mexco expended approximately $768,000 to purchase additional working interests in these wells and to complete these wells.

Mexco’s working interest in these wells is 3.2%.

October 2021, Mexco expended approximately $126,000 to participate in the drilling of four horizontal wells in the Wolfcamp 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

these wells is .52%.

the nine months ended December 31, 2021, Mexco expended approximately $180,000 to participate in the drilling and completion of four

horizontal wells in the Lower Wolfcamp Shale of the Delaware Basin in Eddy County, New Mexico.

Mexco’s working interest in these

wells is .44%.

during the nine months ended December 31, 2021, Mexco expended $31,500 for its share to participate in the drilling and completion 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.

These wells were completed in August 2021 with initial average production rates of 1,294 barrels of

oil, 3,345 barrels of water and 3,124,000 cubic feet of gas per day, or, 1,815 barrels of oil equivalent per day.

Mexco’s working

interest in these wells is .1%.

September 2021, Mexco expended approximately $43,000 to participate in the drilling of three horizontal wells in the 2 nd Bone

Spring formation and two horizontal wells in the 3 rd 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 these wells is an average of approximately .22%.

wells have been drilled and are awaiting completion operations.

the nine months ended December 31, 2021, Mexco expended approximately $140,400 to participate in the drilling and completion of four

horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County,

These wells were subsequently completed in January 2022 with initial average production rates of 1,008 barrels of oil, 3,563

barrels of water and 2,980,000 cubic feet of gas per day, or, 1,505 barrels of oil equivalent per day.

Mexco’s working interest

in these wells is .37%.

August 2021, Mexco expended approximately $52,000 to participate in the drilling of two horizontal wells in the Bone Spring formation

of the Delaware Basin located in the western portion of the Permian Basin in Reeves County, Texas.

Mexco working interest in these wells

is approximately .6%.

These wells have been drilled and are being completed as of December 2021.

the quarter ended June 30, 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

These wells were completed at the end of June 2021 with initial average production rates of 1,184 barrels of oil, 4,380 barrels

of water and 1,818,000 cubic feet of gas per day, or 1,444 barrels of oil equivalent per day.

Mexco’s working interest in these

wells is .56%.

of Wells Drilled in Fiscal 2021.

The Company expended approximately $165,000 for the additional completion costs of 12 horizontal

wells located in Eddy and Lea Counties, New Mexico that the Company participated in drilling during fiscal 2021.

Company participated in the 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 $108,000.

These wells were completed at

the end of June 2021 and beginning of July 2021 with initial average production rates of 1,046 barrels of oil, 3,214 barrels of water

and 2,146,000 cubic feet of gas per day, or 1,403 barrels of oil equivalent per day.

May 2022, Mexco expended approximately $97,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation

of the Delaware Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .52%.

Company participated in the 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 $55,000.

These wells were completed at the

end of June 2021 with initial average production rates of 774 barrels of oil, 2,648 barrels of water and 973,000 cubic feet of gas per

day, or 913 barrels of oil equivalent per day.

in May 2022, Mexco expended approximately $230,000 to participate in the drilling of a horizontal well in the Wolfcamp Sand formation

of the Midland Basin in Reagan County, Texas.

Subsequently, during the second quarter of fiscal 2023, Mexco expended approximately $377,000

to purchase additional working interests in this well and to complete this well.

Mexco’s working interest in this well is 5.1%.

June 2022, Mexco expended approximately $300,000 to participate in the drilling and completion of four horizontal wells in the Bone Spring

formation of the Delaware Basin in Eddy County, New Mexico.

Mexco’s working interest in these wells is 2.1%.

Subsequently, in July

2022, Mexco expended approximately $300,000 for the remaining balance in these wells

in June 2022, Mexco expended approximately $157,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation

of the Delaware Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .52%.

of Wells Drilled in Fiscal 2022.

The Company expended approximately $101,000 for the completion costs of 4 horizontal wells located

in Lea County, New Mexico that the Company participated in drilling during fiscal 2022.

These wells began producing in May 2022 with

initial average production rates of 1,384 barrels of oil, 3,530 barrels of water and 2,172,000 cubic feet of gas per day, or, 1,804 barrels

of oil equivalent per day.

Acquisitions.

The Company acquired various royalty (mineral) interests in 22 wells and several additional potential locations for development operated

by Chesapeake Energy Corporation and located in the Eagleford area of Dimmit County, Texas for a purchase price of $939,000 which was

effective April 1, 2022.

Participations.

In August 2022, Mexco expended approximately $33,000 to participate in the drilling of two horizontal wells in the

Penn Shale formation of the Delaware Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .22%.

are participating in other projects and are reviewing projects in which we may participate.

3 unchanged sentences

the credit facility and, if appropriate, sales of non-core properties.

oil and natural gas 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 $43.60 per bbl in January 2021 to a high of $80.63

per bbl in October 2021.

The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.43 per

MMBtu in April 2021 to a high of $23.86 per MMBtu in February 2021.

December 31, 2021 the WTI posted price for crude oil was $71.19 per bbl and the Henry Hub spot price for natural gas was $3.82 per MMBtu.

See Results of Operations below for realized prices.

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 $58.30 per bbl in August 2021 to a high

of $119.68 per bbl in March 2022.

The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of

$3.32 per MMBtu in December 2021 to a high of $9.44 per MMBtu in May 2022.

June 30, 2022, the WTI posted price for crude oil was $101.74 and the Henry Hub spot price for natural gas was $5.75 per MMBtu.

of Operations below for realized prices.

We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party.

following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2021:

Payments due in:

less than 1 year

Contractual obligations:

The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a 38-month lease agreement

effective May 15, 2018 and extended another 36 months to July 31, 2024.

Of this total obligation for the remainder of the lease, our

majority shareholder will pay $15,572 less than 1 year and $24,656 1-3 years for his portion of the shared office space.

of Operations – Three Months Ended December 31, 2021 and 2020.

For the quarter ended December 31, 2021, there was net income

of $753,302 compared to $80,497 for the quarter ended December 31, 2020, a 836% increase as a result of an increase in operating revenues

due to an increase in oil and gas production and prices partially offset by an increase in operating expenses that is further explained

and gas sales .

Revenue from oil and gas sales was $1,573,984 for the third quarter of fiscal 2022, a 127% increase from $692,243

for the same period of fiscal 2021.

This resulted from an increase in oil and natural gas prices and an increase in oil and natural gas

production volumes.

Volume (bbls)

Average Price (per bbl)

Average Price (per mcf)

and exploration.

Production costs were $291,068 for the third quarter of fiscal 2022, a 23% increase from $235,958 for the same period

of fiscal 2021.

This is primarily the result of an increase in production taxes and marketing charges as a result of the increase in

oil and gas revenues.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $268,018 for the third quarter of fiscal 2022, a

13% increase from $237,459 for the same period of fiscal 2021, 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 $272,552 for the third quarter of fiscal 2022, a 41% increase

from $193,288 for the same period of fiscal 2021.

This was primarily due to an increase in employee compensation and shareholder services.

Interest expense was $3,132 for the third quarter of fiscal 2022, a 79% decrease from $14,604 for the same period of fiscal

2021, due to a decrease in borrowings.

There was no income tax expense for the quarter ended December 31, 2021 and the quarter ended December 31, 2020.

The effective

tax rate for the three months ended December 31, 2021 and December 31, 2020 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 – Nine Months Ended December 31, 2021 and 2020.

For the nine months ended December 31, 2021, there was a net

income of $1,857,136 compared to a net loss of $261,143 for the nine months ended December 31, 2020.

This was a result of an increase

in operating revenues due to an increase in oil and gas production and prices partially offset by an increase in operating expenses that

is further explained below.

following table summarizes our future payments we are obligated to make based on agreements in place as of June 30, 2022:

lease amount represents the monthly rent amount for our principal office space in Midland,

Texas under a 38 month lease agreement effective May 15, 2018 and extended another 36 months

to July 31, 2024.

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

will pay $15,572 less than 1 year and $16,870 1-3 years for his portion of the shared office

of Operations – Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021.

For the quarter ended June 30,

2022, net income was $1,298,672 compared to net income of $395,006 for the quarter ended June 30, 2021.

This was primarily the result

of an increase in operating revenues due to an increase in oil and gas prices and an increase in gas production partially offset by an

increase in operating expenses that is further explained below.

and gas sales.

Revenue from oil and gas sales was $4,370,720 for the nine months ended December 31, 2021, a 159% increase from $1,686,386

for the same period of fiscal 2021.

This resulted from an increase in oil and natural gas prices and an increase in oil and natural gas

production volumes.

Revenue from oil and gas sales was $2,416,113 for the quarter ended June 30, 2022, a 92% increase from $1,255,565

for the quarter ended June 30, 2021.

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

volumes partially offset by a decrease in oil production volumes.

The following table sets forth our oil and natural gas revenues, production

quantities and average prices received during the three months ended June 30:

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $903,643 for the nine months ended December 31, 2021, a 45% increase from $624,741 for the

nine months ended December 31, 2020.

This increase is primarily the result of an increase in production taxes as a result of the increase

in oil and gas revenues and an increase in lease operating expenses over last year 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 during the

Production costs were $435,028 for the three months ended June 30, 2022, a 57% increase from $276,987 for the three

months ended June 30, 2021.

This increase is primarily the result of an increase in production taxes and lease operating expenses as

a result of the increase in oil and gas revenues.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $812,398 for the nine months ended December 31,

2021, an 16% increase from $697,698 for the nine months ended December 31, 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.

Depreciation, depletion and amortization (“DD&A”) expense was $387,128 for the first

quarter of fiscal 2023, a 46% increase from $264,320 for the first quarter of fiscal 2022, primarily due to an increase in production

and an increase in the full cost pool amortization base partially offset by an increase in reserves.

and administrative expenses.

General and administrative expenses were $794,961 for the nine months ended December 31, 2021, a 25%

increase from $634,526 for the nine months ended December 31, 2020.

This was primarily due to an increase in bonuses and director’s

fees which were significantly reduced last year due to the pandemic and an increase in accounting fees and employee stock option compensation

Interest expense was $23,381 for the nine months ended December 31, 2021, a 40% decrease from $39,174 for the nine months

ended December 31, 2020 due to a decrease in borrowings.

There was no income tax for the nine months ended December 31, 2021 and for the nine months ended December 31, 2020.

The effective

tax rate for the nine months ended December 31, 2021 and December 31, 2020 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.

General and administrative expenses were $318,530 for the three months ended June 30, 2022, a 3% increase

from $308,167 for the three months ended June 30, 2021.

This was primarily due to an increase in accounting fees and insurance costs.

Interest expense was $3,131 for the first quarter of fiscal 2023, a decrease of 75% from $12,719 for the first quarter of

fiscal 2022 due to a decrease in borrowings.

There was no income tax expense for the three months ended June 30, 2022 and 2021.

The effective tax rate for the three months

ended June 30, 2022 and 2021 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 2. Management’s Discussion and Analysis