What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-15 · 129 added, 88 removed, 95 unchanged (70% of the section changed)

24 unchanged sentences

that is currently available and is subject to change.

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

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

by the cautionary statement contained in this section.

12 unchanged sentences

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

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

September 30, 2022, we had working capital of $2,298,977 compared to working capital of $2,469,776 at March 31, 2022, a decrease of $170,789

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:

the Three Months Ended

Net cash provided by operating

For the Six Months

Ended September 30,

Net cash provided by operating activities

Net cash used in investing activities

$ (4,253,453 )

Net cash used in financing activities

Net cash provided by (used in) financing activities

Flow Provided by Operating Activities.

Cash flow from operating activities is primarily derived from the production of our crude

oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset

account balances.

Cash flow provided by our operating activities for the 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;

oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other property asset account

Cash flow provided by our operating activities for the six months ended September 30, 2022 was $3,418,087 in comparison to

$1,584,816 for the six months ended September 30, 2021.

This increase of $1,833,271 in our cash flow operating activities consisted of

an increase in our non-cash expenses of $251,742;

a decrease in our accounts receivable of $263,939;

a decrease of $80,141 in our accounts

1 unchanged sentence

and, an increase in our net income for the current quarter of $1,406,554.

Variations in cash flow from operating

activities may impact our level of exploration and development expenditures.

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.

3 unchanged sentences

Cash flow from investing activities is derived from changes in oil and gas property balances.

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.

For the six months ended September 30, 2022, we had net cash of $4,253,453 used for additions to oil and gas properties compared to $554,787

for the six months ended September 30, 2021.

Flow Provided by Financing Activities.

1 unchanged sentence

account balances.

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.

Cash flow provided by our financing activities was $30,179 for the six months ended September 30, 2022 compared to

cash flow used in our financing activities of $994,268 for the six months ended September 30, 2021.

During the six months ended September

30, 2022, we received advances and made payments of $500,000 on our credit facility and received payment of $30,179 from a director for

profits on purchase of stock within the six-month window of a previous sale of stock.

net cash decreased $805,187, leaving cash and cash equivalents on hand of $565,579 as of September 30, 2022.

and Natural Gas Property Development

1 unchanged sentence

The Company currently plans to participate in the drilling and completion of 48 horizontal wells at

an estimated aggregate cost of approximately $3,800,000 for the fiscal year ending March 31, 2023.

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 or in the Midland Basin

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

an estimated aggregate cost of approximately $4,300,000 for the fiscal year ending March 31, 2023, of which 57% will be spent in the

Delaware Basin and the remaining balance in the Midland Basin.

Thirty-six 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 twelve are 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

1 unchanged sentence

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

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.

the first six months of fiscal 2023, Mexco expended approximately $1,196,000 to participate in the drilling and completion 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.

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

These wells are currently being completed.

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

1 unchanged sentence

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

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.

Subsequently, in October 2022,

Mexco expended approximately $148,000 to complete these wells.

the first six months of fiscal 2023, Mexco expended approximately $607,000 to participate in the drilling and completion of a horizontal

well in the Wolfcamp Sand formation of the Midland Basin in Reagan County, Texas.

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.

This well are currently being completed.

the first six months of fiscal 2023, Mexco expended approximately $600,000 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

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

These wells are currently being completed.

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%.

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%.

of Wells Drilled in Fiscal 2022.

1 unchanged sentence

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.

The first 4 of 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.

Participations.

In October 2022, Mexco expended approximately $682,000 to participate in the drilling and completion of four horizontal

wells operated by XTO Energy, Inc.

in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico.

Mexco’s working

interest in these wells is 2.2%

in October 2022, Mexco expended $16,000 to participate in the drilling and completion of three horizontal wells operated by Mewbourne

Oil Company in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico.

Mexco’s working interest in these wells

Acquisitions.

2 unchanged sentences

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.

7 unchanged sentences

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.

West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.55 per bbl in December 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 $9.85 per MMBtu in August 2022.

September 30, 2022, the WTI posted price for crude oil was $75.47 and the Henry Hub spot price for natural gas was $6.40 per MMBtu.

Results 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 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.

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

Payments due in:

Contractual obligations:

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 $12,977 1-3 years for his portion of the shared office space.

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

There was net income

of $1,211,716 for the quarter ended September 30, 2022 compared to net income of $708,828 for the quarter ended September 30, 2021.

was a result of an increase in oil and gas prices and an increase in gas production partially offset by an increase in operating expenses

and a decrease in oil production that is further explained below.

and gas sales.

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:

Revenue from oil and gas sales was $2,281,895 for the second quarter of fiscal 2023, a 48% increase from $1,541,171

for the same period of fiscal 2022.

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

offset by a decrease in oil production.

Volume (bbls)

2 unchanged sentences

and exploration.

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.

Production costs were $394,445 for the second quarter of fiscal 2023, an 18% increase from $335,588 for the same

period of fiscal 2022.

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 (“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.

Depreciation, depletion and amortization expense was $384,379 for the second quarter of fiscal 2023,

a 37% increase from $280,060 for the same period 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 $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.

General and administrative expenses were $322,919 for the second quarter of fiscal 2023, a 51% increase

from $214,242 for the same period of fiscal 2022.

This was primarily due to an increase in salaries and contract services, legal fees,

employee stock option compensation and shareholder services.

Interest expense was $3,561 for the second quarter of fiscal 2023, a 53% decrease from $7,530 for the same period of fiscal

2022, due to a decrease in borrowings partially offset by an increase in interest rate.

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

The effective tax rate for the three

months ended September 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.

of Operations – Six Months Ended September 30, 2022 Compared to Six Months Ended September 30, 2021.

For the six months ended

September 30, 2022, there was net income of $2,510,388 compared to net income of $1,103,834 for the six months ended September 30, 2021.

This was a result of an increase in operating revenues partially offset by an increase in operating expenses that is further explained

and gas sales.

Revenue from oil and gas sales was $4,698,008 for the six months ended September 30, 2022, a 68% increase from $2,796,736

for the same period of fiscal 2022.

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

offset by a decrease in oil production.

Volume (bbls)

Average Price (per bbl)

Average Price (per mcf)

and exploration.

Production costs were $829,473 for the six months ended September 30, 2022, a 35% increase from $612,575 for the

six months ended September 30, 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 $771,507 for the six months ended September 30,

2022, an 42% increase from $544,380 for the six months ended September 30, 2021, 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 $641,449 for the six months ended September 30, 2022, a 23%

increase from $522,409 for the six months ended September 30, 2021.

This was primarily due to an increase in salaries and contract services,

employee stock option compensation, legal fees and shareholder services.

Interest expense was $6,692 for the six months ended September 30, 2022, a 67% decrease from $20,249 for the same period

fiscal 2022 due to a decrease in borrowings partially offset by an increase in interest rate.

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

The effective tax rate for the six months

ended September 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