What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-06-26 compared with 2022-06-27 · 299 added, 378 removed, 832 unchanged (45% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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on page F21 of this report.

FORM 10-K SUMMARY

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed

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have audited the accompanying consolidated balance sheets of Mexco Energy Corporation (a Colorado corporation) and Subsidiaries (the

Company) as of March 31, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders’

equity, and cash flows for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to

as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of

the two years in the period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States

Company) as of March 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity,

and cash flows for each of the two years in the period ended March 31, 2023, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended

March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the entity’s management.

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We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

States) (“PCAOB”) and are required to be independent with respect to Mexco Energy Corporation in accordance with the U.S.

federal securities

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Audit Matters

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated

critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

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does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

of proved reserves impacting the recognition and valuation of depletion expense and impairment of oil and gas properties.

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of proved reserves included the following, among others.

evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering specialists and their relationship

to the Company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the Company’s

proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions

are derived from the Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs,

estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions,

including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s

assumptions as follows:

the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the

current year;

the models used to estimate the operating costs at year-end compared to historical operating costs;

the models used to determine the future capital expenditures and compared estimated future capital expenditures used in the reserve

report to amounts expended for recently drilled and completed wells with similar locations;

the working and net revenue interests used in the reserve report by inspecting a sample of ownership interests, historical pricing

differentials, and operating costs to underlying support from the Company’s accounting records;

the Company’s evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining

historical conversion rates and support for the Company’s or the operator’s intent to develop the proved undeveloped

analytical procedures to the reserve report by comparing to historical actual results and to the prior year reserve report.

evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering

specialists and their relationship to the Company, made inquiries of those reservoir engineers

regarding the process followed and judgments made to estimate the Company’s proved

reserve volumes, and read the reserve report prepared by the Company’s specialists.

the extent key, sensitive inputs and assumptions used to determine proved reserve volumes

and other cash flow inputs and assumptions are derived from the Company’s accounting

records, such as commodity pricing, historical pricing differentials, operating costs, estimated

capital costs and working and net revenue interests, we tested management’s process

for determining the assumptions, including examining the underlying support, on a sample

Specifically, our audit procedures involved testing management’s assumptions

the estimated pricing differentials used in the reserve report to realized prices related

to revenue transactions recorded in the current year;

the models used to estimate the operating costs at year-end compared to historical operating

the models used to determine the future capital expenditures and compared estimated future

capital expenditures used in the reserve report to amounts expended for recently drilled

and completed wells with similar locations;

the working and net revenue interests used in the reserve report by inspecting a sample of

ownership interests, historical pricing differentials, and operating costs to underlying

support from the Company’s accounting records;

the Company’s evidence supporting the amount of proved undeveloped properties reflected

in the reserve report by examining historical conversion rates and support for the Company’s

or the operator’s intent to develop the proved undeveloped properties;

analytical procedures to the reserve report by comparing to historical actual results and

to the prior year reserve report.

WEAVER AND TIDWELL, L.L.P.

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BALANCE SHEETS

March 31, 2022

March 31, 2021

Current assets

Cash and cash equivalents

Cash and cash

Accounts receivable:

Oil and natural gas sales

Prepaid drilling

Prepaid 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

Accumulated depreciation,

depletion and amortization

( 32,215,095 )

( 30,361,047 )

Property and equipment, net

Investment in limited liability company at cost

Operating lease, right-of-use asset

Property and equipment,

Investment – cost

Operating lease, right-of-use

Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

Accounts payable and accrued expenses

Operating lease liability, current

Accounts payable and accrued

Operating lease liability,

Total current liabilities

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Long-term debt

Operating lease liability, long-term

Operating lease liability,

Asset retirement obligations

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Stockholders’ equity

Preferred stock - $ 1.00 par value;

Preferred stock - $ 1.00

10,000,000 shares authorized;

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2,221,416 and 2,216,416 shares issued;

and, 2,149,416 and 2,076,666 shares outstanding as of March 31, 2022 and 2021

2,136,000 and 2,149,416 shares outstanding as of March 31, 2023

Additional paid-in capital

Retained earnings

Treasury stock, at cost ( 67,000 shares)

Total stockholders’ equity

Total liabilities and stockholders’ equity

Treasury stock, at cost

67,000 shares, respectively)

Total stockholders’

Total liabilities and stockholders’

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

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Operating expenses:

Accretion of asset retirement obligation

Depreciation, depletion and amortization

Accretion of asset retirement

Depreciation, depletion

and amortization

General and administrative

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Interest expense

PPP loan forgiveness

Loss on derivative instruments

Net other expense

Income before provision for income taxes

State income tax expense

Income per common share:

Weighted average common shares outstanding:

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

accompanying notes to the consolidated financial statements are an integral

part of these statements.

Energy Corporation and Subsidiaries

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ended March 31, 2023 and 2022

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

of stock through options exercised

based compensation

Balance at March 31, 2022

$ ( 346,001 )

Beginning Balance

$ ( 346,001 )

Issuance of stock through options exercised

Stock based compensation

Issuance of stock through

options exercised

Profit from purchase of

stock by insider

Purchase of stock

based compensation

Balance at March 31, 2023

$ ( 590,495 )

Ending Balance

$ ( 346,001 )

SHARE ACTIVITY

Common stock shares, issued:

At beginning of year

At end of year

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At beginning of year

At end of year

Common stock shares, outstanding

At end of year

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

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ended March 31,

Cash flows from operating activities:

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

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

PPP loan forgiveness

Amortization of debt issuance costs

Changes in operating assets and liabilities:

Depreciation, depletion

and amortization

Accretion of asset retirement

Amortization of debt issuance

Changes in operating assets

and liabilities:

Increase in accounts receivable

(Increase) decrease in right-of-use asset

(Increase) decrease in prepaid expenses

Increase in accounts payable and accrued expenses

Increase (decrease) in operating lease liability

Settlement of asset retirement obligations

Net cash provided by operating activities

Cash flows from investing activities:

Additions to oil and gas properties

Decrease (increase) in

right-of-use asset

Increase in prepaid expenses

(Decrease) increase in

accounts payable and accrued expenses

(Decrease) increase in

operating lease liability

of asset retirement obligations

Net cash provided by operating

Cash flows from investing

Additions to oil and gas

( 5,310,036 )

( 1,888,695 )

Additions to other property and equipment

Additions to other property

and equipment

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

Investment in limited liability

companies at cost

from sale of oil and gas properties and equipment

Net cash used in investing

( 5,441,075 )

( 1,710,024 )

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

Cash flows from financing

Proceeds from exercise

of stock options

Profits from purchase of

stock by insider

Proceeds from long-term

Debt issuance costs

Acquisition of treasury

of long-term debt

( 1,455,000 )

Net cash (used in) provided by financing activities

cash used in 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 and cash equivalents

at beginning of year

and cash equivalents at end of year

Supplemental disclosure of cash flow information:

Cash paid for interest

Accrued capital expenditures included in accounts payable

Accrued capital expenditures

included in accounts payable

Non-cash investing and financing activities:

Asset retirement obligations

Operating lease – right of use asset and associated liabilities

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

Operating lease –

right of use asset and associated liabilities

accompanying notes to the consolidated financial statements are an integral

part of these statements.

ENERGY CORPORATION AND SUBSIDIARIES

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

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

liquids (“NGLs”).

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 the Company’s oil and gas interests are

operated by others.

Summary of Significant Accounting Policies

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and Assumptions .

In preparing financial statements

in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required

to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the

consolidated financial statements and affect the reported amounts of revenues and expenses during the reporting period.

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.

In preparing financial statements in conformity with accounting principles generally accepted in the United States

of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported

amounts of assets and liabilities as of the date of the consolidated financial statements and affect the reported amounts of revenues

and expenses during the reporting period.

In addition, significant estimates are used in determining proved oil and gas reserves.

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.

and Cash Equivalents .

The Company considers all

highly liquid debt instruments purchased with maturities of three months or less and money market funds to be cash equivalents.

maintains cash in bank deposit accounts that may, at times, exceed federally insured limits.

At March 31, 2022, the Company had on

deposit all of its cash and cash equivalents with one financial institution.

The Company has not experienced any losses in such accounts

and believes it is not exposed to any significant credit risk.

The Company considers all highly liquid debt instruments purchased with maturities of three months or less

and money market funds to be cash equivalents.

The Company maintains cash in bank deposit accounts that may, at times, exceed federally

insured limits.

At March 31, 2023, the Company had on deposit all of its cash and cash equivalents with three financial institutions.

The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

Accounts receivable includes trade receivables from joint interest owners and oil and gas purchasers.

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Since the revenue

checks are generally received two to four months after the production month, the Company accrues for revenue earned but not received

checks are generally received two to three months after the production month, the Company accrues for revenue earned but not received

by estimating production volumes and product prices.

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Statements of Operations based on a graded-vesting schedule over the vesting period.

Reclassifications .

Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s

presentation.

These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows.

Investments .

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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.

and Capital Resources .

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properties in areas with significant development potential.

Fair Value of Financial Instruments

Company applies FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), which establishes a framework

for measuring fair value based upon inputs that market participants use in pricing an asset or liability, which are classified into two

observable inputs or unobservable inputs.

Observable inputs represent market data obtained from independent sources, whereas

unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available

without undue cost and effort.

These two types of inputs are further prioritized into the following fair value input hierarchy:

Quoted prices for identical instruments in active markets at the measurement date.

Quoted prices for similar instruments in active markets;

quoted prices for

identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs and

significant value drivers are observable in active markets at the measurement date and for the anticipated term of the

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset

or liability acquired, based on the best information available in the circumstances.

carrying amount reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts

payable approximates fair value because of the immediate or short-term maturity of these financial instruments.

fair value amount reported in the accompanying consolidated balance sheets for long-term debt approximates fair value because the actual

interest rates do not significantly differ from current rates offered for instruments with similar characteristics.

See the Company’s

Note 5 on Long Term Debt for further discussion.

Value Measurements on a Recurring Basis

financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the

fair value measurement.

Company’s commodity derivative instruments were carried at fair value on a recurring basis in the Company’s consolidated

balance sheets.

The Company uses certain pricing models to determine the fair value of its derivative financial instruments.

the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third

management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other

pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.

Assumed credit

risk adjustments, based on published credit ratings and public bond yield spreads are applied to the Company’s commodity derivatives.

The Company’s derivative instruments are subject to netting arrangements and qualify for net presentation in the consolidated balance

sheets in those instances where such arrangements exist with the respective counterparty.

ensure these derivative instruments are recorded at fair value, valuation adjustments may be required to reflect the creditworthiness

of either party as well as market constraints on liquidity.

There was no adjustment as of March 31, 2022.

Value Measurements on a Nonrecurring Basis

asset retirement obligation estimates are derived from historical costs and management’s expectation of future cost environments

and, therefore, the Company has designated these liabilities as Level 3 measurements.

The significant inputs to this fair value measurement

include estimates of plugging, abandonment and remediation costs, well life, inflation and credit-adjusted risk-free rate.

for a reconciliation of the beginning and ending balances of the liability for the Company’s asset retirement obligations.

Derivative Financial Instruments

is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions

deemed by management as competent and competitive.

Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk.

Derivative contracts are

utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash

flows associated with anticipated sales of future oil and natural gas production.

The Company follows FASB ASC Topic 815, Derivatives

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

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

The Company has elected not to designate any of its derivative

contracts for hedge accounting.

Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts,

as well as all payments and receipts on settled derivative contracts, in net realized and unrealized gain (loss) on commodity price hedging

contracts on the consolidated statements of operations.

All derivative contracts are recorded at fair market value and included in the

consolidated balance sheets as assets or liabilities.

As of March 31, 2022 and 2021, the Company had 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.

At the end of the reporting periods, those positions are offset to a single fair value asset or liability for each commodity and the

netted balance is reflected in the consolidated balance sheets as an asset or liability.

the quarter ended June 30, 2020 the Company entered into a series of crude oil put option contracts.

All of these such contracts expired

in July and August 2020.

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 year ended March 31, 2021.

Summary of Realized and Unrealized Losses On Derivative Contracts

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

Long-Term Debt

debt on the Consolidated Balance Sheets consisted of the following as of March 31:

Schedule of Long-Term Debt

Credit facility

Unamortized debt issuance costs (1)

Total long-term debt

the current period, since the Company has no long-term debt outstanding, unamortized debt issuance costs in the amount of $ 12,526

are included in Other noncurrent assets.

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

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

On March 28, 2023, the Agreement was amended to extend the maturity date to March 28,

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

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

Upon closing 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.

Upon closing the first 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.

Upon closing the second amendment to the Agreement, the Company paid a

loan origination fee of $ 9,000

plus legal and recording expenses totaling $ 12,950 ,

which were 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

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

The Company obtained written permission from WTNB prior to declaring the special dividend on April 10, 2023 as discussed in Note 14.

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

The Company obtained written permission from WTNB prior to entering into the current hedge agreement discussed in Note 4.

was no balance outstanding on the credit facility as of March 31, 2023.

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Schedule of Rollforward of Asset Retirement Obligations

Carrying amount of asset retirement obligations, beginning of year

Carrying amount of asset retirement

obligations, beginning of year

Liabilities incurred

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Accretion expense

Carrying amount of asset retirement obligations, end of year

Carrying amount of asset retirement obligations,

Current portion

Non-Current asset retirement obligation

Non-Current asset retirement

August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”).

The IRA 2022, among other

tax provisions, imposes a 15% corporate alternative minimum tax based on financial statement income, effective for tax years beginning

after December 31, 2022.

The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S.

corporations,

effective for stock repurchases after December 31, 2022 .

The IRA 2022 did not impact the Company’s current year tax provision or

the Company’s consolidated financial statements.

Company files a consolidated federal income tax return and various state income tax returns.

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Deferred tax assets:

Percentage depletion carryforwards

depletion carryforwards

Deferred stock-based compensation

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Deferred tax liabilities:

Excess financial accounting bases over tax bases of property and equipment

financial accounting bases over tax bases of property and equipment

Deferred tax asset, net

Valuation allowance

( 1,258,401 )

Net deferred tax

of March 31, 2023, the Company has a statutory depletion carryforward of approximately $ 6,500,000 , which does not expire.

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Schedule of Reconciliation of Provision for Income Taxes

Tax expense at federal statutory rate (1)

Tax expense at federal statutory

Statutory depletion carryforward

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Permanent differences

Total income tax

State income expense

Effective income tax rate

federal statutory rate was 21 % for fiscal years ending March 31, 2022 and 2021.

the years ended March 31, 2022 and 2021, the Company did no t

have any uncertain tax positions.

(1) The federal statutory rate was 21 % for fiscal years ending March 31, 2023 and 2022.

the years ended March 31, 2023 and 2022, the Company did no t have any uncertain tax positions.

the amount of unrecognized tax benefits may change in the next 12 months, the Company does not expect any change to have a significant

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a net deferred tax asset position for years ending March 31, 2023 and 2022.

Our deferred tax asset is $ 753,490

as of March 31, 2022 with a valuation amount

of $ 753,490 .

We believe it is more likely than not that these

deferred tax assets will not be realized.

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.

The 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 March

Our deferred tax asset is $ 3,578 as of March 31, 2023 with

a valuation amount of $ 3,578 .

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

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.

The 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 March 31, 2023.

Major Customers

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and gas production.

fiscal 2022, one purchaser accounted for 67 %

of the total operating revenues and 60 %

of the total oil and natural gas accounts receivable.

In fiscal 2021, one purchaser accounted for 66 %

of the total operating revenues and 71 %

of the total oil and natural gas accounts receivable.

fiscal 2023, one purchaser accounted for 53 % of the total operating revenues and 46 % of the total oil and natural gas accounts receivable

and another purchaser accounted for 8 % of the total operating revenues and 21 % of the total oil and natural gas accounts receivable.

In fiscal 2022, one purchaser accounted for 67 % of the total operating revenues and 60 % of the total oil and natural gas accounts receivable.

Oil and Natural Gas Costs

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Property acquisition costs:

Capitalized asset retirement obligations

Total costs incurred for oil and gas properties

Capitalized asset

retirement obligations

costs incurred for oil and gas properties

Company had the following aggregate capitalized costs relating to its oil and gas property activities at March 31:

3 unchanged sentences

subject to amortization

not subject to amortization

subject to amortization

Oil and gas properties, gross

Less accumulated DD&A

Less accumulated

Total oil and gas properties

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Weighted avg.

common shares outstanding – basic

Effect of the assumed exercise of dilutive stock options

common shares outstanding

Effect of the assumed

exercise of dilutive stock options

Weighted avg.

common shares outstanding – dilutive

shares outstanding – dilutive

Income per common share:

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Anti-dilutive stock options have a weighted average exercise price of $ 18.05 at March 31, 2023.

For the year ended March 31, 2021, no anti-dilutive shares relating to stock options were excluded from the computation of diluted net

Stockholders ’ Equity

For the year ended March 31, 2022, 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 March 31, 2022.

Stockholders’ Equity

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for the treasury account.

There were no shares of common stock repurchased for the treasury account during fiscal 2022 and 2021.

During the year ended March 31, 2023, the Company repurchased 18,416 shares for the treasury account at an

aggregate cost of $ 244,494 , an average price of $ 13.28 per share per share.

There were no shares of common stock repurchased for the

treasury account during fiscal 2022.

Subsequently, in April 2023, the Company’s Board of Directors authorized the use of up to

$ 1,000,000 to repurchase shares of the Company’s common stock, par value, $ 0.50 , for the treasury account.

This authorization replaced

the previously authorized $ 250,000 common stock repurchase program which had $ 5,506 remaining at the time it was replaced.

August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”).

The IRA 2022, among other

tax provisions, establishes a 1 % excise tax on stock repurchases made by publicly traded U.S.

corporations, effective for stock repurchases

after December 31, 2022.

The IRA 2022 does provide for certain exceptions for repurchases of stock including an exception as long as

the aggregate value of the repurchases for the tax year does not exceed $ 1,000,000 .

On September 6, 2022, one of the Company’s directors paid the Company $ 30,179 , representing profit on Company

stock purchased within the six-month window of a previous Company stock sale.

Such payment was made in accordance with Section 16(b) of

the Securities Exchange Act of 1934.

Stock-based Compensation

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the year ended March 31, 2023, the Compensation Committee of the Board of Directors approved and the Company granted 31,000 stock options.

During the year ended March 31, 2021, there were no stock options granted.

The plan also provides for the granting of stock awards.

stock awards were granted during fiscal 2022 and 2021.

During the year ended March 31, 2022, the Compensation Committee of the Board of Directors approved and the Company granted 31,000 stock

Subsequently, in April 2023, the Compensation Committee approved and the Company granted 32,000 stock options.

plan also provides for the granting of stock awards.

No stock awards were granted during fiscal 2023 and 2022.

Company recognized compensation expense of $ 142,783 and $ 87,573 related to vesting stock options in general and administrative expense

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Treasury yield curve in effect at the time

As the Company has never declared dividends, no dividend yield is used in the calculation.

Actual value realized, if any, is

dependent on the future performance of the Company’s common stock and overall stock market conditions.

There is no assurance the

value realized by an optionee will be at or near the value estimated by the Binomial model.

Since the Company has only declared a special one-time dividend, no dividend yield was used in the calculation.

realized, if any, is dependent on the future performance of the Company’s common stock and overall stock market conditions.

is no assurance the value realized by an optionee will be at or near the value estimated by the Binomial model.

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

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

For the year ended March 31,

the year ended March 31,

Grant-date fair value

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

During the year ended March 31, 2022, there were no stock options forfeited or expired.

During the year ended March 31, 2021,

1,000 unvested stock options were forfeited due to the resignation of an employee and 34,200 vested stock options expired unexercised.

During the year ended March 31, 2023, 1,000 unvested stock options were forfeited due to the resignation of an employee.

the year ended March 31, 2022, there were no stock options forfeited or expired.

following table is a summary of activity of stock options for the years ended March 31, 2023 and 2022:

Summary of Activity of Stock Options

Exercise Price

Weighted Aggregate

Average Remaining Contract Life

Average Exercise Price Per Share

Aggregate Average Remaining Contract Life

Outstanding at April 1, 2021

Forfeited or Expired

Outstanding at March 31, 2022

Forfeited or Expired

Outstanding at March 31, 2023

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The Company received proceeds of $ 458,570 from these exercises.

Subsequently, in May 2023,

stock options covering 500 shares were exercised by a former employee.

The Company received proceeds of $ 2,962 from these exercises.

information pertaining to option activity was as follows during the year ended March 31:

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Summary of Information About Options Outstanding

Range of Exercise Prices

Exercise Price

Weighted Average

Contract Life in

Exercise Prices

Average Exercise Price Per Share

Average Remaining Contract Life in Years

Intrinsic Value

$ 3.34 – 4.83

$ 3.34 – 18.05

options at March 31, 2022 expire between August 1, 2024 and July 2031 and have exercise prices ranging from $ 3.34 to $ 8.51 .

options at March 31, 2023 expire between August 1, 2024 and August 2032 and have exercise prices ranging from $ 3.34 to $ 18.05 .

Related Party Transactions

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

Schedule of Operating Lease Assets and Liabilities

March 31, 2022

Operating lease right-of-use asset, beginning balance

of Operating Lease Assets and Liabilities

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 operating lease right-of-use

Operating lease liability,

Total lease liabilities

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Schedule of Future Minimum Lease Payments

Lease Obligation

Fiscal Year Ended March 31, 2024

Fiscal Year Ended March 31, 2025

Total lease payments

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Operating lease liability

operating lease liability, current

Operating lease liability, long term

cash paid for our operating lease for the year ended March 31, 2022 and 2021 was $ 42,237

and $ 48,860 ,

respectively.

Rent expense, less sublease income

of $ 18,555 and

respectively, is included in general and administrative

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 provided small businesses with the resources needed to

maintain their payroll and cover applicable overhead.

The PPP was implemented by the United States Small Business Administration (“SBA”)

with support from the Department of the Treasury.

The PPP provided funds to pay up to 24 weeks of payroll costs including benefits.

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

The Company applied for, and was accepted to participate in this

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.

operating lease

liability, current

Operating lease liability,

cash paid for our operating lease for the year ended March 31, 2023 and 2022 was $ 42,668 and $ 42,237 , respectively.

Rent expense, less

sublease income of $ 15,572 and $ 18,555 , respectively, is included in general and administrative expenses.

Oil and Gas Reserve Data (Unaudited)

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Schedule of Changes in Proved Reserve

Prices utilized in the reserve estimates before adjustments:

Prices utilized in the reserve estimates before

Natural gas per MMBtu

Company’s total estimated proved reserves at March 31, 2022 were approximately 1.616

MBOE of which 50 %

was oil and natural gas liquids and 50 %

was natural gas.

Company’s total estimated proved reserves at March 31, 2023 were approximately 1.552 MBOE of which 47 % was oil and natural gas

liquids and 53 % was natural gas.

in Proved Reserves :

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As of April 1, 2021

Revision of previous estimates

Purchase of minerals in place

Revision of previous

Purchase of minerals

Extensions and discoveries

Sales of minerals in place

Sales of minerals in

As of March 31, 2022

Revision of previous estimates

Purchase of minerals in place

Revision of previous

Purchase of minerals

Extensions and discoveries

Sales of minerals in place

Sales of minerals in

As of March 31, 2023

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change in the timing of new development.

They are primarily working interests on a lease in Reagan County, Texas which are held by production

and still in place to be developed in the future and royalty interests on a lease held by production in Upton County, Texas.

They are primarily royalty interests on leases in Loving, Pecos and Ward Counties, Texas which

are held by production and still in place to be developed in the future.

of Proved Developed and Undeveloped Reserves as of March 31, 2023 and 2022 :

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As of March 31, 2023

March 31, 2022, the

Company reported estimated PUDs of 590 MBOE, which accounted for 37 %

of its total estimated proved oil and gas reserves.

This figure primarily consists of a projected 97

new wells (364 MBOE) operated by others, 26

wells are currently being drilled with plans for 35

wells to follow in fiscal 2023, 17

wells in fiscal 2024 and 19

wells in fiscal 2025 .

The cost of these projects would be funded, to the extent possible, from existing cash balances, cash

flow from operations and bank borrowings.

The remainder may be funded through non-core asset sales and/or sales of our common

March 31, 2023, the Company reported estimated PUDs of 403 MBOE, which accounted for 26 % of its total estimated proved oil and gas reserves .

This figure primarily consists of a projected 84 new wells (234 MBOE) operated by others, 8 wells are currently being drilled with plans

for 15 wells to follow in fiscal 2024, 41 wells in fiscal 2025, 16 wells in fiscal 2026 and 4 wells fiscal 2027.

The cost of these projects

would be funded, to the extent possible, from existing cash balances, cash flow from operations and bank borrowings.

The remainder may

be funded through non-core asset sales and/or sales of our common stock.

following table discloses the Company’s progress toward the conversion of PUDs during fiscal 2023.

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Oil & Natural Gas

Development Costs

PUDs, beginning of year

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Conversions to PD reserves

( 3,612,315 )

Additional PUDs added

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future net cash flows represent an estimate of future net revenues from the production of proved reserves using average prices for 2023

and 2021 along with estimates of the operating costs, production taxes and future development costs necessary to produce such

No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest

and 2022 along with estimates of the operating costs, production taxes and future development costs necessary to produce such reserves.

No deduction has been made for depreciation, depletion or any indirect costs such as general corporate overhead or interest expense.

costs and production taxes are estimated based on current costs with respect to producing oil and natural gas properties.

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Future cash inflows

Future production costs and taxes

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Future net cash flows

Annual 10% discount for estimated timing of cash flows

Annual 10% discount

for estimated timing of cash flows

( 22,793,000 )

( 19,900,000 )

Standardized measure of discounted future net cash flows

Standardized measure

of discounted future net cash flows

in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves:

Schedule of Changes in Standardized Measure of Discounted Future Net Cash Flows to Proved Oil and Gas Reserves

Sales of oil and gas produced, net of production costs

$ (5,244,000 )

$ (1,902,000 )

Sales of oil and gas produced, net of production costs

Sales of oil and gas produced,

net of production costs

$ ( 7,661,000 )

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( 16,829,000 )

Changes in previously estimated development costs

Changes in previously estimated development

Revisions of quantity estimates

1 unchanged sentence

( 2,594,000 )

Net change due to purchases and sales of minerals in place

Extensions and discoveries, less related costs

Net change due to purchases and sales of

minerals in place

Extensions and discoveries, less related

Net change in income taxes

( 1,801,000 )

( 3,861,000 )

Accretion of discount

Changes in timing of estimated cash flows and other

Changes in timing

of estimated cash flows and other

Changes in standardized measure

( 6,213,000 )

Standardized measure, beginning of year

Standardized measure, end of year

Standardized measure,

beginning of year

Standardized measure,

Subsequent Events

May 4, 2022 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.

the first quarter of fiscal 2023, the Company expended approximately $ 237,000 to participate in the drilling of eight horizontal wells

in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico.

the first quarter of fiscal 2023, the Company expended approximately $ 657,000 to participate in the drilling of four horizontal wells

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

June 2022, the Company expended approximately $ 300,000 ,

representing one-half of the total estimated cost,

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.

April 10, 2023, the Company announced that its Board of Directors declared a special dividend of $ 0.10 per common share to its shareholders

of record at the close of business on May 1, 2023.

The special dividend was paid on May 15, 2023.

April 2023, the Company expended approximately $ 133,200 to participate in the drilling of 4 horizontal wells in the Wolfcamp Sand formation

of the Delaware Basin in Lea County, New Mexico.

May 2023, the Company expended approximately $ 210,600 to complete 4 horizontal wells in the Wolfcamp Sand formation of the Delaware Basin

in Lea County, New Mexico that were drilled during fiscal 2023.

June 2023, the Company received approximately $ 258,000 in cash from a sale of joint venture leasehold acreage and marginal producing

working interest wells in Reagan County, Texas.

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

events must be reported and has determined that there are no other subsequent events to be disclosed.

Articles of Incorporation of Mexco Energy Corporation filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K dated

June 24, 1998, and incorporated herein by reference.

Articles of Incorporation of Mexco Energy Corporation filed as Exhibit 3.1 to the Company’s

Annual Report on Form 10-K dated June 24, 1998, and incorporated herein by reference.

Amended Bylaws of Mexco Energy Corporation as amended on September 13, 2011 filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 14, 2011, and incorporated herein by reference.

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First Amendment to Loan Agreement dated February 28, 2020 to the Loan Agreement between West Texas National Bank and Mexco Energy Corporation dated December 31, 2018, and incorporated herein by reference.

Second Amendment to Loan Agreement dated March 28, 2023 to the Loan Agreement between West Texas National Bank and Mexco Energy Corporation dated December 31, 2018.

Code of Business Conduct and Ethics of Mexco Energy Corporation filed with the Company’s Quarterly Report on Form 10-Q filed on November 15, 2004, and incorporated herein by reference.

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XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extenstion Calculation Linkbase Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

1 unchanged sentence

XBRL Taxonomy Extension Presentation Linkbase Document

Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

Page Innteractive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

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-K

Item 9A. Controls and Procedures