What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-06-27 compared with 2023-06-26 · 172 added, 137 removed, 255 unchanged (55% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

following discussion is intended to provide information relevant to an understanding of our financial condition, changes in our financial

14 unchanged sentences

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 Years Ended March 31,

Net cash provided by operating

For the Years Ended March 31,

Net cash provided by operating activities

$ (2,081,960 )

Net cash used in investing activities

1 unchanged sentence

$ (5,441,075 )

$ (2,024,576 )

Net cash used in financing activities

5 unchanged sentences

for the year ended March 31, 2023.

This increase of $2,771,488 in our cash flow operating activities consisted of an increase in our

non-cash expenses of $565,838;

This decrease of $2,081,960 in our cash flow operating activities consisted of increase in our non-cash

expenses of $505,448;

a decrease in our accounts receivable of $426,598;

a decrease of $128,615 in our accounts payable and

accrued expenses;

and, an increase in our net income of $1,807,636.

an increase of $49,673 of our accounts payable and accrued expenses;

and, a decrease in our net income for the current year of $3,317,518.

Variations in cash flow from operating activities may impact our

1 unchanged sentence

expenditures in operating activities consist primarily of 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.

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.

Flow Used in Investing Activities.

3 unchanged sentences

Flow Used in Financing Activities.

Cash flow from financing activities is derived from our changes in long-term debt and in equity

account balances.

Net cash flow used in our financing activities was $209,815 for the year ended March 31, 2023 compared to net cash

flow used in our financing activities of $721,430 for the year ended March 31, 2022.

During the year ended March 31, 2023, we received

advances and made payments of $675,000 on our credit facility, received proceeds of $16,700 from the exercise of director stock options,

received payment of $30,179 form a director for profits on purchase of stock within the six-month window of a previous stock sale, expended

$244,494 for the purchase of 18,416 shares of our stock for the treasury and, expended $12,200 for the renewal of our credit facility.

During the year ended March 31, 2022, we received advances of $275,000 and made payments of $1,455,000 on our credit facility and received

proceeds of $458,570 for the exercise of employee and director stock options.

Cash flow from financing activities is derived from our changes in long-term debt and in

equity account balances.

Net cash flow used in our financing activities was $779,723 for the year ended March 31, 2024 compared to

net cash flow used in our financing activities of $209,815 for the year ended March 31, 2023.

During the year ended March 31, 2024,

we expended $213,600 to pay the annual dividend, expended $585,035 to purchase 50,101 shares of our stock for the treasury account,

and received proceeds of $19,662 for the exercise of employee and director stock options.

During the year ended March 31, 2023, we received proceeds of $16,700 from the exercise of director stock options, received payment of $30,179 from a director for profits on

purchase of stock within the six-month window of a previous stock sale, expended $244,494 for the purchase of 18,416 shares of our

stock for the treasury and, expended $12,200 for the renewal of our credit facility.

net cash increased $237,713, leaving cash and cash equivalents on hand of $2,473,484 as of March 31, 2024.

had working capital of $3,475,776 as of March 31, 2023 compared to working capital of $2,469,776 as of March 31, 2022, an increase of

had working capital of $3,259,200 as of March 31, 2024 compared to working capital of $3,475,776 as of March 31, 2023, a decrease of

$216,576 for the reasons set forth below.

1 unchanged sentence

Participations in Fiscal 2024.

The Company participated in the drilling and completion of 50 horizontal wells at a cost of approximately

$4,200,000, of which $3,750,000 was expended during the fiscal year ending March 31, 2023.

Eighteen of these wells have not been completed.

Thirty-nine 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.

The Company participated in the drilling and completion of 51 horizontal wells and 1 vertical well

at a cost of approximately $2,300,000, of which $2,000,000 was expended during the fiscal year ending March 31, 2024.

Nineteen of these

wells have not been completed.

Forty-eight 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.

The remaining three horizontal wells are in the Bakken formation in McKenzie County,

North Dakota and the vertical well is in Irion County, Texas.

addition to the above working interests, there were 101 gross wells (.025 net wells) drilled by other operators on Mexco’s royalty

interests and 348 gross wells (7.65 net wells) obtained through acquisitions.

April 2022, Mexco expended approximately $176,000 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%.

Subsequently, in May 2023, Mexco

expended approximately $211,000 to complete these wells.

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 were completed in October 2022 with initial average production rates of 507 barrels of oil, 2,147 barrels

of water and 2,147,000 cubic feet of gas per day, or, 560 barrels of oil equivalent per day.

expended approximately $681,000 to participate in the drilling and completion of eight 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%.

These wells were completed in

February and March 2023 with initial average production rates of 1,011 barrels of oil, 4,581 barrels of water and 3,577,000 cubic feet

of gas per day, or 1,607 barrels of oil equivalent per day.

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%.

This well was completed in October 2022

with initial average production rates of 295 barrels of oil, 1,313 barrels of water and 237,000 cubic feet of gas per day, or, 335 barrels

of oil equivalent per day.

expended approximately $649,000 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.

expended approximately $264,000 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%.

These wells began producing in

October 2022 with initial average production rates of 1,154 barrels of oil, 2,887 barrels of water and 2,966,000 cubic feet of gas per

day, or, 1,648 barrels of oil equivalent per day.

expended approximately $84,000 to participate in the drilling and completion of two horizontal wells in the Penn Shale formation of the

Delaware Basin in Lea County, New Mexico.

Two of these wells began producing in November

2023 and the other two in March 2024 with initial average production rates of 822 barrels of oil, 4,159 barrels of water and 2,574,000

cubic feet of gas per day, or 1,251 barrels of oil equivalent (“BOE”) per day.

expended approximately $152,000 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 .4%.

These wells began producing in January

2023 with initial average production rates of 1,367 barrels of oil, 3,900 barrels of water and 1,786,000 cubic feet of gas per day, or,

1,665 barrels of oil equivalent per day.

expended approximately $30,000 to participate in the drilling and completion of two horizontal wells in the Bone Spring formation of

These wells began producing in November 2023 with initial

average production rates of 837 barrels of oil, 1,794 barrels of water and 659,000 cubic feet of gas per day, or 947 BOE per day.

expended approximately $105,000 to participate in the drilling and completion 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 .1%.

These wells began producing in February

2023 with initial average production rates of 622 barrels of oil, 1,991 barrels of water and 262,000 cubic feet of gas per day, or, 666

barrels of oil equivalent per day.

expended approximately $93,000 to participate in the drilling and completion of eight horizontal wells in the Spraberry trend of the

Midland Basin in Reagan County, Texas.

Mexco’s working interest in these wells is approximately .285%.

These wells began producing

in December 2022.

expended $16,000 to participate in the drilling and completion of three horizontal wells in the Bone Spring formation of the Delaware

Basin in Eddy County, New Mexico.

Mexco’s working interest in these wells is .05%.

These wells were subsequently completed in May

2023 with initial average production rates of 437 barrels of oil, 983 barrels of water and 603,000 cubic feet of gas per day, or, 538

barrels of oil equivalent per day.

February 2023, Mexco expended approximately $31,000 to participate in the drilling and completion of seven horizontal wells in the Bone

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

Mexco’s working interest in these wells is approximately .03%.

These wells are currently being completed.

January 2023, Mexco expended $180,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware

These wells began

producing in September 2023 with initial average production rates of 582 barrels of oil, 1,488 barrels of water and 791,000 cubic feet

of gas per day, or 714 BOE per day.

expended approximately $870,000 to participate in the drilling of five horizontal wells in the Bone Spring Sand formation of the Delaware

Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is approximately 1.16%.

These wells are currently awaiting

completion operations.

March 2023, Mexco expended approximately $60,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of

the Delaware Basin in Lea County, New Mexico.

Subsequently, in April 2024, two

of these wells were completed with initial average production rates of 1,065 barrels of oil, 2,107 barrels of water and 706,500 cubic

feet of gas per day, or 1,183 BOE per day.

July 2023, Mexco expended approximately $36,000 to participate in the drilling and completion of two horizontal wells in the Bone Spring

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

Mexco’s working interest in these wells is approximately .1%.

These wells began

drilling in April 2023.

wells began producing in September 2023 with initial average production rates of 898 barrels of oil, 1,969 barrels of water and 503,000

cubic feet of gas per day, or 982 BOE per day.

November 2023, Mexco expended approximately $32,000 to participate in the drilling and completion of one horizontal well in the Penn

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

Mexco’s working interest in this well is .165%.

February 2024, Mexco expended approximately $74,000 to participate in the drilling of two horizontal wells in the Bone Spring Sand formation

of the Delaware Basin in Lea County, New Mexico.

Mexco’s working interest in these wells is .53%.

Subsequently, in May 2024, Mexco

expended approximately $90,000 to complete these wells.

February 2024, Mexco expended approximately $170,000 to participate in the drilling of four horizontal wells in the Bone Spring Sand

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

Mexco’s working interest in these wells is .45%.

February 2024, Mexco expended approximately $153,000 to participate in an exploratory well in the Fusselman Formation of Irion County,

Subsequently, in May 2024, the Company expended $27,000 for additional drilling costs.

This well was later determined to be noncommercial

and will be plugged and abandoned in fiscal 2025.

October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000

of which $400,000 has been funded to date.

The limited liability company is capitalized at approximately $100 million to purchase mineral

interests in the Utica and Marcellus areas in the state of Ohio.

of which $800,000 has been funded as of March 31, 2024.

The limited liability company is capitalized at approximately $100 million to

purchase mineral interests in the Utica and Marcellus areas in the state of Ohio.

Subsequently, in May 2024, the Company funded another

$200,000 toward this investment.

This LLC has returned $81,231 or 8% of the total investment.

of Wells Drilled in Fiscal 2023.

The Company expended approximately $329,000 for the completion costs of 8 horizontal wells located

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

The first 4 of these wells began producing in

May 2022 and the remaining 4 were completed in November 2022 with initial average production rates of 1,168 barrels of oil, 3,797 barrels

of water and 2,621,000 cubic feet of gas per day, or, 1,605 barrels of oil equivalent per day.

in Fiscal 2023.

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 Company also

acquired, for a purchase price of $117,200, royalty interests covering 28 producing wells in 6 counties in the Haynesville trend

area of Louisiana and 5 counties in Texas.

Participations.

In May 2023, Mexco expended approximately $133,000 to participate in the drilling of four horizontal wells in the

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

expended approximately $68,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of the Delaware Basin

The Company expended approximately $450,000 in the completion of 21 horizontal wells in which the

Company participated in fiscal 2023.

Company expended approximately $427,000 for the completion costs of eight horizontal wells in the Wolfcamp Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2023.

Mexco’s working interest in these

wells is .52%.

These wells began producing in October 2023 with initial average production rates of 825 barrels of oil, 3,540 barrels

of water and 2,150,000 cubic feet of gas per day, or, 1,183 BOE per day.

horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico in which the Company participated during

fiscal 2023 were completed in May 2023 with initial average production rates of 437 barrels of oil, 983 barrels of water and 603,000

cubic feet of gas per day, or, 538 barrels of oil equivalent per day.

Mexco’s working interest in these wells is .05%.

horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico in which the Company participated

during fiscal 2023 were completed with initial average production rates of 1,827 barrels of oil, 1,945 barrels of water and 2,264,000

cubic feet of gas per day, or, 2,204 barrels of oil equivalent per day.

Mexco’s working interest in these wells is .033%.

Acquisitions.

During the year, the Company acquired royalty interests in 39 producing wells with additional potential locations for development

in Howard and Lee Counties, Texas for an aggregate purchase price of $261,700.

February 2024, the Company acquired royalty interests in 8 producing wells with additional potential locations for development operated

by PDC Energy, Inc.

and 4 producing wellbores operated by Chevron Corporation for an aggregate purchase price of $575,600.

are located in Weld County, Colorado.

February 2024, the Company acquired royalty interests in 255 producing wells in the Haynesville trend area of Caddo Parish, Louisiana

for a purchase price of $390,300.

December 2023, the Company acquired royalty (mineral) interests in 7 wells operated by Occidental Petroleum Corporation and located in

Reeves County, Texas for a purchase price of $364,000 which is effective November 1, 2023.

In January 2024, the Company acquired an additional

interest in these same wells for a purchase price of $91,000, effective December 1, 2023.

November 2023, the Company acquired small royalty interests in 27 producing wells as well as non-producing mineral interests in 1,280

gross acres located in Crane, Ector, Midland and Upton Counties, Texas for an aggregate purchase price of $105,800.

Subsequently,

in April 2024, the Company acquired small royalty (mineral) interests in 21 wells operated by Anadarko Petroleum Corporation and Cimarex

Energy Company and located in Reeves County, Texas for a purchase price of $158,000 which is effective April 1, 2024.

of Properties.

During the first quarter of fiscal 2024, the Company received approximately $280,000 in cash from a sale of joint

venture leasehold acreage and marginal producing working interest wells in Reagan County, Texas, marginal producing working interest

wells in Pecos County, Texas and interest in surface acreage in Palo Pinto County, Texas.

December 2023, the Company made on a 3-year Term Assignment of 98% of the Company’s leasehold interest in certain deep rights of

200 acres in Loving and Ward Counties, Texas.

The Company received $5,000 per net leasehold acre in the total amount of approximately

The Company retained the remaining 2% leasehold interest as a participating interest in the full unit at approximately .625%

working interest.

The Company also retained an overriding royalty interest of 5% proportionately reduced.

in December 2023, the Company made on a 3-year Term Assignment of the Company’s leasehold interest in 12.96 net mineral acres located

in Lea County, New Mexico.

The Company received $2,500 per net leasehold acre in the total amount of $32,400.

The Company retained an

overriding royalty interest equal to the positive difference between 25% and any existing burdens of record as of the effective date.

Participations.

In April 2024, Mexco expended approximately $80,000 to participate in the drilling of five horizontal wells in the

Bone Spring formation of the Delaware Basin in Lea County, New Mexico and $127,800 to drill four horizontal wells in the Wolfcamp Sand

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

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 $62.72 per bbl in March 2023

to a high of $118.09 per bbl in June 2022.

the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $63.10 per bbl in June 2023

to a high of $89.66 per bbl in September 2023.

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

a low of $1.93 per MMBtu in March 2023 to a high of $9.85 per MMBtu in August 2022.

a low of $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

March 31, 2024 the WTI posted price for crude oil was $79.15 per bbl and the Henry Hub spot price for natural gas was $1.54 per MMBtu.

2 unchanged sentences

2024 Compared to Fiscal 2023

had net income of $4,662,702 for the year ended March 31, 2023 compared to $2,855,066 for the year ended March 31, 2022, a 63% increase

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

an increase in operating expenses that is further explained below.

had net income of $1,344,952 for the year ended March 31, 2024 compared to $4,662,702 for the year ended March 31, 2023, a 71% decrease

as a result of a decrease in operating revenues due to a decrease in oil and natural gas prices and production that is further explained

and natural gas sales.

Revenue from oil and natural gas sales was $9,380,623 for the year ended March 31, 2023, a 44% increase from

Revenue from oil and natural gas sales was $6,462,647 for the year ended March 31, 2024, a 31% decrease from

$9,380,623 for the year ended March 31, 2023.

This resulted from an increase in oil and natural gas production volumes and an increase

in oil and natural gas prices.

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

received during the fiscal years ended March 31:

This resulted from a decrease in oil and natural gas prices and production volumes.

following table sets forth our oil and natural gas revenues, production quantities and average prices received during the fiscal years

ended March 31:

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $1,719,719 in fiscal 2023, a 34% increase from $1,281,112 in fiscal 2022.

Production costs were $1,526,472 in fiscal 2024, an 11% decrease from $1,719,719 in fiscal 2023.

This was primarily

the result of an increase in production taxes and marketing charges as a result of the increase in oil and gas revenues.

the result of a decrease in production taxes as a result of the decrease in oil and gas revenues.

Depreciation,

2 unchanged sentences

a 6% increase from $1,854,047 in fiscal 2023.

This was primarily due to an increase in oil and gas production and an increase in the

full cost pool amortization and a decrease in the oil and gas reserves.

This was primarily due to an increase in the full cost pool amortization and a decrease

in the oil and gas reserves partially offset by a decrease in oil and gas production.

and administrative expenses.

2 unchanged sentences

This was primarily due to an increase in employee stock option compensation, salaries

and contract services, legal and accounting fees.

and contract services, and accounting fees.

Interest expense was $5,234 in fiscal 2024, a 60% decrease from $13,097 in fiscal 2023, due to a decrease in borrowings.

There was no federal income tax for fiscal 2023 or fiscal 2022.

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.

State income tax was $164,510 in fiscal 2023, a 61% increase from $102,356 in fiscal 2022, due to the increase in oil and natural gas

The effective tax rate for fiscal 2023 and fiscal 2022 was 3.4% and 3.5%, respectively.

Federal income tax for fiscal 2024 was $500,915.

There was no federal income tax for fiscal 2023 because the Company was

in a net deferred tax asset position.

State income tax was $119,629 in fiscal 2024, a 27% decrease from $164,510 for fiscal 2023 due

to the decrease in oil and natural gas sales in the State of New Mexico.

The effective tax rate for state and federal taxes combined

for fiscal 2024 and fiscal 2023 was 32% and 3%, respectively.

The increase in the effective federal tax rate is the result of the

Company now being in a net deferred tax liability position and the reconciliation to the federal tax return.

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

1 unchanged sentence

future payments we are obligated to make based on agreements in place as of March 31, 2024:

Payments due in:

less than 1 year

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 $5,191 1-3 years for his portion of the shared office

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

Of this total obligation for the remainder of the lease, our majority shareholder will pay $5,191 less than 1 year for his

portion of the shared office space.

Capital Resources

134 unchanged sentences

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

Credit is extended

based on an evaluation of a customer’s financial condition and, generally, is uncollateralized.

Accounts receivable under joint

operating agreements have a right of offset against future oil and gas revenues if a producing well is completed.

The collectability

of receivables is assessed and an allowance is made for any doubtful accounts.

The allowance for doubtful accounts is determined based

on our previous loss history.

extended based on an evaluation of a customer’s financial condition and, generally, is uncollateralized.

Accounts receivable

under joint operating agreements have a right of offset against future oil and gas revenues if a producing well is completed.

collectibility of receivables is assessed and an allowance is made for any credit losses.

The allowance for credit losses is

determined based on a number of factors, including the length of time accounts receivable are past due, the Company’s previous

loss history, the debtor’s current ability to pay its obligation to the Company, the condition of the general economy and

the industry as a whole.

The Company recognizes deferred tax assets and liabilities for future tax consequences of temporary differences between the

32 unchanged sentences

Rent expense for lease payments is recognized on a straight-line basis over the lease term.

Accounting Pronouncements.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-09, “Income

Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires disaggregated information about the Company’s

effective tax rate reconciliation and income taxes paid.

This ASU is effective for annual periods beginning after December 15, 2024 on

a prospective basis and early adoption is permitted.

The Company is currently evaluating the impact of this standard on its tax disclosures.

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 7. Management’s Discussion and Analysis