MEXCO ENERGY CORP 10-Q

Item 1. Financial Statements Mexco Energy Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, March 31, 2024 2024 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 910,005 $ 2,473,484 Accounts receivable: Oil and natural gas sales 1,037,754 1,001,709 Trade 48,759 9,186 Prepaid costs and expenses 26,050 56,193 Prepaid drilling 29,085 148,748 Total current assets 2,051,653 3,689,320 Property and equipment, at cost Oil and gas properties, using the full cost method 51,263,675 48,304,585 Other 121,926 121,926 Accumulated depreciation, depletion and amortization ( 35,945,246 ) ( 34,184,837 ) Property and equipment, net 15,440,355 14,241,674 Investments – cost basis 1,900,000 1,100,000 Operating lease, right-of-use asset 138,577 19,263 Other noncurrent assets 5,373 8,597 Total assets $ 19,535,958 $ 19,058,854 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 220,550 $ 221,603 Income tax payable 312,036 189,254 Operating lease liability, current 49,872 19,263 Total current liabilities 582,458 430,120 Long-term liabilities Operating lease liability, long-term 88,705 - Asset retirement obligations 682,061 688,808 Deferred income tax liabilities 155,975 311,661 Total long-term liabilities 926,741 1,000,469 Total liabilities 1,509,199 1,430,589 Commitments and contingencies - - Stockholders’ equity Preferred stock - $ 1.00 par value; 10,000,000 shares authorized; none outstanding - - Common stock - $ 0.50 par value; 40,000,000 shares authorized; 2,239,283 and 2,226,916 shares issued; 2,046,000 and 2,091,399 shares outstanding as of December 31, 2024 and March 31, 2024, respectively 1,119,641 1,113,458 Additional paid-in capital 8,795,013 8,567,856 Retained earnings 9,990,851 9,122,481 Treasury stock, at cost ( 193,283 and 135,517 shares, respectively) ( 1,878,746 ) ( 1,175,530 ) Total stockholders’ equity 18,026,759 17,628,265 Total liabilities and stockholders’ equity $ 19,535,958 $ 19,058,854 The accompanying notes are an integral part of the consolidated financial statements. 3 Mexco Energy Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 2024 2023 2024 2023 Three Months Ended Nine Months Ended December 31, December 31, 2024 2023 2024 2023 Operating revenue: Oil sales $ 1,563,663 $ 1,387,008 $ 4,595,585 $ 3,916,492 Natural gas sales 264,741 223,587 616,728 789,903 Other 62,861 45,848 156,014 105,077 Total operating revenues 1,891,265 1,656,443 5,368,327 4,811,472 Operating expenses: Production 460,241 401,035 1,311,066 1,143,116 Accretion of asset retirement obligation 7,705 7,225 23,229 22,121 Depreciation, depletion, and amortization 636,424 400,337 1,760,409 1,268,703 General and administrative 340,514 335,152 1,042,084 981,664 Total operating expenses 1,444,884 1,143,749 4,136,788 3,415,604 Operating income 446,381 512,694 1,231,539 1,395,868 Other income (expenses): Interest income 7,315 36,936 50,891 86,995 Interest expense ( 2,868 ) ( 1,075 ) ( 5,026 ) ( 3,235 ) Net other income (expense) 4,447 35,861 45,865 83,760 Income before provision for income taxes 450,828 548,555 1,277,404 1,479,628 (Benefit from) provision for income taxes ( 18,305 ) 202,945 200,034 398,971 Income tax expense (benefit): Current 257,042 32,959 355,720 79,123 Deferred ( 275,347 ) 169,986 ( 155,686 ) 319,848 Total income tax (benefit) expense ( 18,305 ) 202,945 200,034 398,971 Net income $ 469,133 $ 345,610 $ 1,077,370 $ 1,080,657 Income per common share: Basic: $ 0.23 $ 0.16 $ 0.52 $ 0.51 Diluted: $ 0.22 $ 0.16 $ 0.51 $ 0.50 Weighted average common shares outstanding: Basic: 2,046,000 2,103,503 2,070,086 2,120,611 Diluted: 2,091,808 2,151,783 2,114,936 2,169,708 Dividends declared per share $ - $ - $ 0.10 $ 0.10 The accompanying notes are an integral part of the consolidated financial statements. 4 Mexco Energy Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Common Stock Par Value Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Balance at April 1, 2024 $ 1,113,458 $ 8,567,856 $ 9,122,481 $ ( 1,175,530 ) $ 17,628,265 Net income - - 291,039 - 291,039 Dividends paid - - ( 209,000 ) - ( 209,000 ) Issuance of stock through options exercised 6,183 71,458 - - 77,641 Purchase of stock - - - ( 188,637 ) ( 188,637 ) Stock based compensation - 52,439 - - 52,439 Balance at June 30, 2024 $ 1,119,641 $ 8,691,753 $ 9,204,520 $ ( 1,364,167 ) $ 17,651,747 Net income - - 317,198 - 317,198 Purchase of stock - - - ( 514,579 ) ( 514,579 ) Stock based compensation - 51,630 - - 51,630 Balance at September 30, 2024 $ 1,119,641 $ 8,743,383 $ 9,521,718 $ ( 1,878,746 ) $ 17,505,996 Net income - - 469,133 - 469,133 Stock based compensation - 51,630 - - 51,630 Balance at December 31, 2024 $ 1,119,641 $ 8,795,013 $ 9,990,851 $ ( 1,878,746 ) $ 18,026,759 Common Stock Par Value Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Balance at April 1, 2023 $ 1,110,708 $ 8,321,145 $ 7,991,129 $ ( 590,495 ) $ 16,832,487 Net income - - 465,614 - 465,614 Dividends paid - - ( 213,600 ) - ( 213,600 ) Issuance of stock through options exercised 250 2,712 - - 2,962 Stock based compensation - 54,975 - - 54,675 Balance at June 30, 2023 $ 1,110,958 $ 8,378,832 $ 8,243,143 $ ( 590,495 ) $ 17,142,438 Net income - - 269,433 - 269,433 Prurchase of stock - - - ( 325,256 ) ( 325,256 ) Stock based compensation - 58,848 - - 58,848 Balance at September 30, 2023 $ 1,110,958 $ 8,437,680 $ 8,412,576 $ ( 915,751 ) $ 17,145,463 Balance $ 1,110,958 $ 8,437,680 $ 8,412,576 $ ( 915,751 ) $ 17,145,463 Net income - - 345,610 - 345,610 Stock based compensation - 58,847 - - 58,847 Purchase of stock - - - ( 129,876 ) ( 129,876 ) Balance at December 31, 2023 $ 1,110,958 $ 8,496,527 $ 8,858,186 $ ( 1,045,627 ) $ 17,420,044 Balance $ 1,110,958 $ 8,496,527 $ 8,858,186 $ ( 1,045,627 ) $ 17,420,044 SHARE ACTIVITY Common stock shares, issued: Balance at April 1, 2024 2,226,916 Issued 12,367 Balance at December 31, 2024 2,239,283 Common stock shares, held in treasury: Balance at April 1, 2024 ( 135,517 ) Acquisitions ( 57,766 ) Balance at Dec. 31, 2024 ( 193,283 ) Common stock shares, outstanding at December 31, 2024 2,046,000 The accompanying notes are an integral part of the consolidated financial statements. 5 Mexco Energy Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended December 31, (Unaudited) 2024 2023 Cash flows from operating activities: Net income $ 1,077,370 $ 1,080,657 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax (benefit) expense ( 155,686 ) 319,848 Stock-based compensation 155,699 172,670 Depreciation, depletion and amortization 1,760,409 1,268,703 Accretion of asset retirement obligations 23,229 22,121 Amortization of debt issuance costs 3,224 3,235 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable ( 75,618 ) 454,133 (Increase) decrease in right-of-use asset ( 119,314 ) 42,076 Decrease in prepaid expenses 30,143 36,023 Increase in accounts payable and accrued expenses 15,651 32,042 Settlement of asset retirement obligations ( 16,088 ) ( 14,715 ) Increase in income taxes payable 122,782 - Decrease (increase) in operating lease liability 119,314 ( 42,076 ) Net cash provided by operating activities 2,941,115 3,374,717 Cash flows from investing activities: Additions to oil and gas properties ( 3,072,589 ) ( 1,471,543 ) Investment in limited liability companies at cost ( 800,000 ) ( 200,000 ) Proceeds from sale of oil and gas properties and equipment 202,570 306,513 Net cash used in investing activities ( 3,670,019 ) ( 1,365,030 ) Cash flows from financing activities: Proceeds from exercise of stock options 77,641 2,962 Debt issuance costs - ( 750 ) Proceeds from long-term debt 650,000 - Reduction of long-term debt ( 650,000 ) - Dividends paid ( 209,000 ) ( 213,600 ) Acquisition of treasury stock ( 703,216 ) ( 455,132 ) Net cash used in financing activities ( 834,575 ) ( 666,520 ) Net (decrease) increase in cash and cash equivalents ( 1,563,479 ) 1,343,167 Cash and cash equivalents at beginning of period 2,473,484 2,235,771 Cash and cash equivalents at end of period $ 910,005 $ 3,578,938 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,802 $ - Cash paid for income taxes $ 200,683 $ - Accrued capital expenditures included in accounts payable $ 4,991 $ 15,667 Non-cash investing and financing activities: Asset retirement obligations $ 3,631 $ 2,838 The accompanying notes are an integral part of the consolidated financial statements. 6 Mexco Energy Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Nature of Operations Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest 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”). 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 fifteen states. All of the Company’s oil and gas interests are operated by others. 2. Basis of Presentation and Significant Accounting Policies Principles of Consolidation . The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated. Estimates 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. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results. Interim Financial Statements . In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2024, and the results of its operations and cash flows for the interim periods ended December 31, 2024 and 2023. The consolidated financial statements as of December 31, 2024 and for the three and nine month periods ended December 31, 2024 and 2023 are unaudited. The consolidated balance sheet as of March 31, 2024 was derived from the audited balance sheet filed in the Company’s 2024 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K. Oil and Natural Gas Properties . The Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all costs (direct and indirect) associated with acquisition, exploration, and development of oil and natural gas properties are capitalized. Costs capitalized include acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling and equipping productive and non-productive wells. Drilling costs include directly related overhead costs. All of the Company’s capitalized costs are subject to amortization. In addition, capitalized costs less accumulated depletion and related deferred income taxes are not allowed to exceed an amount (the full cost ceiling) equal to the sum of: 1)the present value of estimated future net revenues discounted at ten percent computed in compliance with SEC guidelines; 2)plus the cost of properties not being amortized; 3)plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; 4)less income tax effects related to differences between the book and tax basis of the properties. No impairments on oil and natural gas properties as a result of the ceiling test were recorded for the three and nine months ended December 31, 2024 and 2023. Investments . The Company accounts for investments of less than 3% of any limited liability companies at cost . The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations. Segments . Based on the Company’s organizational structure, the Company has one operating segment, which is crude oil and natural gas development, exploration and production. In addition, the Company has a single, company-wide management team that allocates capital resources to maximize profitability and measures financial performance as a single enterprise. 3. Asset Retirement Obligations The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The fair value of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. The ARO is included in the consolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses. 7 The following table provides a rollforward of the AROs for the first nine months of fiscal 2025: Schedule of Rollforward of Asset Retirement Obligations Carrying amount of asset retirement obligations as of April 1, 2024 $ 718,808 Liabilities incurred 3,631 Liabilities settled ( 33,607 ) Accretion expense 23,229 Carrying amount of asset retirement obligations as of December 31, 2024 712,061 Less: Current portion 30,000 Non-Current asset retirement obligation $ 682,061 4. Stock-based Compensation The Company recognized stock-based compensation expense of $ 51,630 and $ 58,847 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2024 and 2023, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2024 and 2023 was $ 155,699 and $ 172,670 , respectively. The total cost related to non-vested awards not yet recognized at December 31, 2024 totals $ 330,113 which is expected to be recognized over a weighted average of 1.78 years. During the nine months ended December 31, 2024, no stock options were granted. During the nine months ended December 31, 2023, the Compensation Committee of the Board of Directors approved and the Company granted 32,000 stock options exercisable at $ 12.68 per share with an estimated fair value of $ 279,360 . These options are exercisable at a price not less than the fair market value of the stock at the date of grant, have an exercise period of ten years and generally vest over four years . Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted during the nine months ended December 31, 2024 and 2023. All such amounts represent the weighted average amounts. Schedule of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binominal Models Nine Months Ended December 31 2024 2023 Grant-date fair value - $ 8.73 Volatility factor - 56.5 % Dividend yield - - Risk-free interest rate - 3.44 % Expected term (in years) - 6.25 The following table is a summary of activity of stock options for the nine months ended December 31, 2024: Summary of Activity of Stock Options Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Life in Years Intrinsic Value Outstanding at April 1, 2024 165,750 $ 9.36 6.62 $ 103,275 Granted - - Exercised ( 12,367 ) 6.28 Forfeited or Expired ( 2,500 ) - Outstanding at December 31, 2024 150,883 $ 9.52 6.23 $ 265,761 Vested at December 31, 2024 105,508 $ 7.69 5.55 $ 378,561 Exercisable at December 31, 2024 105,508 $ 7.69 5.55 $ 378,561 During the nine months ended December 31, 2024, stock options covering 12,367 shares were exercised with a total intrinsic value of $ 92,316 . The Company received proceeds of $ 77,641 from these exercises. During the nine months ended December 31, 2023, stock options covering 500 shares were exercised with a total intrinsic value of $ 2,416 . The Company received proceeds of $ 2,962 from these exercises. 8 During the nine months ended December 31, 2024, 1,875 unvested stock options and 625 vested stock options were forfeited due to the resignation of an employee. There were no stock options forfeited or expired during the nine months ended December 31, 2023. No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards. Outstanding options at December 31, 2024 expire between September 2028 and April 2033 and have exercise prices ranging from $ 3.34 to $ 18.05 . 5. Long Term Debt On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which originally provided for a credit facility of $ 1,000,000 with a maturity date of December 28, 2021 . The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually. On February 28, 2020, the Agreement was amended to increase the credit facility to $ 2,500,000 , extend the maturity date to March 28, 2023 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, 2026 . Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent ( 0.5 %) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of December 31, 2024, there was $ 1,500,000 available for borrowing by the Company on the facility. No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2026 . 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 deferred over the life of the credit facility. Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties. The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter. In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the special dividend on April 30, 2024 as discussed in Note 10. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval. There was no balance outstanding on the line of credit as of December 31, 2024. 6. Leases The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes 702 square feet of office space shared with and paid by our majority shareholder. In June 2024, the Company agreed to re-extend its lease at a flat (unescalated) rate for another 36 months. The amended lease now expires on July 31, 2027 . The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets. 9 Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 9 %. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term. The balance sheets classification of lease assets and liabilities was as follows: Schedule of Operating Lease Assets and Liabilities December 31, 2024 Assets Operating lease right-of-use asset, beginning balance $ 19,263 Current period amortization ( 38,759 ) Lease extension 158,073 Total operating lease right-of-use asset $ 138,577 Liabilities Operating lease liability, current $ 49,872 Operating lease liability, long term 88,705 Total lease liabilities $ 138,577 Future minimum lease payments as of December 31, 2024 under non-cancellable operating leases are as follows: Schedule of Future Minimum Lease Payments Lease Obligation Fiscal Year Ended March 31, 2025 $ 15,080 Fiscal Year Ended March 31, 2026 60,320 Fiscal Year Ended March 31, 2027 60,320 Fiscal Year Ended March 31, 2028 20,107 Total lease payments $ 155,827 Less: imputed interest ( 17,250 ) Operating lease liability 138,577 Less: operating lease liability, current ( 49,872 ) Operating lease liability, long term $ 88,705 Net cash paid for our operating lease for the nine months ended December 31, 2024 and 2023 was $ 35,116 and $ 32,001 , respectively. Rent expense, less sublease income of $ 9,430 is included in general and administrative expenses. 7. Income Taxes The income tax provision consists of the following for the nine months ended December 31, 2024 and 2023: Schedule of Income Tax Provision 2024 2023 Nine Months Ended December 31 2024 2023 Current income tax expense: Federal $ 322,708 $ - State 33,012 79,123 Total current income tax expense 355,720 79,123 Deferred income tax (benefit) expense: Federal ( 94,746 ) 319,848 State ( 60,940 ) - Total deferred income tax (benefit) expense ( 155,686 ) 319,848 Total income tax expense: $ 200,034 $ 398,971 10 The following table summarizes our income tax expense and effective income tax rate for the nine months ended December 31 follows: Schedule of Reconciliation of Provision for Income Taxes 2024 2023 Income tax expense $ 200,034 $ 398,971 Effective income tax rate (1) 16 % 27 % (1) The federal statutory rate was 21 % for nine months ended December 31, 2024 and 2023. Total income tax expense from continuing operations for the nine months ended December 31, 2024 and 2023 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to state income taxes net of federal benefit and the impact of permanent differences between book and taxable income. 8. Related Party Transactions Related party transactions for the Company primarily relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the three months ended December 31, 2024 and 2023 was $ 16,174 and $ 3,625 , respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2024 and 2023 was $ 21,462 and $ 21,619 , respectively. The principal stockholder pays for his share of the lease amount for the shared office space directly to the lessor. Amounts paid by the principal stockholder directly to the lessor for the three months ending December 31, 2024 and 2023 were $ 2,544 and $ 3,893 , respectively. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2024 and 2023 were $ 9,430 and $ 11,679 , respectively. 9. Income Per Common Share The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and nine month periods ended December 31, 2024 and 2023: Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share 2024 2023 2024 2023 Three Months Ended Nine Months Ended December 31 December 31 2024 2023 2024 2023 Net income $ 469,133 $ 345,610 $ 1,077,370 $ 1,080,657 Shares outstanding: Weighted avg. shares outstanding – basic 2,046,000 2,103,503 2,070,086 2,120,611 Effect of assumed exercise of dilutive stock options 45,808 48,280 44,850 49,097 Weighted avg. shares outstanding – dilutive 2,091,808 2,151,783 2,114,936 2,169,708 Income per common share: Basic $ 0.23 $ 0.16 $ 0.52 $ 0.51 Diluted $ 0.22 $ 0.16 $ 0.51 $ 0.50 For the three and nine months ended December 31, 2024, 60,500 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 $ 15.34 at December 31, 2024. For the three and nine months ended December 31, 2023, 63,000 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 $ 15.32 at December 31, 2023. 10. Stockholders’ Equity In April 2024, the 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 program does not have an expiration date and may be modified, suspended or terminated at any time by the board of directors. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions. The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow. 11 During the nine months ended December 31, 2024, the Company repurchased 57,766 shares for the treasury at an aggregate cost of $ 703,216 . During the nine months ended December 31, 2023, the Company repurchased 37,161 shares for the treasury at an aggregate cost of $ 455,133 . On April 30, 2024 , the Board of Directors declared a regular annual dividend of $ 0.10 per common share. The Company paid the dividend of $ 209,000 on June 4, 2024 to the stockholders of record at the close of business on May 21, 2024. On April 10, 2023 , the Board of Directors declared a special dividend of $ 0.10 per common share. The Company paid the dividend of $ 213,600 on May 15, 2023 to the stockholders of record at the close of business on May 1, 2023. The Company can provide no assurance that dividends will be declared in the future or as to the amount of any future dividend. Dividends declared by the Board and stock repurchased during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows. Stock repurchases are included as treasury stock in the consolidated balance sheets. 11. Acquisitions During the nine months ended December 31, 2024, the Company incurred approximately $ 2,000,000 in acquisition costs to acquire various royalty interests in approximately 700 wells located in Adams, Broomfield and Weld Counties, Colorado; DeSoto Parish, Louisiana; Eddy County, New Mexico; Karnes, Live Oak, Reagan, Reeves and Upton Counties, Texas; Laramie County, Wyoming; and multiple counties in Nebraska, North and South Dakota and Montana. During the nine months ended December 31, 2023, the Company incurred approximately $ 490,000 in acquisition costs to acquire various royalty interests in approximately 60 producing wells in Crane, Ector, Howard, Midland, Reeves and Upton Counties, Texas. 12. Subsequent Events In January 2025, the Company expended approximately $ 70,000 for the drilling of six horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico. The 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. 12