What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-06-27 compared with 2024-06-27 · 218 added, 196 removed, 231 unchanged (64% 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

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Net cash provided by operating activities

$ (2,081,960 )

Net cash used in investing activities

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$ (3,416,499 )

$ (2,024,576 )

Net cash used in financing activities

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expenses of $156,176;

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

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

level of exploration and development expenditures.

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

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.

an increase in our accounts receivable of $533,564;

an increase of $52,861 of our accounts payable and accrued

and, an increase in our net income for the current year of $367,416.

Variations in cash flow from operating activities may

impact our level of exploration and development expenditures.

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

also consist of employee compensation, accounting, insurance and other general and administrative expenses that we have incurred in order

to address normal and necessary business activities of a public company in the crude oil and natural gas production industry.

Flow Used in Investing Activities.

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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 $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.

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 $834,575 for the year ended March 31, 2025 compared to net cash

flow used in our financing activities of $779,723 for the year ended March 31, 2024.

During the year ended March 31, 2025, we expended

$209,000 to pay the annual dividend, expended $703,216 to purchase 57,766 shares of our stock for the treasury account, and received

proceeds of $77,641 for the exercise of employee stock options.

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.

net cash decreased $719,529, leaving cash and cash equivalents on hand of $1,753,955 as of March 31, 2025.

had working capital of $2,469,664 as of March 31, 2025 compared to working capital of $3,259,200 as of March 31, 2024, a decrease of

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Participations in Fiscal 2025.

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.

The Company participated in the development of 35 horizontal wells at a cost of approximately

$1,100,000 for the year ending March 31, 2025.

Seventeen of these wells have not been completed.

Twenty-nine of these wells are in the

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

three wells are in the Midland

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

and, the remaining three horizontal wells are in Grady

County, Oklahoma.

addition to the above working interests, there were 120 gross wells (.09 net wells) drilled by other operators on Mexco’s royalty

interests and 840 gross wells (2.31 net wells) obtained through acquisitions.

expended approximately $264,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware

expended approximately $207,000 to participate in the drilling of five horizontal wells in the Bone Spring formation of the Delaware

Basin in Lea County, New Mexico.

In November 2024, these wells were completed with initial average production rates of 1,106 barrels

of oil, 2,583 barrels of water and 1,165,000 cubic feet of gas per day, or 1,300 BOE per day.

expended approximately $293,000 to drill and complete four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea

County, New Mexico.

In November 2024, these wells were completed with initial average production rates of 1,089 barrels of oil, 4,716

barrels of water and 3,601,000 cubic feet of gas per day, or 1,689 BOE per day.

expended approximately $117,000 for 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 .5%.

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 March 2025, these wells were completed with

initial average production rates of 1,734 barrels of oil, 3,171 barrels of water and 3,229,000 cubic feet of gas per day, or 2,272 BOE

expended approximately $176,000 for the drilling and completion of two horizontal wells in the Penn Shale formation of the Delaware Basin

in Lea County, New Mexico.

Mexco’s average working interest in these wells is .5%.

Subsequently, in June 2025, one of these wells

were completed with initial average production rates of 676 barrels of oil, 1,899 barrels of water and 729,000 cubic feet of gas per

day, or 798 BOE per day

expended approximately $46,000 for 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 .28%.

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 approximately .285%.

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

expended approximately $70,000 to participate in the drilling of six 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%.

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%.

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 .16%.

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.

Subsequently, in May 2025, Mexco expended approximately

$85,000 to complete these wells.

expended approximately $70,000 to participate in the development of three horizontal wells in the Spraberry trend of the Midland Basin

in Reagan County, Texas.

Mexco’s working interest in these wells is approximately .26%.

expended approximately $32,000 to participate in an exploratory well in the Fusselman Formation of Irion County, Texas.

This well was

determined to be noncommercial and was plugged and abandoned.

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

of which $1,800,000 has been funded as of March 31, 2025.

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.

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.

This LLC has returned $252,394 or 14% of the total

of Wells Drilled in Fiscal 2024.

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

The Company expended approximately $300,000 for the completion of 19 horizontal wells in which the

Company participated during fiscal 2024.

Company expended approximately $107,000 for the completion costs of two horizontal wells in the Bone Spring Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024.

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wells is .53%.

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

In July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil, 2,009 barrels

of water and 2,168,000 cubic feet of gas per day, or 1,763 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%.

during fiscal 2024 were completed in April 2024 with initial average production rates of 732 barrels of oil, 1,481 barrels of water and

657,000 cubic feet of gas per day, or 842 of oil equivalent per day.

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

horizontal well in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico was completed in May 2024 with the initial

production rate of 964 barrels of oil, 2,441 barrels of water and 626,000 cubic feet of gas per day, or 1,068 of oil equivalent per day.

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

Company expended approximately $207,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024.

Mexco’s working interest in these

wells is .45%.

In October 2024, these wells were completed with initial average production rates of 893 barrels of oil, 2,990 barrels

of water and 1,161,000 cubic feet of gas per day, or 1,087 BOE per day.

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

In April 2024, the Company acquired royalty interests in 21 producing wells operated by Anadarko Petroleum Corporation and Cimarex

Energy Company and located in Reeves County, Texas, for a purchase price of $158,000.

August 2024, the Company acquired royalty interests in 6 producing wells operated by Marathon Oil and located in Karnes County, Texas,

for a purchase price of $50,000.

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.

This acquisition was effective August 1, 2024.

August 2024, the Company acquired royalty interests in 10 producing wells operated by Anadarko Petroleum Corporation and located in Weld

County, Colorado, for a purchase price of $118,000 and royalty interests in approximately 250 producing wells operated by Samson Exploration,

EOG Resources, and others in Laramie County, Wyoming and Adams and Weld Counties, Colorado, for a purchase price of $483,000.

these acquisitions were effective September 1, 2024.

September 2024, the Company acquired royalty interests in 21 producing wells operated by Marathon Oil and Murphy Exploration and located

in Karnes County, Texas, for a purchase price of $90,000, effective August 1, 2024.

October 2024, the Company acquired a .3% royalty interest in 15 producing wells operated by Civitas Resources, Inc.

and located in Broomfield

and Adams Counties, Colorado, for a purchase price of $450,000.

This acquisition was effective November 1, 2024.

October 2024, the Company acquired a .5% royalty interest in 3 producing wells operated by Mewbourne Oil Company and located in Eddy

County, New Mexico, for a purchase price of $260,000.

This acquisition was effective November 1, 2024 and includes acreage for further

October 2024, the Company acquired royalty interests in 8 producing wells operated by Marathon Oil and located in Live Oak County, Texas,

for a purchase price of $20,000;

royalty interests in 6 producing wells operated by SWN Production Company, LLC and located in DeSoto

Parish, Louisiana, for a purchase price of $25,000;

royalty interests in 10 producing wells operated by Ovintiv, Inc.

and located in

Upton County, Texas, for a purchase price of $65,000;

and, royalty interests in 12 producing wells operated by Pioneer Natural Resources

and located in Reagan and Upton Counties, Texas, for a purchase price of $65,000.

All of these acquisitions were effective November 1,

in October 2024 and effective November 1, 2024, the Company acquired various small royalty interests in over 400 producing wells operated

by Petro-Hunt Corporation, Hess Bakken Investments II, LLC, Marathon Oil, WPX Energy, and others in multiple counties throughout the

states of Nebraska, North Dakota, South Dakota, and Montana for a purchase price of $188,000.

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.

The cost of such projects would be funded,

to the extent possible, from existing cash balances and cash flow from operations.

The remainder may be funded through borrowings on

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

In November 2024, the Company conveyed its working and royalty interests in 13.5 net acres in Ward County, Texas.

The Company received $15,000 per acre in the total amount of $202,500.

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.

The divestiture of this non-core oil and

gas asset did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves

and, accordingly, the Company recorded the proceeds as sales proceeds, a reduction of its full cost pool, with no gain or loss recognized

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

The cost of such projects

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

The remainder may be funded through

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

Crude oil and natural gas prices generally remained volatile during the last year.

The volatility of the energy markets makes it

extremely difficult to predict future oil and natural gas price movements with any certainty.

For example, in the last twelve months,

the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $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 $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

The volatility of the energy markets makes it extremely

difficult to predict future oil and natural gas price movements with any certainty.

For example, in the last twelve months, the NYMEX

West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.73 per bbl in September 2024 to a

high of $82.89 per bbl in April 2024.

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

of $1.21 per MMBtu in November 2024 to a high of $9.86 per MMBtu in January 2025.

March 31, 2025 the WTI posted price for crude oil was $67.46 per bbl and the Henry Hub spot price for natural gas was $4.11 per MMBtu.

See Results of Operations below for realized prices.

Pipeline capacity constraints and maintenance in the Permian Basin area has contributed

to a wider difference between the WaHa Hub and the Henry Hub and at times realized prices were negative.

of Operations

2025 Compared to Fiscal 2024

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

had net income of $1,712,368 for the year ended March 31, 2025 compared to $1,344,952 for the year ended March 31, 2024, a 27% increase

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

and natural gas sales.

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

Revenue from oil and natural gas sales was $7,116,485 for the year ended March 31, 2025, a 10% increase from

$6,462,647 for the year ended March 31, 2024.

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:

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

by a decrease 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:

Volume (bbls)

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Average Price (per mcf)

operating revenues.

Other revenues increased 70% to $241,581 in fiscal 2025 from $142,237 in fiscal 2024.

This resulted from an increase

in income from one of our limited liability company investments.

Interest income on corporate funds decreased 46% to $72,629 in fiscal 2025 from $135,476 in fiscal 2024.

This decrease resulted

from using the corporate funds for property acquisitions and purchase of treasury stock.

and exploration.

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

Production costs were $1,605,096 in fiscal 2025, a 5% increase from $1,526,472 in fiscal 2024.

This is the result

of an increase in production taxes due to an increase in oil and gas revenues and an increase in lease operating

expenses on new wells in which we own an interest.

Depreciation,

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a 25% increase from $1,969,742 in fiscal 2024.

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.

This was primarily due to an increase in oil and natural gas production and a decrease

in oil and natural gas reserves.

and administrative expenses.

General and administrative expenses were $1,243,548 for the year ended March 31, 2024, an 11% increase

General and administrative expenses were $1,320,074 for the year ended March 31, 2025, a 6% increase

from $1,243,548 for the year ended March 31, 2024.

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

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.

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.

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

engineering services and legal expenses partially offset by a decrease in employee stock option compensation.

Income tax for fiscal 2025 was $304,330 compared to $620,544 for fiscal 2024.

This was primarily due to a decrease in state

income taxes and the reconciliation to the federal tax return.

The effective tax rate for state and federal taxes combined for fiscal

2025 and fiscal 2024 was 15% and 32%, respectively.

The decrease in the effective tax rate is primarily the result of state income taxes,

primarily in New Mexico, the impact of permanent differences between book and taxable income, and the reconciliation to the federal tax

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

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Contractual obligations:

The lease amount represents the monthly rent amount for our

principal office space in Midland, Texas under a 38-month lease agreement effective May 15, 2018 and extended another 36 months to July

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.

The lease amount

represents the monthly rent amount for our principal office space in Midland, Texas under a 36-month lease agreement

expiring July 31, 2027.

Of this total obligation for the remainder of the lease, our majority shareholder will pay $10,175 less than

1 year and $13,567 1-3 years for his portion of the shared office space.

Capital Resources

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obligation (“ARO”) when incurred.

of oil and natural gas properties, whether or not being amortized currently, are accounted for as adjustments of capitalized costs.

or loss on the sale or other disposition of oil and gas properties is not recognized, unless the sale would significantly alter the relationship

between capitalized costs and proved reserves of oil and natural gas attributable to a country.

Under the successful efforts method,

geological and geophysical costs and costs of carrying and retaining undeveloped properties are charged to expense as incurred.

of drilling exploratory wells that do not result in proved reserves are charged to expense.

Depreciation, depletion, amortization and

impairment of crude oil and natural gas properties are generally calculated on a well by well or lease or field basis versus the “full

cost” pool basis.

Additionally, gain or loss is generally recognized on all sales of crude oil and natural gas properties under

the successful efforts method.

As a result our financial statements will differ from companies that apply the successful efforts method

since we will generally reflect a higher level of capitalized costs as well as a higher DD&A rate on our crude oil and natural gas

between capitalized costs and proved reserves of oil and natural gas.

This includes any sales of properties such as Term assignments

and Assignments, Bill of Sales and Conveyances.

the successful efforts method, geological and geophysical costs and costs of carrying and retaining undeveloped properties are charged

to expense as incurred.

Costs of drilling exploratory wells that do not result in proved reserves are charged to expense.

Depreciation,

depletion, amortization and impairment of crude oil and natural gas properties are generally calculated on a well by well, lease, or

field basis versus the “full cost” pool basis.

Additionally, gain or loss is generally recognized on all sales of crude oil

and natural gas properties under the successful efforts method.

As a result, our financial statements will differ from companies that

apply the successful efforts method since we will generally reflect a higher level of capitalized costs as well as a higher DD&A

rate on our crude oil and natural gas properties.

the time it was adopted, management believed that the full cost method would be preferable, as earnings tend to be less volatile than

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subsequent period.

of our proved reserves are based on the quantities of oil and gas that engineering and geological analysis demonstrates, with reasonable

of our proved reserves are based on the quantities of oil and gas that engineering and geological analysis demonstrate, with reasonable

certainty, to be recoverable from established reservoirs in the future under current operating and economic parameters.

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increase the DD&A rate.

Recognition - Revenue from Contracts with Customers.

Revenues from our royalty and non-operated working interest properties are recorded

under the cash receipts approach as directly received from the remitters’ statement accompanying the revenue check.

in accordance with ASC 606, Revenue from Contracts with Customers.

Revenue is reported net of post-production costs

when such costs are contractually deducted by the operator prior to distribution.

Since the revenue

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in the full cost amortization base and amortize these costs as a component of our depletion expense.

Gas imbalances are accounted for under the sales method whereby revenues are recognized based on production sold.

is recorded when our excess takes of natural gas volumes exceed our estimated remaining recoverable reserves (over produced).

No receivables

are recorded for those wells where Mexco has taken less than its ownership share of gas production (under produced).

Compensation .

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

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.

Credit is extended

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

The 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

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the investment is received, it is immediately recognized on the consolidated statements of operations.

The Company evaluates investments

for an impairment whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable.

Indicators of impairment may include, but are not limited to, sustained declines in market value, investee financial condition and operating

performance, industry or economic trends, and other relevant factors.

Reclassifications.

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

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.

The Company determines an arrangement is a lease at inception.

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The incremental borrowing rate used at adoption was 9%.

Significant judgement is required when determining the

incremental borrowing rate.

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.

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.

Adopted Accounting Pronouncements.

In December 2023, the FASB issued ASU 2023-09, Topic 740 Income Taxes:

Improvements to Income

Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this

standard provide for enhanced income tax information primarily through changs to the rate reconciliation and income taxes paid.

ASU is effective for fiscal years beginning after December 15, 2024.

While the adoption of this ASU will modify the company’s

disclosures, it will not have an impact on the Company’s financial position, results of operations, or liquidity.

Accounting Pronouncements Not Yet Adopted.

In November 2024, the FASB issued ASU 2024-03, Topic 220 Income Statement – Reporting

Comprehensive Income – Expense Disaggregation Disclosures:

Disaggregation of the Income Statement Expenses.

The amendments in this

update require disclosure in the Company’s annual and interim consolidated financial statements of specified information about

certain costs and expenses, including depletion, depreciation and amortization recognized as part of crude oil and natural gas producing

activities, and employee compensation.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting

periods beginning after December 15, 2027.

While the adoption of this ASU will modify the company’s disclosures, it will not have

an impact on the Company’s financial position, results of operations, or liquidity.

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