0001493152-21-003242.txt : 20210210 0001493152-21-003242.hdr.sgml : 20210210 20210210144635 ACCESSION NUMBER: 0001493152-21-003242 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20201231 FILED AS OF DATE: 20210210 DATE AS OF CHANGE: 20210210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEXCO ENERGY CORP CENTRAL INDEX KEY: 0000066418 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840627918 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31785 FILM NUMBER: 21613202 BUSINESS ADDRESS: STREET 1: 415 WEST WALL STREET STREET 2: SUITE 475 CITY: MIDLAND STATE: TX ZIP: 79701 BUSINESS PHONE: 9156821119 MAIL ADDRESS: STREET 1: 415 WEST WALL STREET STREET 2: SUITE 475 CITY: MIDLAND STATE: TX ZIP: 79701 FORMER COMPANY: FORMER CONFORMED NAME: MILLER OIL CO DATE OF NAME CHANGE: 19800702 10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-31785

MEXCO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Colorado		84-0627918
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification Number)

415 West Wall Street, Suite 475
Midland, Texas		79701
(Address of principal executive offices)		(Zip code)

(432) 682-1119

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.50 per share		MXC		NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer [ ]	Accelerated Filer [ ]
	Non-Accelerated Filer [ ]	Smaller reporting company [X]
	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The number of shares outstanding of the registrant’s common stock, par value $.50 per share, as of February 10, 2021 was 2,071,666.

MEXCO ENERGY CORPORATION AND SUBSIDIARIES

Table of Contents

			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of December 31, 2020 (Unaudited) and March 31, 2020	3

		Consolidated Statements of Operations (Unaudited) for the three months and nine months ended December 31, 2020 and December 31, 2019	4

		Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and nine months ended December 31, 2020 and December 31, 2019	5

		Consolidated Statements of Cash Flows (Unaudited) for the nine months ended December 31, 2020 and December 31, 2019	6

		Notes to Consolidated Financial Statements (Unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

	Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	20

	Item 1A.	Risk Factors	20

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

	Item 3.	Defaults upon Senior Securities	20

	Item 4.	Mine Safety Disclosures	20

	Item 5.	Other Information	20

	Item 6.	Exhibits	20

SIGNATURES			21

CERTIFICATIONS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2020			2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	41,016		$	34,381
Accounts receivable:
Oil and natural gas sales		363,387			271,315
Trade		16,080			13,382
Prepaid costs and expenses		8,754			50,188
Total current assets		429,237			369,266
Property and equipment, at cost
Oil and gas properties, using the full cost method		38,231,910			37,465,172
Other		120,208			116,993
Accumulated depreciation, depletion and amortization		(28,806,949	)		(28,109,252	)
Property and equipment, net		9,545,169			9,472,913
Investment – cost basis		175,000			150,000
Operating lease, right-of-use asset		36,987			76,130
Other noncurrent assets		-			2,200
Total assets	$	10,186,393		$	10,070,509

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	94,627		$	116,760
Operating lease liability, current		38,438			65,721
Total current liabilities		133,065			182,481
Long-term liabilites
Long-term debt		1,071,817			757,423
Operating lease liability, long-term		-			10,982
Asset retirement obligations		757,684			755,261
Total long-term liabilities		1,829,501			1,523,666
Total liabilities		1,962,566			1,706,147

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; 2,118,866 and 2,107,166 shares issued; 2,051,866 and 2,040,166 shares outstanding as of December 31, 2020 and March 31, 2020, respectively		1,059,433			1,053,583
Additional paid-in capital		7,454,109			7,339,351
Retained earnings		56,286			317,429
Treasury stock, at cost (67,000 shares)		(346,001	)		(346,001	)
Total stockholders’ equity		8,223,827			8,364,362
Total liabilities and stockholders’ equity	$	10,186,393		$	10,070,509

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

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31						December 31
	2020			2019			2020			2019
Operating revenue:
Oil sales	$	520,261		$	643,141		$	1,307,588		$	1,762,663
Natural gas sales		171,982			123,082			378,798			321,004
Other		7,651			3,555			20,006			11,586
Total operating revenues		699,894			769,778			1,706,392			2,095,253

Operating expenses:
Production		235,958			249,921			624,741			698,358
Accretion of asset retirement obligation		7,116			6,961			21,540			20,298
Depreciation, depletion, and amortization		237,459			228,762			697,698			648,729
General and administrative		193,288			239,346			634,526			805,701
Total operating expenses		673,821			724,990			1,978,505			2,173,086

Operating income (loss)		26,073			44,788			(272,113	)		(77,833	)

Other income (expenses):
Interest income		71			611			387			1,110
Interest expense		(14,604	)		(10,203	)		(39,174	)		(25,054	)
PPP loan forgiveness		68,957			-			68,957			-
Loss on derivative instruments		-			-			(19,200	)		-
Net other income (expense)		54,424			(9,592	)		10,970			(23,944	)

Income (loss) before income taxes		80,497			35,196			(261,143	)		(101,777	)

Net income (loss)	$	80,497		$	35,196		$	(261,143	)	$	(101,777	)

Income (loss) per common share:
Basic:	$	0.04		$	0.02		$	(0.13	)	$	(0.05	)
Diluted:	$	0.04		$	0.02		$	(0.13	)	$	(0.05	)

Weighted average common shares outstanding:
Basic:		2,051,081			2,040,166			2,044,054			2,040,166
Diluted:		2,054,288			2,040,166			2,044,054			2,040,166

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

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, 2020	$	1,053,583	$	7,339,351	$	317,429		$	(346,001	)	$	8,364,362
Net loss		-		-		(261,143	)		-			(261,143	)
Issuance of stock through options exercised		5,850		72,945		-			-			78,795
Stock based compensation		-		41,813		-			-			41,813
Balance at December 31, 2020	$	1,059,433	$	7,454,109	$	56,286		$	(346,001	)	$	8,223,827

	Common Stock Par Value		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance at September 30, 2020	$	1,054,333	$	7,375,984	$	(24,211	)	$	(346,001	)	$	8,060,105
Net income		-		-		80,497			-			80,497
Issuance of stock through options exercised		5,100		64,260		-			-			69,360
Stock based compensation		-		13,865		-			-			13,865
Balance at December 31, 2020	$	1,059,433	$	7,454,109	$	56,286		$	(346,001	)	$	8,223,827

	Common Stock Par Value		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance at April 1, 2019	$	1,053,583	$	7,305,048	$	416,907		$	(346,001	)	$	8,429,537
Net loss		-		-		(101,777	)		-			(101,777	)
Stock based compensation		-		24,375		-			-			24,375
Balance at December 31, 2019	$	1,053,583	$	7,329,423	$	315,130		$	(346,001	)	$	8,352,135

	Common Stock Par Value		Additional Paid-In Capital			Retained Earnings		Treasury Stock			Total Stockholders’ Equity
Balance at September 30, 2019	$	1,053,583	$	7,321,298		$	279,934	$	(346,001	)	$	8,308,814
Net income		-		-			35,196		-			35,196
Stock based compensation		-		8,125			-		-			8,125
Balance at December 31, 2019	$	1,053,583	$	7,329,423		$	315,130	$	(346,001	)	$	8,352,135

SHARE ACTIVITY
Common stock shares, issued:
Balance at April 1, 2020				2,107,166
Issued				11,700
Balance at Dec. 31, 2020				2,118,866

Common stock shares, held in treasury:
Balance at April 1, 2020				(67,000	)
Acquisitions				-
Balance at Dec. 31, 2020				(67,000	)

Common stock shares, outstanding at December 31, 2020				2,051,866

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

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31,

(Unaudited)

	2020			2019
Cash flows from operating activities:
Net loss	$	(261,143	)	$	(101,777	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation		41,813			24,375
Depreciation, depletion and amortization		697,698			648,729
Accretion of asset retirement obligations		21,540			20,298
PPP loan forgiveness		(68,574	)		-
Amortization of debt issuance costs		9,394			10,781
Changes in operating assets and liabilities:
Increase in accounts receivable		(94,769	)		(59,627	)
Decrease in right-of-use asset		39,143			48,941
Decrease in prepaid expenses		41,433			36,340
Decrease in other assets		-			30,421
Decrease in accounts payable and accrued expenses		(8,009	)		(54,375	)
Settlement of asset retirement obligations		(7,398	)		(12,054	)
Decrease in operating lease liability		(38,265	)		(48,468	)
Net cash provided by operating activities		372,863			543,584

Cash flows from investing activities:
Additions to oil and gas properties		(1,024,104	)		(1,100,437	)
Additions to other property and equipment		(3,215	)		(2,237	)
Drilling refund		121,970			-
Investment – cost basis		(25,000	)		(100,000	)
Proceeds from sale of oil and gas properties and equipment		111,752			79,133
Net cash used in investing activities		(818,597	)		(1,123,541	)

Cash flows from financing activities:
Proceeds from exercise of stock options		78,795			-
Proceeds from long-term debt		680,000			705,000
Proceeds from PPP loan		68,574			-
Reduction of long-term debt		(375,000	)		(190,000	)
Net cash provided by financing activities		452,369			515,000

Net increase (decrease) in cash and cash equivalents		6,635			(64,957	)

Cash and cash equivalents at beginning of period		34,381			128,252

Cash and cash equivalents at end of period	$	41,016		$	63,295

Supplemental disclosure of cash flow information:
Cash paid for interest	$	28,634		$	14,047

Non-cash investing and financing activities:
Asset retirement obligations	$	14,013		$	15,475
Operating lease – right of use asset and associated liabilities	$	9,360		$	141,385

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

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 exploration, development and production of natural gas, crude oil, 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 fourteen states. All of the Company’s oil and gas interests are operated by others.

Recent Events

The outbreak of the novel coronavirus (“COVID-19”) in the first calendar quarter of 2020 and its continued spread across the globe in the second and third calendar quarters of 2020 has resulted, and is likely to continue to result, in significant economic disruption and has, and is likely to continue to, adversely affect the operations of the Company’s business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas. Federal, state and local governments mobilized to implement containment mechanisms to minimize impacts to their populations and economies. Various containment measures, which include the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity and a resulting decrease in energy demand. In addition, the global economy has experienced a significant disruption to global supply chains. The extent of the COVID-19 outbreak on the Company’s operational and financial performance will continue to depend on certain developments, including the duration and spread of the outbreak and its continued impact on customer activity and third-party providers. The direct impact to the Company’s operations began to take effect at the close of the fiscal year ended March 31, 2020, and continued through the issuance of these condensed consolidated financial statements. The full extent to which the COVID-19 outbreak may affect the Company’s financial conditions, results of operations or liquidity subsequent to the issuance of these condensed consolidated financial statements is uncertain. At the time of this filing, cases of COVID-19 in the U.S. remain high, including in Texas, where we are involved in significant operations.

The severe drop in economic activity, travel restrictions and other restrictions due to COVID-19 have had a significant negative impact on the demand for oil and gas. Due to the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the current oversupply of oil and natural gas in the market, available storage and capacity for the Company’s customers’ production may be limited or completely unavailable in the future, which may further negatively impact the price of oil. The Company cannot predict whether, or when, the global supply and demand imbalance will be resolved or whether, or when, oil and natural gas production and economic activities will return to normalized levels. In the absence of additional reductions to global production, oil, natural gas and NGLs prices could remain at current levels, or decline further, for an extended period of time.

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 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, 2020, and the results of its operations and cash flows for the interim periods ended December 31, 2020 and 2019. The consolidated financial statements as of December 31, 2020 and for the three and nine month periods ended December 31, 2020 and 2019 are unaudited. The consolidated balance sheet as of March 31, 2020 was derived from the audited balance sheet filed in the Company’s 2020 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.

Investments. The Company accounts for investments of less than 1% of any limited liability company using the cost method. 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.

Derivative Financial Instruments. The Company’s derivative financial instruments are used to manage commodity price risk attributable to expected oil and gas production. While there is risk the financial benefit of rising oil and gas prices may not be captured, the Company believes the benefits of stable and predictable cash flows outweigh the potential risks.

The Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during the period in which they occur. Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either a current or non-current asset or a liability measured at its fair value. The Company only offsets derivative assets and liabilities for arrangements with the same counterparty when right of offset exists. Derivative assets and liabilities with different counterparties are recorded gross in the consolidated balance sheets. Derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows.

The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.

Recently Adopted Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (i) hybrid tax regimes; (ii) the tax basis step-up in goodwill obtained in a transaction that is not a business combination; (iii) separate financial statements of entities not subject to tax; (iv) the intraperiod tax allocation exception to the incremental approach; (v) ownership changes in investments - changes from a subsidiary to an equity method investment (and vice versa); (vi) interim-period accounting for enacted changes in tax laws; and (vii) the year-to-date loss limitation in interim-period tax accounting. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt ASU 2019-12 is required to adopt all of the amendments in the same period. The Company is currently assessing the effect that ASU 2019-12 will have on its financial position, results of operations and disclosures.

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.

The following table provides a rollforward of the AROs for the first nine months of fiscal 2021:

Carrying amount of asset retirement obligations as of April 1, 2020	$	762,761
Liabilities incurred		14,013
Liabilities settled		(33,130	)
Accretion expense		21,540
Carrying amount of asset retirement obligations as of December 31, 2020		765,184
Less: Current portion		7,500
Non-Current asset retirement obligation	$	757,684

4. Stock-based Compensation

The Company recognized stock-based compensation expense of $13,865 and $8,125 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2020 and 2019 was $41,813 and $24,375, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2020 totals approximately $127,996 which is expected to be recognized over a weighted average of 2.70 years.

The following table is a summary of activity of stock options for the nine months ended December 31, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Life in Years
Outstanding at April 1, 2020		227,700		$	5.65		4.83
Granted		-			-
Exercised		(11,700	)		-
Forfeited or Expired		(35,200	)		-
Outstanding at December 31, 2020		180,800		$	5.49		5.11

Vested at December 31, 2020		119,800		$	6.33		3.28
Exercisable at December 31, 2020		119,800		$	6.33		3.28

During the nine months ended December 31, 2020 and 2019, no stock options were granted.

During the nine months ended December 31, 2020, stock options covering 11,700 shares were exercised with a total intrinsic value of $12,217. The Company received proceeds of $78,795 from these exercises. During the nine months ended December 31, 2019, no stock options were exercised.

During the nine months ended December 31, 2020, 1,000 unvested stock options were forfeited due to the resignation of an employee and 34,200 vested stock options expired unexercised. There were no stock options forfeited or expired during the nine months ended December 31, 2019. 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, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.

Subsequently, in January 2021, stock options covering 19,800 shares were exercised with a total intrinsic value of $53,751. The Company received proceeds of $134,640 from these exercises.

5. Long Term Debt

Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:

	December 31, 2020			March 31, 2020
Credit facility	$	1,100,000		$	795,000
Unamortized debt issuance costs		(28,183	)		(37,577	)
Total long-term debt	$	1,071,817		$	757,423

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

Under the Agreement, interest on the credit 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, 2020, there was $400,000 available on the credit facility.

No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2023. Upon closing with WTNB on the original Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording expenses totaling $34,532, which were deferred over the original life of the credit facility. Upon closing the amendment to the Agreement, the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses totaling $12,266, which were also deferred over the new remaining 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. The Company is in compliance with all covenants as of December 31, 2020 and believes it will remain in compliance for the next fiscal year.

In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval. The Company obtained written permission from WTNB prior to entering into the current hedge agreement discussed in Note 8.

The balance outstanding on the line of credit as of December 31, 2020 was $1,100,000. The following table is a summary of activity on the WTNB line of credit for the nine months ended December 31, 2020:

	Principal
Balance at April 1, 2020:	$	795,000
Borrowings		680,000
Repayments		(375,000	)
Balance at December 31, 2020:	$	1,100,000

Subsequently, on January 11, 2021, the Company borrowed $75,000 on the WTNB credit facility and on January 15, 2021, made a payment of $75,000 on the credit facility, leaving a balance of $1,100,000.

The Company also maintained a Certificate of Deposit Account at WTNB to collateralize one outstanding letter of credit for $25,000 in lieu of a plugging bond with the Texas Railroad Commission covering the properties the Company operated. The operated property was sold effective December 1, 2019 and the letter of credit was cancelled. On April 10, 2020, the Certificate of Deposit Account was terminated and the funds deposited into the Company’s operating account.

6. Paycheck Protection Program (PPP) Loan.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act became effective. One component of the CARES Act was the paycheck protection program (“PPP”) which provides small businesses with the resources needed to maintain their payroll and cover applicable overhead. The PPP is implemented by the United States Small Business Administration (“SBA”) with support from the Department of the Treasury. The PPP provides funds to pay up to 24 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The Company applied for, and was accepted to participate in this program. On May 5, 2020, the Company received funding for approximately $68,600.

The loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six monthly payments deferred. The Company applied for and on November 25, 2020 was approved for loan forgiveness in the amount of $68,957 under the provisions of Section 1106 of the CARES Act. This was for the forgiveness of our PPP loan in the amount of $68,574 and $383 in accrued interest expense. The Company was eligible for loan forgiveness because the Company used all loan proceeds to partially subsidize direct payroll expenses.

7. Leases

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for the corporate office located in Midland, Texas. This includes 1,021 square feet of office space shared with and reimbursed by the majority shareholder. The lease is a 36-month lease that expires in May 2021 and does not include an option to renew. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021.

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.

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 6.0%. Significant judgement is required when determining the incremental borrowing rate. The Company chose not to discount because the difference is not significant. 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:

	December 31, 2020
Assets
Operating lease right-of-use asset, beginning balance	$	76,130
Current period amortization		(48,503	)
Lease amendment		(1,622	)
Lease extension		10,982
Total operating lease right-of-use asset, ending balance	$	36,987

Liabilities
Operating lease liability, current	$	38,438
Operating lease liability, long term		-
Total lease liabilities	$	38,438

Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2021		16,473
Fiscal Year Ended March 31, 2022		21,965
Total lease payments	$	38,438
Less: imputed interest		-
Operating lease liability		38,438
Less: operating lease liability, current		(38,438	)
Operating lease liability, long term	$	-

Net cash paid for our operating lease for the nine months ended December 31, 2020 and 2019 was $34,121 and $35,300, respectively. Rent expense, less sublease income of $14,315 and $13,167, respectively, is included in general and administrative expenses.

8. Fair Value Measurements

The Company applies FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), which establishes a framework for measuring fair value based upon inputs that market participants use in pricing an asset or liability, which are classified into two catagories: observable inputs or unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two types of inputs are further prioritized into the following fair value input hierarchy:

Level 1: Quoted prices for identical instruments in active markets at the measurement date.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at the measurement date and for the anticipated term of the instrument.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability acquired, based on the best information available in the circumstances.

The carrying amount reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the immediate or short-term maturity of these financial instruments.

The fair value amount reported in the accompanying consolidated balance sheets for long-term debt approximates fair value because the actual interest rates do not significantly differ from current rates offered for instruments with similar characteristics. See the Company’s Note 5 on Long Term Debt for further discussion.

Fair Value Measurements on a Recurring Basis

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

The Company’s commodity derivative instruments were carried at fair value on a recurring basis in the Company’s consolidated balance sheets. The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties.

Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets. Assumed credit risk adjustments, based on published credit ratings and public bond yield spreads are applied to the Company’s commodity derivatives. The Company’s derivative instruments are subject to netting arrangements and qualify for net presentation in the consolidated balance sheets in those instances where such arrangements exist with the respective counterparty.

To ensure these derivative instruments are recorded at fair value, valuation adjustments may be required to reflect the creditworthiness of either party as well as market constraints on liquidity. There was no adjustment as of December 31, 2020.

Fair Value Measurements on a Nonrecurring Basis

The asset retirement obligation estimates are derived from historical costs and management’s expectation of future cost environments and, therefore, the Company has designated these liabilities as Level 3 measurements. The significant inputs to this fair value measurement include estimates of plugging, abandonment and remediation costs, well life, inflation and credit-adjusted risk-free rate. See Note 3 for a reconciliation of the beginning and ending balances of the liability for the Company’s asset retirement obligations.

9. Derivative Financial Instruments

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive.

The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk. Derivative contracts are utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash flows associated with anticipated sales of future oil and natural gas production. The Company follows FASB ASC Topic 815, Derivatives and Hedging (ASC Topic 815), to account for its derivative financial instruments.

The Company’s crude oil derivative positions consisted of put options. The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts, as well as all payments and receipts on settled derivative contracts, in net realized and unrealized gain (loss) on commodity price hedging contracts on the consolidated statements of operations. All derivative contracts are recorded at fair market value and included in the consolidated balance sheets as assets or liabilities. As of December 31, 2020, the Company has no derivative contracts.

The Company may have multiple hedge positions that span a several-month time period and result in fair value asset and liability positions. At the end of the reporting periods, those positions are offset to a single fair value asset or liability for each commodity and the netted balance is reflected in the consolidated balance sheets as an asset or liability.

During the quarter ended June 30, 2020 the Company entered into a series of crude oil put option contracts. All of these such contracts expired in July and August 2020.

The following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as loss on derivative instruments in the Company’s consolidated statements of operations for the nine months ended December 31, 2020.

	Loss Recognized
Realized loss on oil price hedging contracts	$	(19,200	)
Unrealized gain (loss) on oil price hedging contracts		-
Net realized and unrealized loss on derivative contracts	$	(19,200	)

10. Income Taxes

A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry.

Based on the material write-downs of the carrying value of our oil and natural gas properties during fiscal 2016, we are in a net deferred tax asset position as of December 31, 2020. Our deferred tax asset is $1,312,129 as of December 31, 2020 with a valuation amount of $1,312,129. We believe it is more likely than not that these deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as future expected growth.

11. Related Party Transactions

Related party transactions for the Company 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, 2020 and 2019 was $9,122 and $12,289, respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2020 and 2019 was $27,443 and $32,232, 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, 2020 and 2019 were $4,045 and $3,981, respectively. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2020 and 2019 were $11,694 and $11,900, respectively.

12. Income (loss) Per Common Share

The Company’s basic net income (loss) per share has been computed based on the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share assumes the exercise of all stock options having exercise prices less than the average market price of the common stock during the period using the treasury stock method and is computed by dividing net income (loss) by the weighted average number of common shares and dilutive potential common shares (stock options) outstanding during the period. In periods where losses are reported, the weighted-average number of common shares outstanding excludes potential common shares, because their inclusion would be anti-dilutive.

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income (loss) per share for the three and nine month periods ended December 31, 2020 and 2019:

	Three Months Ended				Nine Months Ended
	December 31				December 31
	2020		2019		2020			2019
Net income (loss)	$	80,047	$	35,196	$	(261,143	)	$	(101,777	)

Shares outstanding:
Weighted avg. shares outstanding – basic		2,051,081		2,040,166		2,044,054			2,040,166
Effect of assumed exercise of dilutive stock options		3,207		-		-			-
Weighted avg. shares outstanding – dilutive		2,054,288		2,040,166		2,044,054			2,040,166

Income (loss) per common share:
Basic	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)
Diluted	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)

For the three months ended December 31, 2019, 139,800 potential common shares relating to stock options were excluded in the computation of diluted net income per share because the price of the options was greater than the average market price of the common shares and therefore, the effect would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $6.12 at December 31, 2020.

Due to a net loss for the nine months ended December 31, 2020 and 2019, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

13. Subsequent Events

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, references to the “Company”, “Mexco”, “we”, “us” or “our” mean Mexco Energy Corporation and its consolidated subsidiaries.

Cautionary Statements Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding our plans, beliefs or current expectations and may be signified by the words “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “budget”, “plan”, “forecast”, “predict” and other similar expressions. Forward-looking statements appear throughout this Form 10-Q with respect to, among other things: profitability; planned capital expenditures; estimates of oil and gas production; future project dates; estimates of future oil and gas prices; estimates of oil and gas reserves; our future financial condition or results of operations; and our business strategy and other plans and objectives for future operations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement.

While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in the Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

Liquidity and Capital Resources. Historically, we have funded our operations, acquisitions, exploration and development expenditures from cash generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock. Our primary financial resource is our base of oil and gas reserves. We have pledged our producing oil and gas properties to secure our revolving line of credit. We do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.

Due to the current commodity price environment, we are applying financial discipline to all aspects of our business. In order to meet obligations, we may continue to sell non-core assets.

Our long-term strategy is on increasing profit margins while concentrating on obtaining reserves with low cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of royalties and working interests and non-operated properties in areas with significant development potential.

For the first nine months of fiscal 2021, cash flow from operations was $372,863, a 31% decrease when compared to the corresponding period of fiscal 2020 primarily as a result of a 19% decrease in crude oil and natural gas sales primarily due to a 37% decrease in crude oil price partially offset by a 4% increase in natural gas price, a 17% increase in crude oil production and a 14% increase in natural gas production. Net cash of $305,000 was received from the line of credit, cash of $78,795 was received from the exercise of stock options, net cash of $793,597 was used for additions to oil and gas properties, and cash of $25,000 was used for an investment at cost basis. Accordingly, net cash increased $6,635, leaving cash and cash equivalents on hand of $41,016 as of December 31, 2020.

At December 31, 2020, we had working capital of $296,172 compared to working capital of $186,785 at March 31, 2020, an increase of $109,387 primarily due to the reasons set forth below.

Oil and Natural Gas Property Development. The Company’s working interests in the following mentioned 42 wells range from ..03% to 1.2% with a total capital expenditure of approximately $1,295,000 through February 10, 2021, which includes subsequent events listed herein.

The Company planned to participate in the drilling and completion of 20 horizontal wells at an estimated aggregate cost of approximately $1,200,000 for the fiscal year ending March 31, 2021, of which, $600,000 has already been expended during the nine months ending December 31, 2020. The operators of these wells include Concho Resources, Inc., Marathon Oil Company, Mewbourne Oil Company, and others.

During the first six months of fiscal 2021, Mexco participated in the drilling and completion of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $233,000. These wells were completed in September 2020 with initial average production rates of 1,224 barrels of oil, 4,881 barrels of water and 3,422,000 cubic feet of gas per day, or 1,794 barrels of oil equivalent per day. Mexco’s working interest in these wells is 1.2%.

During the second quarter of fiscal 2021, Mexco participated in the drilling of four horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $202,000. Mexco’s working interest in these wells is 1.2%. Subsequently, in January 2021, Mexco expended $168,000 to complete these wells.

Also during the first quarter of fiscal 2021, Mexco expended $99,000 to participate in the drilling of five horizontal wells in the Upper Avalon formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .5%. Subsequently, in January 2021, Mexco expended $172,000 to complete these wells.

During the third quarter of fiscal 2021, Mexco participated in the drilling of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico at an initial cost of $37,200. Subsequently, in January 2021, Mexco expended another $37,200 for an increased interest in these wells. Mexco’s working interest in these wells is 1.2%.

In October 2020, the Company also expended $10,200 for its share to participate in the drilling of two horizontal wells in the 3^rdBone Spring Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in this well is .1%.

The Company has expended approximately $270,000 which is the balance of the completion costs of 22 horizontal wells located in Eddy and Lea Counties, New Mexico which were drilled during fiscal 2020. Of these wells, thirteen wells were completed during Mexco’s first six months of fiscal 2021. In December 2020, four more of these wells were completed and initially produced at an average production rate of 1,171 barrels of oil; 4,004 barrels of water; and 2,517,000 cubic feet of gas per day, or 1,591 barrels of oil equivalent per day. Mexco’s working interest in these wells is .36%. Another three of these wells were also completed in December 2020 and the remaining two wells were completed in January 2021.

Subsequently, in January 2021, Mexco expended approximately $49,000 to participate in the drilling of four horizontal wells in the Upper and Middle Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .36%.

Effective July 1, 2020, the Company sold its interest in the deep rights of a property in Martin County, Texas for a cash payment of $100,000.

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.

Beginning in March 2020, crude oil and natural gas prices decreased significantly through May 2020. 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 negative $41.25 per bbl in April 2020 to a high of $59.75 per bbl in January 2020. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $3.14 per MMBtu in October 2020. On December 31, 2020 the WTI posted price for crude oil was $44.50 per bbl and the Henry Hub spot price for natural gas was $2.36 per MMBtu. See Results of Operations below for realized prices which are substantially below the Henry Hub Spot Market Price.

Paycheck Protection Program (PPP) Loan. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act became effective. One component of the CARES Act was the paycheck protection program (“PPP”) which provides small businesses with the resources needed to maintain their payroll and cover applicable overhead. The PPP is implemented by the United States Small Business Administration (“SBA”) with support from the Department of the Treasury. The PPP provides funds to pay up to 24 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The Company applied for, and was accepted to participate in this program. On May 5, 2020, the Company received funding for $68,574.

The loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six monthly payments deferred. The Company applied for and on November 25, 2020 was approved for loan forgiveness under the provisions of Section 1106 of the CARES Act. The Company was eligible for loan forgiveness because the Company used all loan proceeds to partially subsidize direct payroll expenses.

Contractual Obligations. We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party. The following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2020:

	Payments due in:
	Total		less than 1 year		1 - 3 years		over 3 years
Contractual obligations:
Secured bank line of credit (1)	$	1,100,000	$	-	$	1,100,000	$	-
Leases (2)	$	38,438	$	38,438	$	-	$	-

	⁽¹⁾	These amounts represent the balances outstanding under the bank line of credit. This repayment assumes that interest will be paid on a monthly basis, no additional funds will be drawn and does not include estimated interest of $41,250 less than 1 year, and $51,563 1-3 years.
	⁽²⁾	The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a three-year lease agreement effective May 15, 2018. Of this total obligation for the remainder of the lease, our majority shareholder will pay $9,438 for his portion of the shared office space.

Results of Operations – Three Months Ended December 31, 2020 and 2019. For the quarter ended December 31, 2020, there was net income of $80,497 compared to $35,196 for the quarter ended December 31, 2019, a 129% increase primarily as a result of a decrease in operating expenses that is further explained below.

Oil and gas sales. Revenue from oil and gas sales was $692,243 for the third quarter of fiscal 2021, a 10% decrease from $766,223 for the same period of fiscal 2020. This resulted from a decrease in oil prices partially offset by an increase in oil and gas production volumes and an increase in gas prices.

	2020		2019		% Difference
Oil:
Revenue	$	520,261	$	643,141		(19.1	)%
Volume (bbls)		13,004		11,503		13.0	%
Average Price (per bbl)	$	40.01	$	55.91		(28.4	)%

Gas:
Revenue	$	171,982	$	123,082		39.7	%
Volume (mcf)		82,688		76,583		8.0	%
Average Price (per mcf)	$	2.08	$	1.61		29.2	%

Production and exploration. Production costs were $235,958 for the third quarter of fiscal 2021, a 6% decrease from $249,921 for the same period of fiscal 2020. This is primarily the result of a decrease in lease operating expenses due to the sale of our marginal operated properties in Ector County, Texas and a decrease in production taxes as a result of the decrease in oil and gas sales.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $237,459 for the third quarter of fiscal 2021, a 4% increase from $228,762 for the same period of fiscal 2020, primarily due to an increase in oil and gas production and a decrease in oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

General and administrative expenses. General and administrative expenses were $193,288 for the third quarter of fiscal 2021, a 19% decrease from $239,346 for the same period of fiscal 2020. This was primarily due to a decrease in salaries, contract services and employee insurance expense.

Interest expense. Interest expense was $14,604 for the third quarter of fiscal 2021, a 43% increase from $10,203 for the same period of fiscal 2020, due to an increase in borrowings partially offset by a decrease in interest rates.

PPP loan forgiveness. PPP loan forgiveness in the amount of $68,957 for the three months ended December 31, 2020 was for the forgiveness of our PPP loan in the amount of $68,574 and $383 in accrued interest expense. The Company received the proceeds for this loan in May 2020 and applied for and received loan forgiveness in November 2020.

Income taxes. There was no income tax expense for the quarter ended December 31, 2020 and the quarter ended December 31, 2019. The effective tax rate for the three months ended December 31, 2020 and December 31, 2019 was 0%. We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.

Results of Operations – Nine Months Ended December 31, 2020 and 2019. For the nine months ended December 31, 2020, there was a net loss of $261,143 compared to a net loss of $101,777 for the nine months ended December 31, 2019. This was a result of a decrease in operating revenues partially offset by a decrease in operating expenses that is further explained below.

Oil and gas sales. Revenue from oil and gas sales was $1,686,386 for the nine months ended December 31, 2020, a 19% decrease from $2,083,667 for the same period of fiscal 2020. This resulted from a decrease in oil prices partially offset by an increase in oil and gas production volumes and an increase in gas prices.

	2020		2019		% Difference
Oil:
Revenue	$	1,307,588	$	1,762,663		(25.8	)%
Volume (bbls)		37,681		32,206		17.0	%
Average Price (per bbl)	$	34.70	$	54.73		(36.6	)%

Gas:
Revenue	$	378,798	$	321,004		18.0	%
Volume (mcf)		251,094		221,116		13.6	%
Average Price (per mcf)	$	1.51	$	1.45		4.1	%

Production and exploration. Production costs were $624,741 for the nine months ended December 31, 2020, an 11% decrease from $698,358 for the nine months ended December 31, 2019. This decrease is primarily the result of a decrease in production taxes as a result of a decrease in oil revenues and a decrease in lease operating expenses due to numerous wells being shut-in during the month of May 2020 as well as cost cutting measures being implemented by the operators because of the depressed oil prices.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $697,698 for the nine months ended December 31, 2020, an 8% increase from $648,729 for the nine months ended December 31, 2019, primarily due to an increase in oil and gas production and a decrease in oil and gas reserves partially offset by a decrease in the full cost pool amortization base.

General and administrative expenses. General and administrative expenses were $634,526 for the nine months ended December 31, 2020, a 21% decrease from $805,701 for the nine months ended December 31, 2019. This was primarily due to a decrease in salaries, engineering fees and accounting fees.

Interest expense. Interest expense was $39,174 for the nine months ended December 31, 2020, a 56% increase from $25,054 for the nine months ended December 31, 2019 due to an increase in borrowings partially offset by an decrease in interest rates.

Income taxes. There was no income tax for the nine months ended December 31, 2020 and for the nine months ended December 31, 2019. The effective tax rate for the nine months ended December 31, 2020 and December 31, 2019 was 0%. We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary sources of market risk for us include fluctuations in commodity prices and interest rates. All of our financial instruments are for purposes other than trading.

Credit Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At December 31, 2020, our largest credit risk associated with any single purchaser was $235,604 or 65% of our total oil and gas receivables. We have not experienced any significant credit losses.

Interest Rate Risk. At December 31, 2020, we had an outstanding loan balance of $1,100,000 under our credit agreement, which bears interest 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. If the interest rate on our bank debt increases or decreases by one percentage point our annual pretax income would change by $11,000 based on the outstanding balance at December 31, 2020.

Energy Price Risk. Our most significant market risk is the pricing for crude oil and natural gas. Our financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. Prices for oil and natural gas fluctuate widely. We cannot predict future oil and natural gas prices with any certainty. Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future.

Factors that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability of alternative fuels and overall political and economic conditions in oil producing countries.

Oil prices dropped sharply in early March 2020, and then continued to decline reaching levels below zero dollars per barrel. This was a result of multiple factors affecting supply and demand in global oil and gas markets, including the announcement of price reductions and production increases by OPEC members and other oil exporting nations and the ongoing COVID-19 pandemic. Oil and natural gas prices are expected to continue to be volatile as a result of the changes in oil and natural gas production, inventories and demand, as well as national and international economic performance. Even though oil prices improved in June 2020, we cannot predict when oil prices will stabilize.

Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves. Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration and development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of time. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance.

Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources. Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other. If the average oil price had increased or decreased by ten dollars per barrel for the first nine months of fiscal 2021, pretax income or loss would have changed by $376,810. If the average gas price had increased or decreased by one dollar per mcf for the first nine months of fiscal 2021, pretax income or loss would have changed by $251,094.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis. At the end of the period covered by this report, our principal executive officer and principal financial officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on such evaluation, such officers concluded that, as of December 31, 2020, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. No changes in our internal control over financial reporting occurred during the nine months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. We are not aware of any legal or governmental proceedings against us, or contemplated to be brought against us, under various environmental protection statutes or other regulations to which we are subject.

Item 1A. Risk Factors

There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 2020 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

On November 24, 2020, subsequent to the death of the Chairman of the Audit Committee and a Director on November 4, 2020, the Board of Directors appointed Thomas H. Decker as the Chairman of the Audit Committee. The Board has determined that Mr. Decker is an “audit committee financial expert” (as that term is defined under the applicable SEC rules and regulations) based on the Board’s qualitative assessment of Mr. Decker’s level of knowledge, experience and formal education.

Item 6. Exhibits

	31.1	Certification of the Chief Executive Officer of Mexco Energy Corporation

	31.2	Certification of the Chief Financial Officer of Mexco Energy Corporation

	32.1	Certification of the Chief Executive Officer and Chief Financial Officer of Mexco Energy Corporation pursuant to 18 U.S.C. §1350

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEXCO ENERGY CORPORATION
	(Registrant)

Dated: February 10, 2021	/s/ Nicholas C. Taylor
	Nicholas C. Taylor
	Chairman of the Board and Chief Executive Officer

Dated: February 10, 2021	/s/ Tamala L. McComic
	Tamala L. McComic
	President, Chief Financial Officer, Treasurer and Assistant Secretary

EX-31.1 2 ex31-1.htm

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

CERTIFICATION

I, Nicholas C. Taylor, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Mexco Energy Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2021	/s/ Nicholas C. Taylor
	Nicholas C. Taylor
	Chairman of the Board and Chief Executive Officer

EX-31.2 3 ex31-2.htm

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

CERTIFICATION

I, Tamala L. McComic, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Mexco Energy Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2021	/s/ Tamala L. McComic
	Tamala L. McComic
	President and Chief Financial Officer

EX-32.1 4 ex32-1.htm

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

OF MEXCO ENERGY CORPORATION

PURSUANT TO 18 U.S.C. §1350

In connection with the Quarterly Report of Mexco Energy Corporation on Form 10-Q for the quarterly period ended December 31, 2020, as filed with the Securities and Exchange Commission on February 10, 2021 (the “Report”), the undersigned, in the capacities and on the dates indicated below, each hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

	1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Mexco Energy Corporation as of the dates and for periods presented as required by such Report.

Date: February 10, 2021	/s/ Nicholas C. Taylor
	Nicholas C. Taylor
	Chairman of the Board and Chief Executive Officer

Date: February 10, 2021	/s/ Tamala L. McComic
	Tamala L. McComic
	President and Chief Financial Officer

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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 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.

The following table provides a rollforward of the AROs for the first nine months of fiscal 2021:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Carrying amount of asset retirement obligations as of April 1, 2020</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">762,761</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Liabilities incurred</td> <td> </td> <td> </td> <td style="text-align: right">14,013</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Liabilities settled</td> <td> </td> <td> </td> <td style="text-align: right">(33,130</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Accretion expense</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">21,540</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Carrying amount of asset retirement obligations as of December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">765,184</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: Current portion</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">7,500</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Non-Current asset retirement obligation</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">757,684</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">March 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 66%">Credit facility</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 14%; text-align: right">1,100,000</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 14%; text-align: right">795,000</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Unamortized debt issuance costs</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(28,183</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(37,577</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total long-term debt</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,071,817</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">757,423</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

The following table is a summary of activity on the WTNB line of credit for the nine months ended December 31, 2020:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Principal</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Balance at April 1, 2020:</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">795,000</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Borrowings</td> <td> </td> <td> </td> <td style="text-align: right">680,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Repayments</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(375,000</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">Balance at December 31, 2020:</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,100,000</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

The balance sheets classification of lease assets and liabilities was as follows:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Assets</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 82%; padding-left: 10pt">Operating lease right-of-use asset, beginning balance</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">76,130</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Current period amortization</td> <td> </td> <td> </td> <td style="text-align: right">(48,503</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Lease amendment</td> <td> </td> <td> </td> <td style="text-align: right">(1,622</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Lease extension</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">10,982</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total operating lease right-of-use asset, ending balance</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">36,987</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Liabilities</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Operating lease liability, current</td> <td> </td> <td>$</td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Operating lease liability, long term</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total lease liabilities</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">38,438</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

The following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as loss on derivative instruments in the Company’s consolidated statements of operations for the nine months ended December 31, 2020.   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Loss Recognized</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 77%; text-align: justify">Realized loss on oil price hedging contracts</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 20%; text-align: right">(19,200</td> <td style="width: 1%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; text-align: justify">Unrealized gain (loss) on oil price hedging contracts</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; text-align: justify">Net realized and unrealized loss on derivative contracts</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">(19,200</td> <td style="padding-bottom: 2.5pt">)</td></tr> </table>

The following table is a summary of activity of stock options for the nine months ended December 31, 2020:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Number of Shares</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Weighted Average Exercise Price</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Weighted Average Remaining Contract Life in Years</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 39%">Outstanding at April 1, 2020</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 16%; text-align: right">227,700</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 16%; text-align: right">5.65</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 20%; text-align: right">4.83</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Granted</td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">(11,700</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Forfeited or Expired</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(35,200</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Outstanding at December 31, 2020</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">180,800</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">5.49</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: right">5.11</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Vested at December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">119,800</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">6.33</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3.28</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Exercisable at December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">119,800</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">6.33</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3.28</td> <td> </td></tr> </table>

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income (loss) per share for the three and nine month periods ended December 31, 2020 and 2019:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="6" style="text-align: center">Three Months Ended</td> <td> </td> <td> </td> <td colspan="6" style="text-align: center">Nine Months Ended</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="6" style="text-align: center">December 31</td> <td> </td> <td> </td> <td colspan="6" style="text-align: center">December 31</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2019</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2019</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%; padding-bottom: 1.5pt">Net income (loss)</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">80,047</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">35,196</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">(261,143</td> <td style="width: 1%; padding-bottom: 1.5pt">)</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">(101,777</td> <td style="width: 1%; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Shares outstanding:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Weighted avg. shares outstanding – basic</td> <td> </td> <td> </td> <td style="text-align: right">2,051,081</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,040,166</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,044,054</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,040,166</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Effect of assumed exercise of dilutive stock options</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">3,207</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">Weighted avg. shares outstanding – dilutive</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,054,288</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,040,166</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,044,054</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,040,166</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Income (loss) per common share:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Basic</td> <td> </td> <td>$</td> <td style="text-align: right">0.04</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.02</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">(0.13</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.05</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Diluted</td> <td> </td> <td>$</td> <td style="text-align: right">0.04</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.02</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">(0.13</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.05</td> <td>)</td></tr> </table>

10070509

10186393

2200

76130

36987

150000

175000

9472913

9545169

28109252

28806949

116993

120208

37465172

38231910

369266

429237

50188

8754

13382

16080

271315

363387

34381

41016

1706147

1962566

1523666

1829501

755261

757684

10982

757423

1071817

182481

133065

65721

38438

116760

94627

10070509

10186393

346001

317429

56286

7339351

7454109

1053583

1059433

1978505

2173086

673821

724990

634526

805701

193288

239346

697698

648729

237459

228762

21540

20298

7116

6961

624741 698358 235958 249921

-272113

-77833

26073

44788

-261143

-101777

80497

35196

10970

-23944

54424

-9592

-19200

39174

25054

14604

10203

387

1110

611

-0.13

-0.05

0.04

0.02

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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 exploration, development and production of natural gas, crude oil, 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 fourteen states. All of the Company’s oil and gas interests are operated by others.   Recent Events   The outbreak of the novel coronavirus (“COVID-19”) in the first calendar quarter of 2020 and its continued spread across the globe in the second and third calendar quarters of 2020 has resulted, and is likely to continue to result, in significant economic disruption and has, and is likely to continue to, adversely affect the operations of the Company’s business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas. Federal, state and local governments mobilized to implement containment mechanisms to minimize impacts to their populations and economies. Various containment measures, which include the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity and a resulting decrease in energy demand. In addition, the global economy has experienced a significant disruption to global supply chains. The extent of the COVID-19 outbreak on the Company’s operational and financial performance will continue to depend on certain developments, including the duration and spread of the outbreak and its continued impact on customer activity and third-party providers. The direct impact to the Company’s operations began to take effect at the close of the fiscal year ended March 31, 2020, and continued through the issuance of these condensed consolidated financial statements. The full extent to which the COVID-19 outbreak may affect the Company’s financial conditions, results of operations or liquidity subsequent to the issuance of these condensed consolidated financial statements is uncertain. At the time of this filing, cases of COVID-19 in the U.S. remain high, including in Texas, where we are involved in significant operations.   The severe drop in economic activity, travel restrictions and other restrictions due to COVID-19 have had a significant negative impact on the demand for oil and gas. Due to the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the current oversupply of oil and natural gas in the market, available storage and capacity for the Company’s customers’ production may be limited or completely unavailable in the future, which may further negatively impact the price of oil. The Company cannot predict whether, or when, the global supply and demand imbalance will be resolved or whether, or when, oil and natural gas production and economic activities will return to normalized levels. In the absence of additional reductions to global production, oil, natural gas and NGLs prices could remain at current levels, or decline further, for an extended period of time.

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 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, 2020, and the results of its operations and cash flows for the interim periods ended December 31, 2020 and 2019. The consolidated financial statements as of December 31, 2020 and for the three and nine month periods ended December 31, 2020 and 2019 are unaudited. The consolidated balance sheet as of March 31, 2020 was derived from the audited balance sheet filed in the Company’s 2020 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.   Investments. The Company accounts for investments of less than 1% of any limited liability company using the cost method. 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.   Derivative Financial Instruments. The Company’s derivative financial instruments are used to manage commodity price risk attributable to expected oil and gas production. While there is risk the financial benefit of rising oil and gas prices may not be captured, the Company believes the benefits of stable and predictable cash flows outweigh the potential risks.   The Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during the period in which they occur. Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either a current or non-current asset or a liability measured at its fair value. The Company only offsets derivative assets and liabilities for arrangements with the same counterparty when right of offset exists. Derivative assets and liabilities with different counterparties are recorded gross in the consolidated balance sheets. Derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows.   The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.   Recently Adopted Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (i) hybrid tax regimes; (ii) the tax basis step-up in goodwill obtained in a transaction that is not a business combination; (iii) separate financial statements of entities not subject to tax; (iv) the intraperiod tax allocation exception to the incremental approach; (v) ownership changes in investments - changes from a subsidiary to an equity method investment (and vice versa); (vi) interim-period accounting for enacted changes in tax laws; and (vii) the year-to-date loss limitation in interim-period tax accounting. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt ASU 2019-12 is required to adopt all of the amendments in the same period. The Company is currently assessing the effect that ASU 2019-12 will have on its financial position, results of operations and disclosures.

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.   The following table provides a rollforward of the AROs for the first nine months of fiscal 2021:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Carrying amount of asset retirement obligations as of April 1, 2020</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">762,761</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Liabilities incurred</td> <td> </td> <td> </td> <td style="text-align: right">14,013</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Liabilities settled</td> <td> </td> <td> </td> <td style="text-align: right">(33,130</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Accretion expense</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">21,540</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Carrying amount of asset retirement obligations as of December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">765,184</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: Current portion</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">7,500</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Non-Current asset retirement obligation</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">757,684</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

4. Stock-based Compensation   The Company recognized stock-based compensation expense of $13,865 and $8,125 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2020 and 2019 was $41,813 and $24,375, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2020 totals approximately $127,996 which is expected to be recognized over a weighted average of 2.70 years.   The following table is a summary of activity of stock options for the nine months ended December 31, 2020:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Number of Shares</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Weighted Average Exercise Price</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Weighted Average Remaining Contract Life in Years</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 39%">Outstanding at April 1, 2020</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 16%; text-align: right">227,700</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 16%; text-align: right">5.65</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 20%; text-align: right">4.83</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Granted</td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Exercised</td> <td> </td> <td> </td> <td style="text-align: right">(11,700</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">-</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Forfeited or Expired</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(35,200</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Outstanding at December 31, 2020</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">180,800</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt">$</td> <td style="padding-bottom: 2.5pt; text-align: right">5.49</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: right">5.11</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Vested at December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">119,800</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">6.33</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3.28</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Exercisable at December 31, 2020</td> <td> </td> <td> </td> <td style="text-align: right">119,800</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">6.33</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3.28</td> <td> </td></tr> </table>   During the nine months ended December 31, 2020 and 2019, no stock options were granted.   During the nine months ended December 31, 2020, stock options covering 11,700 shares were exercised with a total intrinsic value of $12,217. The Company received proceeds of $78,795 from these exercises. During the nine months ended December 31, 2019, no stock options were exercised.   During the nine months ended December 31, 2020, 1,000 unvested stock options were forfeited due to the resignation of an employee and 34,200 vested stock options expired unexercised. There were no stock options forfeited or expired during the nine months ended December 31, 2019. 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, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.   Subsequently, in January 2021, stock options covering 19,800 shares were exercised with a total intrinsic value of $53,751. The Company received proceeds of $134,640 from these exercises.

5. Long Term Debt   Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">March 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 66%">Credit facility</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 14%; text-align: right">1,100,000</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 14%; text-align: right">795,000</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Unamortized debt issuance costs</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(28,183</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(37,577</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total long-term debt</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,071,817</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">757,423</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>   On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which 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.   Under the Agreement, interest on the credit 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, 2020, there was $400,000 available on the credit facility.   No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2023. Upon closing with WTNB on the original Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording expenses totaling $34,532, which were deferred over the original life of the credit facility. Upon closing the amendment to the Agreement, the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses totaling $12,266, which were also deferred over the new remaining 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. The Company is in compliance with all covenants as of December 31, 2020 and believes it will remain in compliance for the next fiscal year.   In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval. The Company obtained written permission from WTNB prior to entering into the current hedge agreement discussed in Note 8.   The balance outstanding on the line of credit as of December 31, 2020 was $1,100,000. The following table is a summary of activity on the WTNB line of credit for the nine months ended December 31, 2020:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Principal</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Balance at April 1, 2020:</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">795,000</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Borrowings</td> <td> </td> <td> </td> <td style="text-align: right">680,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Repayments</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(375,000</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">Balance at December 31, 2020:</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">1,100,000</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>   Subsequently, on January 11, 2021, the Company borrowed $75,000 on the WTNB credit facility and on January 15, 2021, made a payment of $75,000 on the credit facility, leaving a balance of $1,100,000.   The Company also maintained a Certificate of Deposit Account at WTNB to collateralize one outstanding letter of credit for $25,000 in lieu of a plugging bond with the Texas Railroad Commission covering the properties the Company operated. The operated property was sold effective December 1, 2019 and the letter of credit was cancelled. On April 10, 2020, the Certificate of Deposit Account was terminated and the funds deposited into the Company’s operating account.

7. Leases   The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for the corporate office located in Midland, Texas. This includes 1,021 square feet of office space shared with and reimbursed by the majority shareholder. The lease is a 36-month lease that expires in May 2021 and does not include an option to renew. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021.   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.   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 6.0%. Significant judgement is required when determining the incremental borrowing rate. The Company chose not to discount because the difference is not significant. 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:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2020</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Assets</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 82%; padding-left: 10pt">Operating lease right-of-use asset, beginning balance</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 15%; text-align: right">76,130</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Current period amortization</td> <td> </td> <td> </td> <td style="text-align: right">(48,503</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Lease amendment</td> <td> </td> <td> </td> <td style="text-align: right">(1,622</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Lease extension</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">10,982</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total operating lease right-of-use asset, ending balance</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">36,987</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Liabilities</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Operating lease liability, current</td> <td> </td> <td>$</td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; padding-left: 10pt">Operating lease liability, long term</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; padding-left: 10pt">Total lease liabilities</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">38,438</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>   Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Lease Obligation</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Fiscal Year Ended March 31, 2021</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: right">16,473</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Fiscal Year Ended March 31, 2022</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">21,965</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Total lease payments</td> <td> </td> <td>$</td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: imputed interest</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Operating lease liability</td> <td> </td> <td> </td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: operating lease liability, current</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(38,438</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Operating lease liability, long term</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">-</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>   Net cash paid for our operating lease for the nine months ended December 31, 2020 and 2019 was $34,121 and $35,300, respectively. Rent expense, less sublease income of $14,315 and $13,167, respectively, is included in general and administrative expenses.

8. Fair Value Measurements   The Company applies FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), which establishes a framework for measuring fair value based upon inputs that market participants use in pricing an asset or liability, which are classified into two catagories: observable inputs or unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two types of inputs are further prioritized into the following fair value input hierarchy:   Level 1: Quoted prices for identical instruments in active markets at the measurement date.   Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at the measurement date and for the anticipated term of the instrument.   Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability acquired, based on the best information available in the circumstances.   The carrying amount reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the immediate or short-term maturity of these financial instruments.   The fair value amount reported in the accompanying consolidated balance sheets for long-term debt approximates fair value because the actual interest rates do not significantly differ from current rates offered for instruments with similar characteristics. See the Company’s Note 5 on Long Term Debt for further discussion.   Fair Value Measurements on a Recurring Basis   A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.   The Company’s commodity derivative instruments were carried at fair value on a recurring basis in the Company’s consolidated balance sheets. The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties.   Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets. Assumed credit risk adjustments, based on published credit ratings and public bond yield spreads are applied to the Company’s commodity derivatives. The Company’s derivative instruments are subject to netting arrangements and qualify for net presentation in the consolidated balance sheets in those instances where such arrangements exist with the respective counterparty.   To ensure these derivative instruments are recorded at fair value, valuation adjustments may be required to reflect the creditworthiness of either party as well as market constraints on liquidity. There was no adjustment as of December 31, 2020.   Fair Value Measurements on a Nonrecurring Basis   The asset retirement obligation estimates are derived from historical costs and management’s expectation of future cost environments and, therefore, the Company has designated these liabilities as Level 3 measurements. The significant inputs to this fair value measurement include estimates of plugging, abandonment and remediation costs, well life, inflation and credit-adjusted risk-free rate. See Note 3 for a reconciliation of the beginning and ending balances of the liability for the Company’s asset retirement obligations.

9. Derivative Financial Instruments   It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive.   The Company is exposed to certain risks relating to its ongoing business operations, such as commodity price risk. Derivative contracts are utilized to economically hedge the Company’s exposure to price fluctuations and reduce the variability in the Company’s cash flows associated with anticipated sales of future oil and natural gas production. The Company follows FASB ASC Topic 815, Derivatives and Hedging (ASC Topic 815), to account for its derivative financial instruments.   The Company’s crude oil derivative positions consisted of put options. The Company has elected not to designate any of its derivative contracts for hedge accounting. Accordingly, the Company records the net change in the mark-to-market valuation of these derivative contracts, as well as all payments and receipts on settled derivative contracts, in net realized and unrealized gain (loss) on commodity price hedging contracts on the consolidated statements of operations. All derivative contracts are recorded at fair market value and included in the consolidated balance sheets as assets or liabilities. As of December 31, 2020, the Company has no derivative contracts.   The Company may have multiple hedge positions that span a several-month time period and result in fair value asset and liability positions. At the end of the reporting periods, those positions are offset to a single fair value asset or liability for each commodity and the netted balance is reflected in the consolidated balance sheets as an asset or liability.   During the quarter ended June 30, 2020 the Company entered into a series of crude oil put option contracts. All of these such contracts expired in July and August 2020.   The following tables summarizes the amounts of the Company’s realized and unrealized losses on derivative contracts listed as loss on derivative instruments in the Company’s consolidated statements of operations for the nine months ended December 31, 2020.   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Loss Recognized</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 77%; text-align: justify">Realized loss on oil price hedging contracts</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 20%; text-align: right">(19,200</td> <td style="width: 1%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; text-align: justify">Unrealized gain (loss) on oil price hedging contracts</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt; text-align: justify">Net realized and unrealized loss on derivative contracts</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">(19,200</td> <td style="padding-bottom: 2.5pt">)</td></tr> </table>

10. Income Taxes   A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry.   Based on the material write-downs of the carrying value of our oil and natural gas properties during fiscal 2016, we are in a net deferred tax asset position as of December 31, 2020. Our deferred tax asset is $1,312,129 as of December 31, 2020 with a valuation amount of $1,312,129. We believe it is more likely than not that these deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as future expected growth.

11. Related Party Transactions   Related party transactions for the Company 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, 2020 and 2019 was $9,122 and $12,289, respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2020 and 2019 was $27,443 and $32,232, 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, 2020 and 2019 were $4,045 and $3,981, respectively. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2020 and 2019 were $11,694 and $11,900, respectively.

12. Income (loss) Per Common Share   The Company’s basic net income (loss) per share has been computed based on the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share assumes the exercise of all stock options having exercise prices less than the average market price of the common stock during the period using the treasury stock method and is computed by dividing net income (loss) by the weighted average number of common shares and dilutive potential common shares (stock options) outstanding during the period. In periods where losses are reported, the weighted-average number of common shares outstanding excludes potential common shares, because their inclusion would be anti-dilutive.   The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income (loss) per share for the three and nine month periods ended December 31, 2020 and 2019:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="6" style="text-align: center">Three Months Ended</td> <td> </td> <td> </td> <td colspan="6" style="text-align: center">Nine Months Ended</td> <td> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">December 31</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">December 31</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2019</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2020</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2019</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 40%; padding-bottom: 1.5pt">Net income (loss)</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">80,047</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">35,196</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">(261,143</td> <td style="width: 1%; padding-bottom: 1.5pt">)</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; width: 1%">$</td> <td style="border-bottom: black 1.5pt solid; width: 12%; text-align: right">(101,777</td> <td style="width: 1%; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Shares outstanding:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Weighted avg. shares outstanding – basic</td> <td> </td> <td> </td> <td style="text-align: right">2,051,081</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,040,166</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,044,054</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">2,040,166</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Effect of assumed exercise of dilutive stock options</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">3,207</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 2.5pt">Weighted avg. shares outstanding – dilutive</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,054,288</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,040,166</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,044,054</td> <td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">2,040,166</td> <td style="padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Income (loss) per common share:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-left: 10pt">Basic</td> <td> </td> <td>$</td> <td style="text-align: right">0.04</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.02</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">(0.13</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.05</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt">Diluted</td> <td> </td> <td>$</td> <td style="text-align: right">0.04</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">0.02</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">(0.13</td> <td>)</td> <td> </td> <td>$</td> <td style="text-align: right">(0.05</td> <td>)</td></tr> </table>   For the three months ended December 31, 2019, 139,800 potential common shares relating to stock options were excluded in the computation of diluted net income per share because the price of the options was greater than the average market price of the common shares and therefore, the effect would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $6.12 at December 31, 2020.   Due to a net loss for the nine months ended December 31, 2020 and 2019, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

13. Subsequent Events   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.

Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:   <table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Lease Obligation</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 82%">Fiscal Year Ended March 31, 2021</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 15%; text-align: right">16,473</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Fiscal Year Ended March 31, 2022</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">21,965</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Total lease payments</td> <td> </td> <td>$</td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: imputed interest</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Operating lease liability</td> <td> </td> <td> </td> <td style="text-align: right">38,438</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Less: operating lease liability, current</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(38,438</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 2.5pt">Operating lease liability, long term</td> <td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">-</td> <td style="padding-bottom: 2.5pt"> </td></tr> </table>

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.

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, 2020, and the results of its operations and cash flows for the interim periods ended December 31, 2020 and 2019. The consolidated financial statements as of December 31, 2020 and for the three and nine month periods ended December 31, 2020 and 2019 are unaudited. The consolidated balance sheet as of March 31, 2020 was derived from the audited balance sheet filed in the Company’s 2020 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.

Derivative Financial Instruments. The Company’s derivative financial instruments are used to manage commodity price risk attributable to expected oil and gas production. While there is risk the financial benefit of rising oil and gas prices may not be captured, the Company believes the benefits of stable and predictable cash flows outweigh the potential risks.   The Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during the period in which they occur. Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either a current or non-current asset or a liability measured at its fair value. The Company only offsets derivative assets and liabilities for arrangements with the same counterparty when right of offset exists. Derivative assets and liabilities with different counterparties are recorded gross in the consolidated balance sheets. Derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows.   The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.

Recently Adopted Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (i) hybrid tax regimes; (ii) the tax basis step-up in goodwill obtained in a transaction that is not a business combination; (iii) separate financial statements of entities not subject to tax; (iv) the intraperiod tax allocation exception to the incremental approach; (v) ownership changes in investments - changes from a subsidiary to an equity method investment (and vice versa); (vi) interim-period accounting for enacted changes in tax laws; and (vii) the year-to-date loss limitation in interim-period tax accounting. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt ASU 2019-12 is required to adopt all of the amendments in the same period. The Company is currently assessing the effect that ASU 2019-12 will have on its financial position, results of operations and disclosures.

The Company accounts for investments of less than 1% of any limited liability company using the cost method.

762761

765184

14013

33130

7500

13943

8125

41813

24375

127996

P2Y8M12D

11700

19800

12217

53751

1000

34200

Outstanding options at December 31, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00. 2021-11 2030-03

3.34

7.00

227700

180800

35200

119800

5.65

5.49

6.33

P4Y9M29D

P5Y1M9D

P3Y3M11D

400000

1000000

2500000

2021-12-28

2023-03-28

1500000

0.005

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.

0.005

0.001 0.005

2500

5000

12266 34532 3125

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.

795000

1100000

75000

1100000

375000

75000

25000

37577

28183

680000

P36M

2021-05-31

In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021.

0.060

34121

35300

14315

13167

76130 48503 -1622 10982

38438

16473

21965

38438

-19200 -19200

1312129

27443

32232

9122

12289

11694

11900

4045

3981

139800

6.12

3207

1021

4160

Investments. The Company accounts for investments of less than 1% of any limited liability company using the cost method. 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.

68574

6. Paycheck Protection Program (PPP) Loan.   On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act became effective. One component of the CARES Act was the paycheck protection program (“PPP”) which provides small businesses with the resources needed to maintain their payroll and cover applicable overhead. The PPP is implemented by the United States Small Business Administration (“SBA”) with support from the Department of the Treasury. The PPP provides funds to pay up to 24 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The Company applied for, and was accepted to participate in this program. On May 5, 2020, the Company received funding for approximately $68,600.   The loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six monthly payments deferred. The Company applied for and on November 25, 2020 was approved for loan forgiveness in the amount of $68,957 under the provisions of Section 1106 of the CARES Act. This was for the forgiveness of our PPP loan in the amount of $68,574 and $383 in accrued interest expense. The Company was eligible for loan forgiveness because the Company used all loan proceeds to partially subsidize direct payroll expenses.

68600

P2Y

2022-05-05

0.01

The loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six monthly payments deferred.

68957

383

68574

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Dec. 31, 2020	Feb. 10, 2021
Cover [Abstract]
Entity Registrant Name	MEXCO ENERGY CORP
Entity Central Index Key	0000066418
Document Type	10-Q
Document Period End Date	Dec. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		2,071,666
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021

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Consolidated Balance Sheets - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Current assets
Cash and cash equivalents	$ 41,016	$ 34,381
Accounts receivable:
Oil and natural gas sales	363,387	271,315
Trade	16,080	13,382
Prepaid costs and expenses	8,754	50,188
Total current assets	429,237	369,266
Property and equipment, at cost
Oil and gas properties, using the full cost method	38,231,910	37,465,172
Other	120,208	116,993
Accumulated depreciation, depletion and amortization	(28,806,949)	(28,109,252)
Property and equipment, net	9,545,169	9,472,913
Investment - cost basis	175,000	150,000
Operating lease, right-of-use asset	36,987	76,130
Other noncurrent assets		2,200
Total assets	10,186,393	10,070,509
Current liabilities
Accounts payable and accrued expenses	94,627	116,760
Operating lease liability, current	38,438	65,721
Total current liabilities	133,065	182,481
Long-term liabilities
Long-term debt	1,071,817	757,423
Operating lease liability, long-term		10,982
Asset retirement obligations	757,684	755,261
Total long-term liabilities	1,829,501	1,523,666
Total liabilities	1,962,566	1,706,147
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; 2,118,866 and 2,107,166 shares issued; 2,051,866 and 2,040,166 shares outstanding as of December 31, 2020 and March 31, 2020, respectively	1,059,433	1,053,583
Additional paid-in capital	7,454,109	7,339,351
Retained earnings	56,286	317,429
Treasury stock, at cost (67,000 shares)	(346,001)	(346,001)
Total stockholders' equity	8,223,827	8,364,362
Total liabilities and stockholders' equity	$ 10,186,393	$ 10,070,509

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2020	Mar. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 1.00	$ 1.00
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares outstanding
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	2,118,866	2,107,166
Common stock, shares outstanding	2,051,866	2,040,166
Treasury stock, shares	67,000	67,000

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Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Operating revenue:
Total operating revenues	$ 699,894	$ 769,778	$ 1,706,392	$ 2,095,253
Operating expenses:
Production	235,958	249,921	624,741	698,358
Accretion of asset retirement obligation	7,116	6,961	21,540	20,298
Depreciation, depletion, and amortization	237,459	228,762	697,698	648,729
General and administrative	193,288	239,346	634,526	805,701
Total operating expenses	673,821	724,990	1,978,505	2,173,086
Operating income (loss)	26,073	44,788	(272,113)	(77,833)
Other income (expenses):
Interest income	71	611	387	1,110
Interest expense	(14,604)	(10,203)	(39,174)	(25,054)
PPP loan forgiveness	68,957		68,957
Loss on derivative instruments			(19,200)
Net other income (expense)	54,424	(9,592)	10,970	(23,944)
Income (loss) before income taxes	80,497	35,196	(261,143)	(101,777)
Net income (loss)	$ 80,497	$ 35,196	$ (261,143)	$ (101,777)
Income (loss) per common share:
Basic:	$ 0.04	$ 0.02	$ (0.13)	$ (0.05)
Diluted:	$ 0.04	$ 0.02	$ (0.13)	$ (0.05)
Weighted average common shares outstanding:
Basic:	2,051,081	2,040,166	2,044,054	2,040,166
Diluted:	2,054,288	2,040,166	2,044,054	2,040,166
Oil Sales [Member]
Operating revenue:
Total operating revenues	$ 520,261	$ 643,141	$ 1,307,588	$ 1,762,663
Natural Gas Sales [Member]
Operating revenue:
Total operating revenues	171,982	123,082	378,798	321,004
Other [Member]
Operating revenue:
Total operating revenues	$ 7,651	$ 3,555	$ 20,006	$ 11,586

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock Par Value [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Balance at Mar. 31, 2019	$ 1,053,583	$ 7,305,048	$ 416,907	$ (346,001)	$ 8,429,537
Net loss			(101,777)		(101,777)
Stock based compensation		24,375			24,375
Balance at Dec. 31, 2019	1,053,583	7,329,423	315,130	(346,001)	8,352,135
Balance at Sep. 30, 2019	1,053,583	7,321,298	279,934	(346,001)	8,308,814
Net loss			35,196		35,196
Stock based compensation		8,125			8,125
Balance at Dec. 31, 2019	1,053,583	7,329,423	315,130	(346,001)	8,352,135
Balance at Mar. 31, 2020	1,053,583	7,339,351	317,429	(346,001)	$ 8,364,362
Common stock shares, issued at Mar. 31, 2020					2,107,166
Common stock shares, held in treasury at Mar. 31, 2020					(67,000)
Net loss			(261,143)		$ (261,143)
Issuance of stock through options exercised	5,850	72,945			78,795
Stock based compensation		41,813			$ 41,813
Common stock shares, issued					11,700
Common stock shares, held in treasury, Acquisitions, shares
Balance at Dec. 31, 2020	1,059,433	7,454,109	56,286	(346,001)	$ 8,223,827
Common stock shares, issued at Dec. 31, 2020					2,118,866
Common stock shares, held in treasury at Dec. 31, 2020					(67,000)
Common stock shares outstanding at Dec. 31, 2020					2,051,866
Balance at Sep. 30, 2020	1,054,333	7,375,984	(24,211)	(346,001)	$ 8,060,105
Net loss			80,497		80,497
Issuance of stock through options exercised	5,100	64,260			69,360
Stock based compensation		13,865			13,865
Balance at Dec. 31, 2020	$ 1,059,433	$ 7,454,109	$ 56,286	$ (346,001)	$ 8,223,827
Common stock shares, issued at Dec. 31, 2020					2,118,866
Common stock shares, held in treasury at Dec. 31, 2020					(67,000)
Common stock shares outstanding at Dec. 31, 2020					2,051,866

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121641772&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References + Details

XML 16 R6.htm IDEA: XBRL DOCUMENT

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities:
Net loss	$ (261,143)	$ (101,777)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	41,813	24,375
Depreciation, depletion and amortization	697,698	648,729
Accretion of asset retirement obligations	21,540	20,298
PPP loan forgiveness	(68,574)
Amortization of debt issuance costs	9,394	10,781
Changes in operating assets and liabilities:
Increase in accounts receivable	(94,769)	(59,627)
Decrease in right-of-use asset	39,143	48,941
Decrease in prepaid expenses	41,433	36,340
Decrease in other assets		30,421
Decrease in accounts payable and accrued expenses	(8,009)	(54,375)
Settlement of asset retirement obligations	(7,398)	(12,054)
Decrease in operating lease liability	(38,265)	(48,468)
Net cash provided by operating activities	372,863	543,584
Cash flows from investing activities:
Additions to oil and gas properties	(1,024,104)	(1,100,437)
Additions to other property and equipment	(3,215)	(2,237)
Drilling refund	121,970
Investment - cost basis	(25,000)	(100,000)
Proceeds from sale of oil and gas properties and equipment	111,752	79,133
Net cash used in investing activities	(818,597)	(1,123,541)
Cash flows from financing activities:
Proceeds from exercise of stock options	78,795
Proceeds from long-term debt	680,000	705,000
Proceeds from PPP loan	68,574
Debt issuance costs
Reduction of long-term debt	(375,000)	(190,000)
Net cash provided by financing activities	452,369	515,000
Net increase (decrease) in cash and cash equivalents	6,635	(64,957)
Cash and cash equivalents at beginning of period	34,381	128,252
Cash and cash equivalents at end of period	41,016	63,295
Supplemental disclosure of cash flow information:
Cash paid for interest	28,634	14,047
Non-cash investing and financing activities:
Asset retirement obligations	14,013	15,475
Operating lease - right of use asset and associated liabilities	$ 9,360	$ 141,385

XML 17 R7.htm IDEA: XBRL DOCUMENT

Nature of Operations

9 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1. Nature of Operations

Recent Events

XML 18 R8.htm IDEA: XBRL DOCUMENT

Basis of Presentation and Significant Accounting Policies

9 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

XML 19 R9.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligations

9 Months Ended

Dec. 31, 2020

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

3. Asset Retirement Obligations

The following table provides a rollforward of the AROs for the first nine months of fiscal 2021:

Carrying amount of asset retirement obligations as of April 1, 2020	$	762,761
Liabilities incurred		14,013
Liabilities settled		(33,130	)
Accretion expense		21,540
Carrying amount of asset retirement obligations as of December 31, 2020		765,184
Less: Current portion		7,500
Non-Current asset retirement obligation	$	757,684

XML 20 R10.htm IDEA: XBRL DOCUMENT

Stock-based Compensation

9 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

4. Stock-based Compensation

The following table is a summary of activity of stock options for the nine months ended December 31, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Life in Years
Outstanding at April 1, 2020		227,700		$	5.65		4.83
Granted		-			-
Exercised		(11,700	)		-
Forfeited or Expired		(35,200	)		-
Outstanding at December 31, 2020		180,800		$	5.49		5.11

Vested at December 31, 2020		119,800		$	6.33		3.28
Exercisable at December 31, 2020		119,800		$	6.33		3.28

During the nine months ended December 31, 2020 and 2019, no stock options were granted.

Outstanding options at December 31, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.

Subsequently, in January 2021, stock options covering 19,800 shares were exercised with a total intrinsic value of $53,751. The Company received proceeds of $134,640 from these exercises.

XML 21 R11.htm IDEA: XBRL DOCUMENT

Long Term Debt

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Long Term Debt

5. Long Term Debt

Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:

	December 31, 2020			March 31, 2020
Credit facility	$	1,100,000		$	795,000
Unamortized debt issuance costs		(28,183	)		(37,577	)
Total long-term debt	$	1,071,817		$	757,423

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.

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.

	Principal
Balance at April 1, 2020:	$	795,000
Borrowings		680,000
Repayments		(375,000	)
Balance at December 31, 2020:	$	1,100,000

Subsequently, on January 11, 2021, the Company borrowed $75,000 on the WTNB credit facility and on January 15, 2021, made a payment of $75,000 on the credit facility, leaving a balance of $1,100,000.

XML 22 R12.htm IDEA: XBRL DOCUMENT

Paycheck Protection Program (PPP) Loan

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Paycheck Protection Program (PPP) Loan

6. Paycheck Protection Program (PPP) Loan.

XML 23 R13.htm IDEA: XBRL DOCUMENT

Leases

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

7. Leases

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

	December 31, 2020
Assets
Operating lease right-of-use asset, beginning balance	$	76,130
Current period amortization		(48,503	)
Lease amendment		(1,622	)
Lease extension		10,982
Total operating lease right-of-use asset, ending balance	$	36,987

Liabilities
Operating lease liability, current	$	38,438
Operating lease liability, long term		-
Total lease liabilities	$	38,438

Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2021		16,473
Fiscal Year Ended March 31, 2022		21,965
Total lease payments	$	38,438
Less: imputed interest		-
Operating lease liability		38,438
Less: operating lease liability, current		(38,438	)
Operating lease liability, long term	$	-

XML 24 R14.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

9 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

8. Fair Value Measurements

Level 1: Quoted prices for identical instruments in active markets at the measurement date.

Fair Value Measurements on a Recurring Basis

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

Fair Value Measurements on a Nonrecurring Basis

XML 25 R15.htm IDEA: XBRL DOCUMENT

Derivative Financial Instruments

9 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

9. Derivative Financial Instruments

It is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive.

During the quarter ended June 30, 2020 the Company entered into a series of crude oil put option contracts. All of these such contracts expired in July and August 2020.

	Loss Recognized
Realized loss on oil price hedging contracts	$	(19,200	)
Unrealized gain (loss) on oil price hedging contracts		-
Net realized and unrealized loss on derivative contracts	$	(19,200	)

XML 26 R16.htm IDEA: XBRL DOCUMENT

Income Taxes

9 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

XML 27 R17.htm IDEA: XBRL DOCUMENT

Related Party Transactions

9 Months Ended

Dec. 31, 2020

Related Party Transactions

11. Related Party Transactions

XML 28 R18.htm IDEA: XBRL DOCUMENT

Income (Loss) Per Common Share

9 Months Ended

Dec. 31, 2020

Income (loss) per common share:

Income (Loss) Per Common Share

12. Income (loss) Per Common Share

	Three Months Ended				Nine Months Ended
	December 31				December 31
	2020		2019		2020			2019
Net income (loss)	$	80,047	$	35,196	$	(261,143	)	$	(101,777	)

Shares outstanding:
Weighted avg. shares outstanding – basic		2,051,081		2,040,166		2,044,054			2,040,166
Effect of assumed exercise of dilutive stock options		3,207		-		-			-
Weighted avg. shares outstanding – dilutive		2,054,288		2,040,166		2,044,054			2,040,166

Income (loss) per common share:
Basic	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)
Diluted	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)

XML 29 R19.htm IDEA: XBRL DOCUMENT

Subsequent Events

9 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

XML 30 R20.htm IDEA: XBRL DOCUMENT

Basis of Presentation and Significant Accounting Policies (Policies)	9 Months Ended
	Dec. 31, 2020
Accounting Policies [Abstract]
Principles of Consolidation	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	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 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	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, 2020, and the results of its operations and cash flows for the interim periods ended December 31, 2020 and 2019. The consolidated financial statements as of December 31, 2020 and for the three and nine month periods ended December 31, 2020 and 2019 are unaudited. The consolidated balance sheet as of March 31, 2020 was derived from the audited balance sheet filed in the Company’s 2020 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.
Investments	Investments. The Company accounts for investments of less than 1% of any limited liability company using the cost method. 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.
Derivative Financial Instruments	Derivative Financial Instruments. The Company’s derivative financial instruments are used to manage commodity price risk attributable to expected oil and gas production. While there is risk the financial benefit of rising oil and gas prices may not be captured, the Company believes the benefits of stable and predictable cash flows outweigh the potential risks. The Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during the period in which they occur. Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either a current or non-current asset or a liability measured at its fair value. The Company only offsets derivative assets and liabilities for arrangements with the same counterparty when right of offset exists. Derivative assets and liabilities with different counterparties are recorded gross in the consolidated balance sheets. Derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows. The Company uses certain pricing models to determine the fair value of its derivative financial instruments. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those securities trade in active markets.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (i) hybrid tax regimes; (ii) the tax basis step-up in goodwill obtained in a transaction that is not a business combination; (iii) separate financial statements of entities not subject to tax; (iv) the intraperiod tax allocation exception to the incremental approach; (v) ownership changes in investments - changes from a subsidiary to an equity method investment (and vice versa); (vi) interim-period accounting for enacted changes in tax laws; and (vii) the year-to-date loss limitation in interim-period tax accounting. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt ASU 2019-12 is required to adopt all of the amendments in the same period. The Company is currently assessing the effect that ASU 2019-12 will have on its financial position, results of operations and disclosures.

XML 31 R21.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligations (Tables)

9 Months Ended

Dec. 31, 2020

Asset Retirement Obligation Disclosure [Abstract]

Schedule of Rollforward of Asset Retirement Obligations

The following table provides a rollforward of the AROs for the first nine months of fiscal 2021:

Carrying amount of asset retirement obligations as of April 1, 2020	$	762,761
Liabilities incurred		14,013
Liabilities settled		(33,130	)
Accretion expense		21,540
Carrying amount of asset retirement obligations as of December 31, 2020		765,184
Less: Current portion		7,500
Non-Current asset retirement obligation	$	757,684

XML 32 R22.htm IDEA: XBRL DOCUMENT

Stock-based Compensation (Tables)

9 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of Activity of Stock Options

The following table is a summary of activity of stock options for the nine months ended December 31, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Life in Years
Outstanding at April 1, 2020		227,700		$	5.65		4.83
Granted		-			-
Exercised		(11,700	)		-
Forfeited or Expired		(35,200	)		-
Outstanding at December 31, 2020		180,800		$	5.49		5.11

Vested at December 31, 2020		119,800		$	6.33		3.28
Exercisable at December 31, 2020		119,800		$	6.33		3.28

XML 33 R23.htm IDEA: XBRL DOCUMENT

Long Term Debt (Tables)

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Schedule of Long Term Debt

Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:

	December 31, 2020			March 31, 2020
Credit facility	$	1,100,000		$	795,000
Unamortized debt issuance costs		(28,183	)		(37,577	)
Total long-term debt	$	1,071,817		$	757,423

Summary of Line of Credit Activity

The following table is a summary of activity on the WTNB line of credit for the nine months ended December 31, 2020:

	Principal
Balance at April 1, 2020:	$	795,000
Borrowings		680,000
Repayments		(375,000	)
Balance at December 31, 2020:	$	1,100,000

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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+ Details

XML 34 R24.htm IDEA: XBRL DOCUMENT

Leases (Tables)

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Schedule of Operating Lease Assets and Liabilities

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

	December 31, 2020
Assets
Operating lease right-of-use asset, beginning balance	$	76,130
Current period amortization		(48,503	)
Lease amendment		(1,622	)
Lease extension		10,982
Total operating lease right-of-use asset, ending balance	$	36,987

Liabilities
Operating lease liability, current	$	38,438
Operating lease liability, long term		-
Total lease liabilities	$	38,438

Schedule of Future Minimum Lease Payments

Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2021		16,473
Fiscal Year Ended March 31, 2022		21,965
Total lease payments	$	38,438
Less: imputed interest		-
Operating lease liability		38,438
Less: operating lease liability, current		(38,438	)
Operating lease liability, long term	$	-

XML 35 R25.htm IDEA: XBRL DOCUMENT

Derivative Financial Instruments (Tables)

9 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Realized and Unrealized Losses On Derivative Contracts

	Loss Recognized
Realized loss on oil price hedging contracts	$	(19,200	)
Unrealized gain (loss) on oil price hedging contracts		-
Net realized and unrealized loss on derivative contracts	$	(19,200	)

XML 36 R26.htm IDEA: XBRL DOCUMENT

Income (Loss) Per Common Share (Tables)

9 Months Ended

Dec. 31, 2020

Income (loss) per common share:

Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share

	Three Months Ended				Nine Months Ended
	December 31				December 31
	2020		2019		2020			2019
Net income (loss)	$	80,047	$	35,196	$	(261,143	)	$	(101,777	)

Shares outstanding:
Weighted avg. shares outstanding – basic		2,051,081		2,040,166		2,044,054			2,040,166
Effect of assumed exercise of dilutive stock options		3,207		-		-			-
Weighted avg. shares outstanding – dilutive		2,054,288		2,040,166		2,044,054			2,040,166

Income (loss) per common share:
Basic	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)
Diluted	$	0.04	$	0.02	$	(0.13	)	$	(0.05	)

XML 37 R27.htm IDEA: XBRL DOCUMENT

Basis of Presentation and Significant Accounting Policies (Details Narrative)	9 Months Ended
	Dec. 31, 2020
Accounting Policies [Abstract]
Cost method investments, percentage description	The Company accounts for investments of less than 1% of any limited liability company using the cost method.

XML 38 R28.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligations - Schedule of Rollforward of Asset Retirement Obligations (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Mar. 31, 2020
Asset Retirement Obligation Disclosure [Abstract]
Carrying amount of asset retirement obligations, beginning of the period			$ 762,761
Liabilities incurred			14,013
Liabilities settled			(33,130)
Accretion expense	$ 7,116	$ 6,961	21,540	$ 20,298
Carrying amount of asset retirement obligations, end of the period	765,184		765,184
Less: Current portion	7,500		7,500
Non-Current asset retirement obligation	$ 757,684		$ 757,684		$ 755,261

XML 39 R29.htm IDEA: XBRL DOCUMENT

Stock-based Compensation (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
Stock-based Compensation (Details Narrative) - USD ($)	Jan. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Total cost related to non-vested awards		$ 127,996		$ 127,996
Non-vested awards, weighted average period of recognition				2 years 8 months 12 days
Number of stock options granted shares
Stock options shares exercised				11,700
Stock options intrinsic value exercised				$ 12,217
Proceeds from options exercised				$ 78,795
Stock options shares forfeited				1,000
Stock options shares expired				34,200
Outstanding options expiration date description				Outstanding options at December 31, 2020 expire between November 2021 and March 2030 and have exercise prices ranging from $3.34 to $7.00.
Stock option exercise price, minimum				$ 3.34
Stock option exercise price, maximum				$ 7.00
Subsequent Event [Member]
Stock options shares exercised	19,800
Stock options intrinsic value exercised	$ 53,751
Proceeds from options exercised	$ 134,640
Minimum [Member]
Outstanding options expiration month and year				2021-11
Maximum [Member]
Outstanding options expiration month and year				2030-03
General and Administrative Expense [Member]
Stock based compensation expense		$ 13,943	$ 8,125	$ 41,813	$ 24,375

XML 40 R30.htm IDEA: XBRL DOCUMENT

Stock-based Compensation - Summary of Activity of Stock Options (Details) - $ / shares	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Number of Shares, Granted
Number of Shares, Exercised	(11,700)
Stock Option [Member]
Number of Shares, Beginning Balance	227,700
Number of Shares, Granted
Number of Shares, Exercised	(11,700)
Number of Shares, Forfeited or Expired	(35,200)
Number of Shares, Ending Balance	180,800
Number of Shares, Vested	119,800
Number of Shares, Exercisable	119,800
Weighted Average Exercise Price Per Share, Beginning Balance	$ 5.65
Weighted Average Exercise Price Per Share, Granted
Weighted Average Exercise Price Per Share, Exercised
Weighted Average Exercise Price Per Share, Forfeited or Expired
Weighted Average Exercise Price Per Share, Ending Balance	5.49
Weighted Average Exercise Price Per Share, Vested	6.33
Weighted Average Exercise Price Per Share, Exercisable	$ 6.33
Weighted Average Remaining Contract Life in Years, Beginning Balance	4 years 9 months 29 days
Weighted Average Remaining Contract Life in Years, Ending Balance	5 years 1 month 9 days
Weighted Aggregate Average Remaining Contract Life in Years, Vested	3 years 3 months 11 days
Weighted Aggregate Average Remaining Contract Life in Years, Exercisable	3 years 3 months 11 days

XML 41 R31.htm IDEA: XBRL DOCUMENT

Long Term Debt (Details Narrative) - USD ($)				9 Months Ended
Long Term Debt (Details Narrative) - USD ($)	Jan. 15, 2021	Feb. 28, 2020	Dec. 28, 2018	Dec. 31, 2020	Jan. 11, 2021	Mar. 31, 2020
Line of credit				$ 1,100,000		$ 795,000
Repayments				375,000
West Texas National Bank [Member]
Outstanding letter of credit				$ 25,000
West Texas National Bank [Member] \| Subsequent Event [Member]
Line of credit	$ 1,100,000				$ 75,000
Repayments	$ 75,000
Loan Agreement [Member]
Debt instrument covenant description				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.
Loan Agreement [Member] \| West Texas National Bank [Member]
Credit facility face amount		$ 2,500,000	$ 1,000,000	$ 400,000
Line of credit maturity date		Mar. 28, 2023	Dec. 28, 2021
Line of credit, increase in borrowing base amount		$ 1,500,000
Accrues variable interest rate		0.50%
Line of credit commitment fee description		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.
Line of credit commitment fee, percentage		0.50%
Loan origination fee, percentage		0.50%		0.10%
Loan origination fee		$ 5,000		$ 2,500
Legal and recording expenses		$ 34,532		12,266
Extension fees				$ 3,125

XML 42 R32.htm IDEA: XBRL DOCUMENT

Long Term Debt - Schedule of Long Term Debt (Details) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Debt Disclosure [Abstract]
Credit facility	$ 1,100,000	$ 795,000
Unamortized debt issuance costs	(28,183)	(37,577)
Total long-term debt	$ 1,071,817	$ 757,423

- Definition

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

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Long Term Debt - Summary of Line of Credit Activity (Details)	9 Months Ended
	Dec. 31, 2020 USD ($)
Debt Disclosure [Abstract]
Balance at April 1, 2020:	$ 795,000
Borrowings	680,000
Repayments	(375,000)
Balance at December 31, 2020:	$ 1,100,000

- Definition

+ References + Details

XML 44 R34.htm IDEA: XBRL DOCUMENT

Paycheck Protection Program (PPP) Loan (Details Narrative) - USD ($)			9 Months Ended
	Nov. 25, 2020	May 05, 2020	Dec. 31, 2020	Dec. 31, 2019
PPP fund received		$ 68,600
Loan term			2 years
Debt maturity date			May 05, 2022
Annual interest rate			1.00%
Debt description			The loan was a two-year loan with a maturity date of May 5, 2022 an annual interest rate of 1% payable monthly with the first six monthly payments deferred.
Proceeds from PPP loan			$ 68,574
Accrued interest expense			$ 383
CARES Act [Member]
Loan forgiveness amount	$ 68,957

- Definition

Identification of the lender and information about a contractual promise to repay a short-term or long-term obligation, which includes borrowings under lines of credit, notes payable, commercial paper, bonds payable, debentures, and other contractual obligations for payment. This may include rationale for entering into the arrangement, significant terms of the arrangement, which may include amount, repayment terms, priority, collateral required, debt covenants, borrowing capacity, call features, participation rights, conversion provisions, sinking-fund requirements, voting rights, basis for conversion if convertible and remarketing provisions. The description may be provided for individual debt instruments, rational groupings of debt instruments, or by debt in total.

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Leases (Details Narrative)	1 Months Ended	9 Months Ended
Leases (Details Narrative)	Jun. 30, 2020	Dec. 31, 2020 USD ($) ft²	Dec. 31, 2019 USD ($)
Area of lease \| ft²		4,160
Lease term		36 months
Lease expiration date		May 31, 2021
Lease term extension, description	In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021.
Incremental borrowing interest percentage		6.00%
Net cash paid for operating lease \| $		$ 34,121	$ 35,300
Sublease income \| $		$ 14,315	$ 13,167
Shareholder [Member]
Area of lease \| ft²		1,021

XML 46 R36.htm IDEA: XBRL DOCUMENT

Leases - Schedule of Operating Lease Assets and Liabilities (Details) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Leases [Abstract]
Operating lease right-of-use asset, beginning balance	$ 76,130
Current period amortization	(48,503)
Lease amendment	(1,622)
Lease extension	10,982
Total operating lease right-of-use asset, ending balance	36,987	$ 76,130
Operating lease liability, current	38,438	65,721
Operating lease liability, long term		$ 10,982
Total lease liabilities	$ 38,438

XML 47 R37.htm IDEA: XBRL DOCUMENT

Leases - Schedule of Future Minimum Lease Payments (Details) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Leases [Abstract]
Fiscal Year Ended March 31, 2021	$ 16,473
Fiscal Year Ended March 31, 2022	21,965
Total lease payments	38,438
Less: imputed interest
Operating lease liability	38,438
Less: operating lease liability, current	(38,438)	$ (65,721)
Operating lease liability, long term		$ 10,982

XML 48 R38.htm IDEA: XBRL DOCUMENT

Derivative Financial Instruments - Summary of Realized and Unrealized Losses On Derivative Contracts (Details)	Dec. 31, 2020 USD ($)
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Realized loss on oil price hedging contracts	$ (19,200)
Unrealized gain (loss) on oil price hedging contracts
Net realized and unrealized loss on derivative contracts	$ (19,200)

XML 49 R39.htm IDEA: XBRL DOCUMENT

Income Taxes (Details Narrative)	Dec. 31, 2020 USD ($)
Income Tax Disclosure [Abstract]
Deferred tax asset, net	$ 1,312,129
Valuation allowance	$ 1,312,129

XML 50 R40.htm IDEA: XBRL DOCUMENT

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Related Party Transactions [Abstract]
Total billed to and reimbursed expenses	$ 9,122	$ 12,289	$ 27,443	$ 32,232
Due to related party	$ 4,045	$ 3,981	$ 11,694	$ 11,900

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Income (Loss) Per Common Share (Details Narrative) - $ / shares	3 Months Ended	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2020
Income (loss) per common share:
Anti-diluted excluding common shares	139,800
Weighted average exercise price		$ 6.12

XML 52 R42.htm IDEA: XBRL DOCUMENT

Income (Loss) Per Common Share - Schedule of Reconciliation of Basic and Diluted Net Income (Loss) Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Income (loss) per common share:
Net income (loss)	$ 80,497	$ 35,196	$ (261,143)	$ (101,777)
Shares outstanding: Weighted avg. shares outstanding - basic	2,051,081	2,040,166	2,044,054	2,040,166
Shares outstanding: Effect of the assumed exercise of dilutive stock options	$ 3,207
Shares outstanding: Weighted avg. shares outstanding - dilutive	2,054,288	2,040,166	2,044,054	2,040,166
Income (loss) per common share: Basic	$ 0.04	$ 0.02	$ (0.13)	$ (0.05)
Income (loss) per common share: Diluted	$ 0.04	$ 0.02	$ (0.13)	$ (0.05)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

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