UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D. C. 20549





FORM
      10-Q





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


For
      the
      quarterly period ended December 31, 2007





OR





o   
      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. 0-6994




**MEXCO
      ENERGY CORPORATION**


*(Exact
      name of registrant as specified in its charter)*




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





214
      West
      Texas Avenue, Suite 1101, Midland, Texas 79701


*(Address
      of principal executive offices)*





(432)
      682-1119


*(Registrant’s
      telephone number, including area code)*





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 (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.  YES þ NO
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in rule 12b-2 of the Exchange Act. (Check
      one):





Large
                Accelerated Filer o
            Accelerated
                Filer o
            Non-Accelerated
                Filer þ





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





The
      number of shares outstanding of the registrant’s common stock, par value $.50
      per share, as of February  14,
      2008
      was 1,757,366.




Page
          1


**MEXCO
      ENERGY CORPORATION**




Table
      of Contents


PagePART
                I. FINANCIAL INFORMATIONItem
                1.
            Consolidated
                Balance Sheets as of December 31, 2007(Unaudited)
                and March 31, 2007
            3Consolidated
                Statements of Operations (Unaudited) forthe
                three months and nine months ended December 31, 2007and
                December 31, 2006
            4Consolidated
                Statements of Cash Flows (Unaudited) forthe
                nine months ended December 31, 2007 and December 31, 2006
            5Notes
                to Consolidated Financial Statements (Unaudited)
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Conditionand
                Results of Operations
            9Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            11Item
                4.
            Controls
                and Procedures
            12PART
                II. OTHER INFORMATION
            12Item
                1.
            Legal
                ProceedingsItem
                1A.
            Risk
                FactorsItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                6.
            ExhibitsSIGNATURES
            13CERTIFICATIONS





Page
          2


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      BALANCE SHEETS





December
                31,
            
            March
                31,2007
            
            2007(Unaudited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            219,954
            
            $
            72,537Accounts
                receivable:Oil
                and gas sales
            
            
            468,199
            
            
            399,659Trade
            
            
            310,709
            
            
            2,987Income
                tax receivable
            
            
            60,654
            
            
            59,736Prepaid
                costs and expenses
            
            
            38,046
            
            
            65,986Total
                current assets
            
            
            1,097,562
            
            
            600,905Investment
                in GazTex, LLC
            
            
            20,509
            
            
            20,509Property
                and equipment, at costOil
                and gas properties, using the full cost method
            
            
            23,622,834
            
            
            20,526,431Other
            
            
            51,412
            
            
            51,41223,674,246
            
            
            20,577,843Less
                accumulated depreciation, depletion and amortization
            
            
            11,771,801
            
            
            11,240,277Property
                and equipment, net
            
            
            11,902,445
            
            
            9,337,566$
            13,020,516
            
            $
            9,958,980




**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilitiesAccounts
                payable and accrued expenses
            
            $
            518,294
            
            $
            154,074Long-term
                debt
            
            
            3,075,000
            
            
            700,000Asset
                retirement obligation
            
            
            359,021
            
            
            350,584Deferred
                income tax liability
            
            
            1,093,988
            
            
            978,686Commitments
                and contingenciesStockholders’
                equityPreferred
                stock - $1.00 par value;10,000,000
                shares authorized; none outstanding
            
            
            -
            
            
            -Common
                stock - $0.50 par value;40,000,000
                shares authorized;1,841,366
                and 1,840,366 shares issued;1,757,366
                and 1,780,841 shares outstanding as ofDecember
                31 and March 31, 2007, respectively
            
            
            920,683
            
            
            920,183Additional
                paid-in capital
            
            
            4,361,898
            
            
            4,291,892Retained
                earnings
            
            
            3,118,249
            
            
            2,871,085Treasury
                stock, at cost (84,000 and 59,525 shares, respectively)
            
            
            (426,617
            )
            
            (307,524
            )Total
                stockholders’ equity
            
            
            7,974,213
            
            
            7,775,636$
            13,020,516
            
            $
            9,958,980




**The
      accompanying notes are an integral part of**


**the
      consolidated financial statements.**




Page
          3


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(Unaudited)





Three
                Months Ended
            
            Nine
                Months EndedDecember
                31
            
            December
                312007
            
            2006
            
            2007
            
            2006Operating
                revenue:Oil
                and gas sales
            
            $
            952,211
            
            $
            663,031
            
            $
            2,642,302
            
            $
            2,214,141Other
            
            
            2,869
            
            
            167
            
            
            4,203
            
            
            2,224Total
                operating revenues
            
            
            955,080
            
            
            663,198
            
            
            2,646,505
            
            
            2,216,365Operating
                expenses:Production
            
            
            241,019
            
            
            218,774
            
            
            1,041,405
            
            
            641,371Accretion
                of asset retirement obligation
            
            
            6,368
            
            
            5,592
            
            
            19,691
            
            
            17,436Depreciation,
                depletion, and amortization
            
            
            174,842
            
            
            152,135
            
            
            531,523
            
            
            459,585General
                and administrative
            
            
            187,648
            
            
            176,791
            
            
            636,191
            
            
            613,203Total
                operating expenses
            
            
            609,877
            
            
            553,292
            
            
            2,228,810
            
            
            1,731,595Operating
                profit
            
            
            345,203
            
            
            109,906
            
            
            417,695
            
            
            484,770Other
                income (expense):Interest
                income
            
            
            1,170
            
            
            336
            
            
            3,255
            
            
            2,736Interest
                expense
            
            
            (22,791
            )
            
            (2,359
            )
            
            (58,484
            )
            
            (18,817
            )Net
                other expense
            
            
            (21,621
            )
            
            (2,023
            )
            
            (55,229
            )
            
            (16,081
            )Earnings
                before income taxes and
              minority
                interest
            
            
            323,582
            
            
            107,883
            
            
            362,466
            
            
            468,689Income
                tax expense (benefit):Current
            
            
            -
            
            
            (30,531
            )
            
            -
            
            
            32,253Deferred
            
            
            102,468
            
            
            71,334
            
            
            115,302
            
            
            16,366102,468
            
            
            40,803
            
            
            115,302
            
            
            48,619Earnings
                before minority interest
            
            
            221,114
            
            
            67,080
            
            
            247,164
            
            
            420,070Minority
                interest in loss of subsidiary
            
            
            -
            
            
            -
            
            
            -
            
            
            4,835Net
                income
            
            $
            221,114
            
            $
            67,080
            
            $
            247,164
            
            $
            424,905Net
                income per common share:Basic:
            
            $
            0.13
            
            $
            0.04
            
            $
            0.14
            
            $
            0.24Diluted:
            
            $
            0.12
            
            $
            0.04
            
            $
            0.14
            
            $
            0.23




**The
      accompanying notes are an integral part of**


**the
      consolidated financial statements.**




Page
          4


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
      the
      Nine Months Ended December 31,


(Unaudited)





2007
            
            2006**Cash
                flows from operating activities:**Net
                income
            
            $
            247,164
            
            $
            424,905Adjustments
                to reconcile net income to net
              cash
                provided by operating activities:Increase
                in deferred tax liabilities
            
            
            115,302
            
            
            16,366Excess
                tax benefit from share based payment arrangement
            
            
            (1,100
            )
            
            -Stock-based
                compensation
            
            
            66,506
            
            
            91,026Depreciation,
                depletion and amortization
            
            
            531,523
            
            
            459,585Common
                stock issued to director
            
            
            -
            
            
            14,100Accretion
                of asset retirement obligations
            
            
            19,691
            
            
            17,436Minority
                interest in loss of GazTex, LLC
            
            
            -
            
            
            (4,835
            )Decrease
                (increase) in accounts receivable
            
            
            (436,916
            )
            
            70,335Decrease
                in prepaid expenses
            
            
            87,676
            
            
            22,741Increase
                (decrease) in accounts payableand
                accrued expenses
            
            
            28,395
            
            
            (14,196
            )Net
                cash provided by operating activities
            
            
            658,241
            
            
            1,097,463**Cash
                flows from investing activities:**Additions
                to oil and gas properties
            
            
            (2,810,831
            )
            
            (582,870
            )Additions
                to other property and equipment
            
            
            -
            
            
            (11,564
            )Proceeds
                from sale of oil and gas properties and equipment
            
            
            39,000
            
            
            28,002Net
                cash used in investing activities
            
            
            (2,771,831)
            )
            
            (566,432
            )**Cash
                flows from financing activities:**Proceeds
                from exercise of stock options
            
            
            4,000
            
            
            157,150Acquisition
                of treasury stock
            
            
            (119,093
            )
            
            (38,109
            )Reduction
                of long-term debt
            
            
            (50,000
            )
            
            (600,000
            )Proceeds
                from long-term debt
            
            
            2,425,000
            
            
            -Excess
                tax benefit from share based payment arrangement
            
            
            1,100
            
            
            -Minority
                interest contributions
            
            
            -
            
            
            4,835Net
                cash provided by (used in) financing activities
            
            
            2,261,007
            
            
            (476,124
            )Net
                increase in cash and cash equivalents
            
            
            147,417
            
            
            54,907Cash
                and cash equivalents at beginning of year
            
            
            72,537
            
            
            52,768**Cash
                and cash equivalents at end of period**
            
            $
            219,954
            
            $
            107,675Interest
                paid
            
            $
            54,854
            
            $
            22,004Income
                taxes paid
            
            $
            -
            
            $
            -Supplemental
                disclosure of non-cash financing activities:Cashless
                exercise of stock options and repurchaseof
                treasury shares
            
            $
            -
            
            $
            40,000Percentage
                of royalty interest purchase issued as paymentfor
                finder’s fee
            
            $
            46,250
            
            $
            -




**The
      accompanying notes are an integral part of**


**the
      consolidated financial statements.**




Page
          5


MEXCO
      ENERGY CORPORATION AND SUBSIDIARY


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Unaudited)





**1.
      Nature of Operations**





Mexco
      Energy Corporation (a Colorado Corporation), its wholly owned subsidiaries,
      Forman Energy Corporation (a New York Corporation) and OBTX, LLC (a Delaware
      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). Although most of the Company’s oil and gas
      interests are centered in West Texas, the Company owns producing properties
      and
      undeveloped acreage in ten states. Although most of the Company’s oil and gas
      interests are operated by others, the Company operates several properties in
      which it owns an interest.





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, 2007, and the results of its operations and cash flows for
      the
      interim periods ended December 31, 2007 and 2006. 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 Company’s annual report on Form 10-K filed with the
      Securities and Exchange Commission (“SEC”). 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 Securities and Exchange Commission. 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.





**2.
      Summary of 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, management is required
      to
      make informed judgments and estimates 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. Although
      management believes its estimates and assumptions are reasonable, actual results
      may differ materially from those estimates. Significant estimates affecting
      these financial statements include the estimated quantities of proved oil and
      gas reserves, the related present value of estimated future net cash flows,
      asset retirement obligation, fair value of stock options and income
      taxes.





**Stock-based
      Compensation** .
      Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”) resulted
      in the recognition of compensation expense of $13,989 or $.01 per basic share
      and diluted share for the three months ended December 31, 2007 and $66,506
      or
      $.04 per basic share and diluted share for the nine months ended December 31,
      2007. Due to an employee’s forfeiture of unvested stock options, the three
      months’ expense amount was adjusted $1,543. Compensation expense recognized for
      the three months and nine months ended December 31, 2006 was $35,428 or $.02
      per
      basic share and diluted share and $91,026 or $.05 per basic share and diluted
      share, respectively.





Included
      in the following table is a summary of the grant-date fair value of stock
      options granted and the related assumptions.


For
                the nine months
            
            For
                the nine monthsended
                December 31, 2007
            
            ended
                December 31, 2006Grant-date
                fair value
            
            $
            2.20
            
            $
            5.15Volatility
                factor
            
            
            56.06
            %
            
            71.46
            %Dividend
                yield
            
            
            -
            
            
            -Risk-free
                interest rate
            
            
            3.54
            %
            
            5.07
            %Expected
                term (in years)
            
            
            5
            
            
            5





During
      the nine months ended December 31, 2007 and 2006, stock options covering 25,000
      and 35,000 shares, respectively, were granted.




Page
          6




Stock
      options covering 1,000 shares were exercised during the nine months ended
      December 31, 2007. Stock options covering 41,800 shares were exercised during
      the nine months ended December 31, 2006.





The
      following table is a summary of activity of stock options for the nine months
      ended December 31, 2007:





Weighted
                Average
            
            Weighted
                Average
            
            AggregateNumber
                of
            
            Exercise
                Price
            
            Contract
                Life
            
            IntrinsicShares
            
            Per
                Share
            
            in
                Years
            
            ValueOutstanding
                at March 31, 2007
            
            
            305,000
            
            $
            6.35Granted
            
            
            25,000
            
            
            4.35Exercised
            
            
            (1,000
            )
            
            4.00Forfeited
                or Expired
            
            
            (39,000
            )
            
            7.31Outstanding
                at December 31, 2007
            
            
            290,000
            
            $
            6.06
            
            
            3.55
            
            $
            (602,450
            )Exercisable
                at December 31, 2007
            
            
            235,000
            
            $
            6.02
            
            
            3.35
            
            $
            (478,275
            )





Prior
      to
      April 1, 2007, notice of termination was sent to a consultant and his remaining
      30,000 vested options forfeited on June 20, 2007.  During
      the second quarter the Company received notice of resignation from an employee
      and her remaining 5,250 vested and 3,750 unvested options forfeited on November
      30, 2007.  During
      the nine months ended December 30, 2006,  18,200
      stock options were forfeited due to the termination of consulting agreements
      with two of our consultants. However, these are all isolated events which the
      Company does not expect in the future. The Company has assumed no options will
      be forfeited before vesting due to the limited number of employees at the
      executive and senior management level who receive stock options, past employment
      history and current stock price projections.





Outstanding
      options at December 31, 2007  expire
      between April 2008 and July 2014 and have exercise prices ranging
      from  $4.00
      to
      $8.24.





Compensation
      related to non-vested awards not yet recognized at December 31, 2007 totals
      approximately  $111,783
      which is expected to be recognized over a weighted average of 2.91
      years.





**Stockholders’
      Equity.** The
      following is a summary of the changes in the Company’s common shares outstanding
      for the first nine months of fiscal 2008:


For
                the nine months endedDecember
                31, 2007Shares
                outstanding, beginning of period
            
            
            1,780,841Exercise
                of stock options
            
            
            1,000Grant
                of stock awards
            
            
            -Purchase
                of shares for treasury
            
            
            (24,475
            )Shares
                outstanding, end of period
            
            
            1,757,366





During
      the nine months ended December 31, 2007, the Company repurchased 24,475 shares
      for the treasury at an aggregate cost of $119,093.





**Asset
      Retirement Obligations** .
      The
      Company’s asset retirement obligations relate to the plugging of wells, the
      removal of facilities and equipment, and site restoration on oil and gas
      properties. SFAS No. 143 requires the fair value of a liability for an asset
      retirement obligation to be recorded in the period in which it is incurred
      with
      a corresponding increase in the carrying amount of the related long-lived
      asset.





The
      following table provides a rollforward of the asset retirement obligations
      for
      the first nine months of fiscal 2008:





Carrying
                amount of asset retirement obligations as of April 1, 2007
            
            $
            400,584Liabilities
                incurred
            
            
            26,076Liabilities
                settled
            
            
            (37,330
            )Accretion
                expense
            
            
            19,691Carrying
                amount of asset retirement obligations as of December 31,
                2007
            
            
            409,021Less:
                Current portion
            
            
            50,000Non-current
                asset retirement obligation
            
            $
            359,021




The
      asset
      retirement obligation is included on the consolidated balance sheets with the
      current portion being included in accounts payable and accrued expenses.




Page
          7




**Income
      Per Common Share.** Basic
      net income per share is computed by dividing net income (loss) by the weighted
      average number of common shares outstanding during the period. Diluted net
      income per share 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. The following is a reconciliation of
      the
      number of shares used in the calculation of basic income per share and diluted
      income per share for the three and nine month periods ended December 31, 2007
      and 2006.





Three
                Months Ended
            
            Nine
                Months EndedDecember
                31
            
            December
                312007
            
            2006
            
            2007
            
            2006Weighted
                average number ofcommon
                shares outstanding
            
            
            1,764,649
            
            
            1,774,189
            
            
            1,771,222
            
            
            1,757,178Incremental
                shares from the assumedexercise
                of dilutive stock options
            
            
            7,934
            
            
            29,157
            
            
            6,786
            
            
            72,090Dilutive
                potential common shares
            
            
            1,772,583
            
            
            1,803,346
            
            
            1,778,008
            
            
            1,829,268





For
      the
      three months and nine months ended December 31, 2007, potential common shares
      of
      240,000 shares, relating to stock options, were excluded in the computation
      of
      diluted net income per share because  the
      options are anti-dilutive. During the three and nine month periods ending
      December 31, 2006, 214,000 and 105,000  shares,
      respectively, were excluded from the diluted net income per share calculations.
      Anti-dilutive stock options have a  weighted
      average exercise price of $6.49 at December 31, 2007.





**Income
      Taxes** .
      The
      Company recognizes deferred tax assets and liabilities for future tax
      consequences of temporary differences between the carrying amounts of assets
      and
      liabilities and their respective tax bases. Deferred tax assets and liabilities
      are measured using enacted tax rates applicable to the years in which those
      differences are expected to be settled. The effect on deferred tax assets and
      liabilities of a change in tax rates under SFAS No. 109 is recognized in net
      income in the period that includes the enactment date. There is no current
      income tax expense for the three and nine months ending December 31, 2007.
      The
      effective income tax rate for the nine months ended December 31, 2007
      was  32%.
      The
      effective income tax rate for the nine months ended December 31, 2006 was 10%
      as
      a result of the decrease of deferred income taxes due to a revision of an
      estimate of statutory depletion and a net operating loss carryforward.





Effective
      April 1, 2007, we adopted Financial Accounting Standards Bulletin (“FASB”)
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109* (“FIN
      48”), which clarifies the financial statement recognition and disclosure
      requirements for uncertain tax positions taken or expected to be taken in a
      tax
      return. Any interest and penalties related to uncertain tax positions are
      recorded as interest expense and general and administrative expense,
      respectively. At the time of adoption and as of December 31, 2007, we did not
      have any uncertain tax positions.





**Investment
      in GazTex, LLC.** The
      Company’s long-term assets consist of an investment in GazTex, LLC, a Russian
      company owned 50% by OBTX, LLC, accounted for by the equity method. OBTX, LLC
      is
      a Delaware limited liability company in which through January 15, 2007, Mexco
      owned 90% of the interest, with the remaining 10% divided equally among three
      individuals, one of whom is Arden Grover, a director of Mexco Energy
      Corporation. All geological and geophysical costs associated with the evaluation
      of Russian properties were paid 90% by Mexco and 10% by the other three owners
      of OBTX, LLC. On January 16, 2007, the Company purchased all of the outstanding
      stock of OBTX, LLC for $2,051. The investment balance of $20,509 represents
      the
      cash balance of the investment in GaxTex, LLC. The 10% interest in OBTX, LLC
      prior to this purchase is included in the financial statements as a minority
      interest. There have not been any expenses for the nine months ended December
      31, 2007 and no expenses are expected in the foreseeable future.





**Long
      Term Liabilities.** Long
      term debt consists of a revolving credit agreement with Bank of America, N.A.
      (“Bank”), which provides for a credit facility of $5,000,000, subject to a
      borrowing base determination bearing interest at prime rate per annum with
      a
      maturity date of October 31, 2009. On September 26, 2007, the borrowing base
      was
      redetermined and set at $4,225,000. Amounts borrowed under this agreement are
      collateralized by the common stock of the Company’s wholly owned subsidiary and
      all of the Company’s oil and gas properties.  As
      of
      February 14, 2008, the balance outstanding under this agreement was $2,925,000.





**Recent
      Accounting Pronouncements.** In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      157”), which provides guidance for using fair value to measure assets and
      liabilities. The pronouncement clarifies (1) the extent to which companies
      measure assets and liabilities at fair value; (2) the information used to
      measure fair value; and (3) the effect that fair value measurements have on
      earnings. SFAS 157 will apply whenever another standard requires (or permits)
      assets or liabilities to be measured at fair value. SFAS 157 is effective as
      of
      the beginning of our 2009 fiscal year. Management is currently evaluating the
      impact, if any, of SFAS 157 on our financial statements.




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          8




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Liabilities - Including an amendment
      of FASB Statement No. 115* (“SFAS
      159”). SFAS 159 permits entities to choose to measure certain financial assets
      and liabilities at fair value. Unrealized gains and losses, arising subsequent
      to adoption, are reported in earnings. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. Management does not anticipate that the
      adoption of SFAS 159 will have a material effect on our consolidated financial
      statements.





**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 can be identified with words and
      phrases such as “believe,” “expect,” “anticipate,” “should,” “estimate,”
“foresee” or other words and phrases of similar meaning. 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, estimates of future oil and gas prices; estimates of oil and gas
      reserves; future financial condition or results of operations; and 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.





**Liquidity
      and Capital Resources.** Historically, we have funded our operations, acquisitions, exploration and
      development expenditures from cash generated by operating activities, bank
      borrowings and issuance of common stock. Our primary financial resource is
      our
      base of oil and gas reserves. We pledge our producing oil and gas properties
      to
      secure our revolving line of credit.





Our
      long
      term strategy is on increasing profit margins while concentrating on obtaining
      reserves with low cost operations by acquiring and developing primarily gas
      properties and secondarily oil properties with potential for long-lived
      production.





For
      the
      first nine months of fiscal 2008, cash flow from operations was $658,241
      compared to $1,097,463 for the first nine months of fiscal 2007 partially due
      to
      a decrease in net income. We also had a decrease in cash payments from working
      interest partners which resulted in an increase in accounts receivable. Cash
      of
      $2,810,831 was used for additions to property and equipment and cash of $119,093
      was used to repurchase stock for the treasury account.  Net
      proceeds provided from long-term debt was $2,375,000. Accordingly, net cash
      increased $147,417.





During
      the first nine months of fiscal 2008, we participated in the drilling of a
      well
      in Crane County, Texas of which our costs are approximately $161,000. The well
      is currently producing but further testing and possible new pay zones may be
      added.





We
      also
      participated in the drilling of a well in Lea County, New Mexico. The initial
      well failed due to mechanical reasons; however, other methods are being
      evaluated for the exploration and development of this project. Costs incurred
      related to this project are approximately $237,000 for the nine month period.
      A
      lawsuit is being filed against the drilling company to recover damages due
      to
      this failure.





We
      are
      currently participating in the drilling and completion of a well in Borden
      County, Texas. Costs incurred related to this project are approximately
      $316,000. The results of this well are currently being evaluated.





We
      are
      currently participating in the drilling and completion of a well in San Patricio
      County, Texas. Costs incurred for this project are approximately $166,000.
      The
      results of this well are currently being evaluated.





We
      are in
      the process of acquiring mineral, royalty and surface interests in several
      counties, mainly in Texas. Purchases incurred related to this project to date
      are approximately $34,000.




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          9




During
      the third quarter of fiscal 2008, we drilled a well in Loving County, Texas.
      The
      well is currently being completed. Our share of the costs incurred for this
      project is approximately $142,000.





On
      December 31, 2007, we purchased 118 mineral acres amounting to approximately
      22%
      royalty interest in Tarrant County, Texas for $1,850,000. This property contains
      one producing well in the Newark East (Barnett Shale) Field and two additional
      wells have been drilled and are being prepared for production.  A
      director and employee of the Company received a finder’s fee of 2.5% ORRI in
      lieu of a cash payment as disclosed on Form 8-K dated December 31, 2007.





We
      continue to focus a substantial portion of our efforts on the acquisition of
      royalties and minerals in areas with significant development
      potential.





We
      are
      participating in several projects and are reviewing several other projects
      for
      potential participation. 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.





At
      December 31, 2007, we had working capital of approximately $579,268 compared
      to
      working capital of $446,831 at March 31, 2007, an increase of
      $132,437  due
      to an
      increase in accounts receivable and accounts payable trade. These increases
      were
      related to drilling costs on our well in Loving County.





Crude
      oil
      and natural gas prices have fluctuated significantly in recent years as well
      as
      in recent months. Fluctuations in price have a significant impact on our
      financial condition and liquidity. However, management is of the opinion that
      cash flow from operations and funds available from financing will be sufficient
      to provide for its working capital requirements and capital expenditures for
      the
      current fiscal year.





**Long-Term
      Debt.** We
      have a
      revolving credit agreement with Bank of America, N.A. (“Bank”), which provides
      for a credit facility of $5,000,000, subject to a borrowing base determination
      bearing interest at prime rate per annum with a maturity date of October 31,
      2009. On September 26, 2007, the borrowing base was redetermined and set at
      $4,225,000. As  of
      December 31, 2007, the balance outstanding under this agreement was $3,075,000.
      The borrowing base is evaluated annually, on or about August 1. Amounts borrowed
      under this agreement are collateralized by the common stock of our wholly owned
      subsidiary and all oil and gas properties. Two letters of credit for $50,000
      each, in lieu of a plugging bond covering the properties we operate, are
      outstanding under the facility, one with the Texas Railroad Commission and
      one
      with the State of New Mexico. Interest under this agreement is payable monthly
      at the prime rate (7.25% and 8.25% at  December
      31, 2007 and 2006, respectively). This agreement generally restricts our ability
      to transfer assets or control of the Company, incur debt, extend credit, change
      the nature of our business, substantially change management personnel or pay
      cash dividends. The balance outstanding on the line of credit as of February
      14,
      2008 was $2,925,000.





**Results
      of Operations - Three Months Ended December 31, 2007 and
      2006.** Net
      income increased from $67,080 for the quarter ended December 31, 2006 to
      $221,114 for the quarter ended December 31, 2007, an increase of $154,034 or
      230%.





Oil
      and
      gas sales increased  from
      $663,031 for the third quarter of fiscal 2007 to $952,211 for the same period
      of
      fiscal 2008. This increase of 44% or $289,180 resulted from an increase in
      oil
      and gas prices and production. Average gas prices increased from $5.34 per
      mcf
      for the third quarter of fiscal 2007 to $6.36 per mcf for the same period of
      fiscal 2008. Average oil prices also increased from $49.35 per bbl for the
      third
      quarter of fiscal 2007 to $86.05 for the same period of fiscal 2008. Oil and
      gas
      production quantities were 4,212 barrels (“bbls”) and 85,244 thousand cubic feet
      (“mcf”) for the third quarter of fiscal 2007 and 4,515 bbls and 88,630 mcf for
      the same period of fiscal 2008, an increase of 7% in oil production and 4%
      in
      gas production.





Production
      costs increased 10% from $218,774 for the third quarter of fiscal 2007 to
      $241,019 for the same period of fiscal 2008. This was the result of increased
      production taxes due to the increase in oil and gas sales.





General
      and administrative expenses increased 6% from $176,791 for the third quarter
      of
      fiscal 2007 to $187,648 for the same period of fiscal 2008. This was due to
      an
      increase in salaries, consulting services and fees.





Depreciation,
      depletion and amortization based on production increased 15%, from $152,135
      for
      the  third
      quarter of fiscal 2007 to $174,842 for the same period of fiscal 2008, primarily
      due to an increase to the full cost pool amortization base.





Interest
      expense increased 867% from $2,359 for the third quarter of fiscal 2007 to
      $22,791 for the same period of fiscal 2008, due to an increase in
      borrowings.




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          10




Effective
      tax rate decreased from 38% for the third quarter of fiscal 2007 to 32% for
      the
      same period of fiscal 2008.





**Results
      of Operations - Nine Months Ended December 31, 2007 and
      2006.** Net
      income decreased from $424,905 for the nine months ended December 31, 2006
      to
      $247,164 for the same period of fiscal 2008, a decrease of $177,741 or
      42%.





Oil
      and
      gas sales increased from $2,214,141 for the nine months ended December 31,
      2006
      to $2,642,302 for the same period of fiscal 2008. This increase of 19%, or
      $428,161, resulted from increases in oil and gas prices as well as oil and
      gas
      production. Average gas prices increased from $5.67 per mcf for the first nine
      months ended December 31, 2006 to $6.35 per mcf for the same period of fiscal
      2008. Average oil prices also increased from $60.06 per bbl for the first nine
      months of fiscal 2007 to $72.09 for the same period of fiscal 2008. Oil and
      gas
      production quantities were 12,742 barrels (“bbls”) and 255,314 thousand cubic
      feet (“mcf”) for the first nine months ended December 31, 2006 and 13,348 bbls
      and 264,435 mcf for the same period of fiscal 2008, an increase of 4% in gas
      production and 5% in oil production.





Production
      costs increased from $641,371 for the first nine months ended December 31,
      2006
      to $1,041,405 for the same period of fiscal 2008. This was the result of an
      increase in repairs and maintenance to operated wells in the El Cinco field
      and
      increased production taxes due to the increase in oil and gas
      sales.





General
      and administrative expenses  increased
      4% from $613,203 for the first nine months ended December 31, 2006 to $636,191
      for the same period of fiscal 2008. This was due to an increase in salaries,
      consulting services and fees.





Depreciation,
      depletion and amortization based on production increased 16%, from $459,585
      for
      the first  nine
      months ended December 31, 2006 to $531,523 for the same period of fiscal 2008
      primarily due to an increase to the full cost pool amortization
      base.





Interest
      expense increased 211% from $18,817 for the first nine months ended December
      31,
      2006 to $58,484 for the same period of fiscal 2008 due to an increase in
      borrowings.





Effective
      tax rate increased from 10% for the nine months ended December 31, 2006 to
      32%
      for the same period of fiscal 2008. This lower effective tax rate in fiscal
      2007
      was the result of the decrease of deferred income taxes due to a revision of
      an
      estimate of statutory depletion and a net operating loss carryforward.





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





The
      primary sources of market risk for us include fluctuations in commodity prices
      and interest rate fluctuations. At December 31, 2007, we had not entered into
      any hedge arrangements, commodity swap agreements, commodity futures, options
      or
      other similar agreements relating to crude oil and natural gas.





**Interest
      Rate Risk.** At
      December 31, 2007 we had an outstanding loan balance of $3,075,000 under our
      $5.0 million revolving credit agreement, which bears interest at the prime
      rate,
      which varies from time to time. If the interest rate on our bank debt increases
      or decreases by one percentage point, our annual pretax income would change
      by
      $30,750 based on the outstanding balance at December 31, 2007.





**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 generally are
      uncollateralized. At December 31, 2007, our largest credit risk associated
      with
      any single purchaser was $49,375. We are also exposed to credit risk in the
      event of nonperformance from any of our working interest partners. At December
      31, 2007, our largest credit risk associated with any working interest partner
      was $96,339. We have not experienced any significant credit losses.





**Volatility
      of Oil and Gas Prices** .
      Our
      revenues, operating results and future rate of growth are highly dependent
      upon
      the prevailing market prices of, and demand for, oil and natural gas. These
      commodity prices are subject to wide fluctuations and market uncertainties
      due
      to a variety of factors that are beyond our control. These factors include
      the
      level of global demand for petroleum products, foreign 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 economic conditions, both foreign and domestic. We cannot predict
      future oil and gas prices with any degree of certainty and expect energy prices
      to remain volatile and unpredictable. Sustained weakness in oil and gas prices
      may also reduce the amount of net oil and gas reserves that we can produce
      economically. Any reduction in reserves, including reductions due to price
      fluctuations, can reduce the borrowing base under our revolving credit facility
      and adversely affect our liquidity and our ability to obtain capital for our
      exploration and development activities. Similarly, any improvements in oil
      and
      gas prices can have a favorable impact on our financial condition, results
      of
      operations and capital resources. If
      the
      average oil price had increased or decreased by one dollar per barrel for the
      first nine months of fiscal 2008, our pretax income would have changed by
      $13,348. If the average gas price had increased or decreased by ten cents per
      mcf for the first nine months of fiscal 2008, our pretax income would have
      changed by $26,444.




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          11




**Item
      4. Controls and Procedures**





We
      maintain controls and procedures designed to ensure that information required
      to
      be disclosed by us in reports filed or submitted under the Securities Exchange
      Act of 1934 is recorded, processed, summarized and reported within the time
      periods specified in the Securities and Exchange Commission rules and forms.
      At
      the end of the period covered by this report, we carried out an evaluation,
      under the supervision and with the participation of management, including the
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of our disclosure controls and procedures pursuant to
      Securities Exchange Act Rule 13a-15(b). Based upon that evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that its disclosure
      controls and procedures are effective.





No
      changes in the Company’s internal control over financial reporting occurred
      during the quarter ended December 31, 2007 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 a party to a lawsuit that is being filed against
                the
                drilling company of a well in which we have a working interest of
                approximately 6.5%. 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 2007
                Annual Report on Form 10-K.




Item
              4.
            Submission
                of Matters to a Vote of Security Holders
              None.




Item
              6.
            Exhibits
                and Reports on Form 8-K
              Current
                  report on Form 8-K filed on December 31, 2007, pursuant to Item
                  8.01,
                  announcing the purchase of royalty interest
                  properties.





**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




Page
          12





**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)Date:
                    February 14, 2008
                  
                  /s/ Nicholas
                    C. TaylorNicholas
                      C.
                      Taylor
                    President


Date:
                  February 14, 2008
                
                /s/ Tamala
                  L. McComicTamala
                    L. McComic
                  Vice
                    President, Treasurer and Assistant Secretary


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          13