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 September 30, 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*
            *(IRS
                Employer**incorporation
                or organization)*
            *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  November
      13, 2007 was 1,767,366.





**MEXCO
      ENERGY CORPORATION**






Table
      of Contents




Page


PART
                I. FINANCIAL INFORMATIONItem
                1.
            Consolidated
                Balance Sheets as of September 30, 2007(Unaudited)
                  and March 31, 2007
            3Consolidated
                Statements of Operations (Unaudited) forthe
                three months and six months ended September 30, 2007and
                September 30, 2006
            4Consolidated
                Statements of Cash Flows (Unaudited) forthe
                six months ended September 30, 2007 and September 30, 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
            11PART
                II. OTHER INFORMATION
            12Item
                1.
            Legal
                ProceedingsItem
                1A.
            Risk
                FactorsItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                6.
            ExhibitsSIGNATURES
            12CERTIFICATIONS




2


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      BALANCE SHEETS





September
                30,
            
            March
                31,2007
            
            2007(Unaudited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            109,822
            
            $
            72,537Accounts
                receivable:Oil
                and gas sales
            
            
            398,818
            
            
            399,659Trade
            
            
            1,192
            
            
            2,987Income
                tax receivable
            
            
            64,395
            
            
            59,736Prepaid
                costs and expenses
            
            
            56,090
            
            
            65,986Total
                current assets
            
            
            630,317
            
            
            600,905Investment
                in GazTex, LLC
            
            
            20,509
            
            
            20,509Property
                and equipment, at costOil
                and gas properties, using the full cost method
            
            
            21,527,984
            
            
            20,526,431Other
            
            
            51,412
            
            
            51,41221,579,396
            
            
            20,577,843Less
                accumulated depreciation, depletion and amortization
            
            
            11,596,958
            
            
            11,240,277Property
                and equipment, net
            
            
            9,982,438
            
            
            9,337,566$
            10,633,264
            
            $
            9,958,980**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Accounts
                payable and accrued expenses
            
            $
            410,614
            
            $
            154,074Long-term
                debt
            
            
            1,050,000
            
            
            700,000Asset
                retirement obligation
            
            
            374,351
            
            
            350,584Deferred
                income tax liability
            
            
            991,520
            
            
            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;1,772,366
                and 1,780,841 shares outstanding as ofSeptember
                30 and March 31, 2007, respectively
            
            
            920,683
            
            
            920,183Additional
                paid-in capital
            
            
            4,347,908
            
            
            4,291,892Retained
                earnings
            
            
            2,897,134
            
            
            2,871,085Treasury
                stock, at cost (69,000 and 59,525 shares, respectively)
            
            
            (358,946
            )
            
            (307,524
            )Total
                stockholders’ equity
            
            
            7,806,779
            
            
            7,775,636$
            10,633,264
            
            $
            9,958,980




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




3


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(Unaudited)





Three
                Months Ended
            
            Six
                Months EndedSeptember
                30
            
            September
                302007
            
            2006
            
            2007
            
            2006Operating
                revenue:Oil
                and gas sales
            
            $
            839,947
            
            $
            773,698
            
            $
            1,690,092
            
            $
            1,551,110Other
            
            
            1,161
            
            
            1,890
            
            
            1,334
            
            
            2,057Total
                operating revenues
            
            
            841,108
            
            
            775,588
            
            
            1,691,426
            
            
            1,553,167Operating
                expenses:Production
            
            
            467,336
            
            
            206,968
            
            
            800,386
            
            
            422,597Accretion
                of asset retirement obligation
            
            
            6,713
            
            
            6,860
            
            
            13,324
            
            
            11,844Depreciation,
                depletion, and amortization
            
            
            183,797
            
            
            156,921
            
            
            356,681
            
            
            307,450General
                and administrative
            
            
            178,918
            
            
            174,919
            
            
            448,543
            
            
            436,412Total
                operating expenses
            
            
            836,764
            
            
            545,668
            
            
            1,618,934
            
            
            1,178,303Operating
                profit
            
            
            4,344
            
            
            229,920
            
            
            72,492
            
            
            374,864Other
                income (expense):Interest
                income
            
            
            1,747
            
            
            2,107
            
            
            2,085
            
            
            2,400Interest
                expense
            
            
            (20,345
            )
            
            (6,359
            )
            
            (35,694
            )
            
            (16,458
            )Net
                other expense
            
            
            (18,598
            )
            
            (4,252
            )
            
            (33,609
            )
            
            (14,058
            )Earnings
                (loss) before income taxes andminority
                interest
            
            
            (14,254
            )
            
            225,668
            
            
            38,883
            
            
            360,806Income
                tax expense (benefit):Current
            
            
            -
            
            
            22,539
            
            
            -
            
            
            62,784Deferred
            
            
            (5,498
            )
            
            72,692
            
            
            12,834
            
            
            (54,968
            )(5,498
            )
            
            95,231
            
            
            12,834
            
            
            7,816Earnings
                (loss) before minority interest
            
            
            (8,756
            )
            
            130,437
            
            
            26,049
            
            
            352,990Minority
                interest in loss of subsidiary
            
            
            -
            
            
            97
            
            
            -
            
            
            4,835Net
                (loss) income
            
            $
            (8,756
            )
            $
            130,534
            
            $
            26,049
            
            $
            357,825Net
                income per common share:Basic:
            
            $
            -
            
            $
            0.07
            
            $
            0.01
            
            $
            0.21Diluted:
            
            $
            -
            
            $
            0.07
            
            $
            0.01
            
            $
            0.20







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


4


**Mexco
      Energy Corporation and Subsidiaries**


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
      the
      Six Months Ended September 30,


(Unaudited)




2007
            
            2006**Cash
                flows from operating activities:**Net
                income
            
            $
            26,049
            
            $
            357,825Adjustments
                to reconcile net income to netcash
                provided by operating activities:Increase
                (decrease) in deferred tax liabilities
            
            
            12,834
            
            
            (54,968
            )Stock-based
                compensation
            
            
            52,516
            
            
            55,598Depreciation,
                depletion and amortization
            
            
            356,681
            
            
            307,450Common
                stock issued to director
            
            
            -
            
            
            14,100Accretion
                of asset retirement obligations
            
            
            13,324
            
            
            11,844Minority
                interest in loss of GazTex, LLC
            
            
            -
            
            
            (4,835
            )Increase
                in accounts receivable
            
            
            (2,024
            )
            
            (20,744
            )Decrease
                in prepaid expenses
            
            
            9,896
            
            
            36,105Increase
                in income taxes payable
            
            
            -
            
            
            3,048Increase
                (decrease) in accounts payableand
                accrued expenses
            
            
            121,380
            
            
            (14,860
            )Net
                cash provided by operating activities
            
            
            590,656
            
            
            690,563**Cash
                flows from investing activities:**Additions
                to oil and gas properties
            
            
            (866,749
            )
            
            (213,213
            )Additions
                to other property and equipment
            
            
            -
            
            
            (11,564
            )Proceeds
                from sale of oil and gas properties and equipment
            
            
            10,800
            
            
            24,700Net
                cash used in investing activities
            
            
            (855,949
            )
            
            (200,077
            )**Cash
                flows from financing activities:**Proceeds
                from exercise of stock options
            
            
            4,000
            
            
            104,650Acquisition
                of treasury stock
            
            
            (51,422
            )
            
            (32,300
            )Reduction
                of long-term debt
            
            
            (50,000
            )
            
            (500,000
            )Proceeds
                from long-term debt
            
            
            400,000
            
            
            -Minority
                interest contributions
            
            
            -
            
            
            4,835Net
                cash provided by (used in) financing activities
            
            
            302,578
            
            
            (422,815
            )Net
                increase in cash and cash equivalents
            
            
            37,285
            
            
            67,671Cash
                and cash equivalents at beginning of year
            
            
            72,537
            
            
            52,768**Cash
                and cash equivalents at end of period**
            
            $
            109,822
            
            $
            120,439Interest
                paid
            
            $
            33,902
            
            $
            19,317Income
                taxes paid
            
            $
            -
            
            $
            -Supplemental
                disclosure of non-cash financing activities:Cashless
                exercise of stock options and repurchaseof
                treasury shares
            
            $
            -
            
            $
            40,000





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


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 September 30, 2007, and the results of its operations and cash flows for
      the
      interim periods ended September 30, 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 A 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
      and
      the future development, dismantlement and abandonment costs.





**Stock-based
      Compensation** .
      Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”) resulted
      in the recognition of compensation expense of $33,387 or $.02 per basic share
      and diluted share and $21,497 or $.01 per basic share and diluted share for
      the
      three months ended September 30, 2007 and 2006, respectively. Compensation expense recognized for the six months ended
      September 30, 2007 and 2006 was $52,516 or $.03 per basic share and diluted
      share and $55,598 or $.03 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 six monthsended
                September 30, 2006Grant-date
                fair value
            $
                5.15Volatility
                factor
            71.46%Dividend
                yield
            -Risk-free
                interest rate
            5.07%Expected
                term (in years)
            5





There
      were no stock options granted during the six months ended September 30, 2007.
      During the six months ended September 30, 2006, stock options covering 35,000
      shares were granted.





Stock
      options covering 1,000 shares were exercised during the six months ended
      September 30, 2007. Stock options covering 31,800 shares were exercised during
      the six months ended September 30, 2006.





6


The
      following table is a summary of activity of stock options for the six months
      ended September 30, 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
            
            
            -
            
            
            -Exercised
            
            
            1,000
            
            
            4.00Forfeited
                or Expired
            
            
            30,000
            
            
            7.33Outstanding
                at September 30, 2007
            
            
            274,000
            
            $
            6.25
            
            
            3.70
            
            $
            (302,000
            )Exercisable
                at September 30, 2007
            
            
            237,750
            
            $
            6.02
            
            
            3.62
            
            $
            (205,963
            )





Prior
      to
      April 1, 2007, notice of termination was sent to a consultant and his remaining
      30,000 options forfeited on June 20, 2007.  During
      the second quarter the Company received notice of resignation from an employee
      and her remaining 9,000 options will forfeit on November 30, 2007 if not
      exercised by that date. However, these are isolated events which the Company
      does not expect in the future. During the six months ended September 30, 2006,
      18,200 stock options were forfeited due to the termination of consulting
      agreements with two of our consultants.





Outstanding
      options at September 30, 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 September 30, 2007 totals
      approximately $83,107 which is expected to be recognized over a weighted average
      of 2.2 years.





**Stockholders’
      Equity.** The
      following is a summary of the changes in the Company’s common shares outstanding
      for the first half of 2007:




For
                the six months endedSeptember
                30, 2007Shares
                outstanding, beginning of period
            
            
            1,780,841Exercise
                of stock options
            
            
            1,000Grant
                of stock awards
            
            
            -Purchase
                of shares for treasury
            
            
            (9,475
            )Shares
                outstanding, end of period
            
            
            1,772,366




During
      the six months ended September 30, 2007, the Company repurchased
      9,475  shares
      for the treasury at an aggregate cost of $51,422. In October 2007, the Company
      repurchased an additional 5,000 shares for the treasury at an aggregate cost
      of
      $26,108.





**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 six months of fiscal 2008:





Carrying
                amount of asset retirement obligations as of April 1, 2007
            
            $
            400,584Liabilities
                incurred
            
            
            12,469Liabilities
                settled
            
            
            (2,026
            )Accretion
                expense
            
            
            13,324Carrying
                amount of asset retirement obligations as of September 30,
                2007
            
            
            424,351Less:
                Current portion
            
            
            50,000Non-current
                asset retirement obligation
            
            $
            374,351





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





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. Due to a net loss for the three months
      ended September 30, 2007, the weighted average number of common shares
      outstanding excludes common stock equivalents, because their inclusion would
      be
      anti-dilutive. 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 six month periods ended September 30, 2007 and 2006.





Three
                Months Ended
            
            Six
                Months EndedSeptember
                30
            
            September
                302007
            
            2006
            
            2007
            
            2006Weighted
                average number ofcommon
                shares outstanding
            
            
            1,772,268
            
            
            1,751,755
            
            
            1,774,526
            
            
            1,737,422Incremental
                shares from the assumedexercise
                of dilutive stock options
            
            
            -
            
            
            51,645
            
            
            11,871
            
            
            63,129Dilutive
                potential common shares
            
            
            1,772,268
            
            
            1,803,400
            
            
            1,786,397
            
            
            1,800,551





For  the
      three-month and six-month periods ended September 30, 2007, potential common
      shares of 274,000 and 224,000 shares, respectively, 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 six month periods ending
      September 30, 2006, 125,000 and 45,000 shares, respectively, were excluded
      from
      the diluted net income per share calculations. Anti-dilutive stock options
      have
      a weighted average exercise price of $6.75 at September 30, 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 six months ending September 30, 2007.
      The
      effective income tax rate for the six months ended September 30, 2007 was 33%.
      The effective income tax rate for the six months ended September 30, 2006 was
      2%
      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 September 30, 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 six months ended September
      30, 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.  On
      September 26, 2007, the borrowing base was redetermined and set at $4,225,000
      bearing interest at prime rate per annum with a maturity date of October 31,
      2009. 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 September 30, 2007, the balance outstanding under this
      agreement was $1,050,000.





**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.





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 six months of fiscal 2008, cash flow from operations was $590,656 compared
      to $690,563 for the first six months of fiscal 2007 due to a decrease in net
      income. Cash of $866,749 was used for additions to property and equipment and
      cash of $51,422 was used to repurchase stock for the treasury account. Net
      proceeds provided from long-term debt was $350,000. Accordingly, net cash
      increased $37,285.





During
      the first six months of fiscal 2008, we participated in the drilling of a well
      in Crane County, Texas of which our costs are approximately $150,000. 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 $211,000. 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
      $300,000. The results of this well are currently being evaluated.





In
      September 2007, we committed to participate in a well in San Patricio County,
      Texas. Our share of the costs for the drilling and completion of this well
      are
      estimated to be $140,000.





We
      are in
      the process of acquiring mineral, royalty and surface interests in several
      counties, mainly Texas. Costs incurred related to this project to date are
      approximately $29,000.





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.





9


At
      September 30, 2007, we had working capital of approximately $219,703 compared
      to
      working capital of $446,831  at
      March
      31, 2007, a decrease of $227,128 due to an increase in accounts payable and
      accrued expenses. This increase in accounts payable was primarily related to
      numerous repairs and maintenance on our operated wells in the El Cinco field.
      This work was completed in September 2007.





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.
      On September 26, 2007, the borrowing base was redetermined and set at $4,225,000
      bearing interest at prime rate per annum with a maturity date of October 31,
      2009. As of September 30, 2007, the balance outstanding under this agreement
      was
      $1,050,000. 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 prime rate (7.75%  and
      8.25%
      at September 30, 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  November
      13, 2007 was $1,125,000.





**Results
      of Operations - Three Months Ended September 30, 2007 and
      2006.**  Net
      income decreased from $130,534 for the quarter ended September 30, 2006 to
      a net
      loss of $8,756 for the quarter ended September 30, 2007, a decrease of $139,290
      or 107%.





Oil
      and
      gas sales increased from $773,698 for the second quarter of fiscal 2007 to
      $839,947 for the same period of fiscal 2008. This increase of 9% or $66,249
      resulted from an increase in oil and gas prices and oil production. Average
      gas
      prices increased from $5.83 per mcf for the second quarter of fiscal 2007 to
      $5.97 per mcf for the same period of fiscal 2008. Average oil prices also
      increased from $66.15 per bbl for the second quarter of fiscal 2007 to $70.53
      for the same period of fiscal 2008. Oil and gas production quantities were
      3,899
      barrels (“bbls”) and 88,532 thousand cubic feet (“mcf”) for the second quarter
      of fiscal 2007 and 4,441 bbls and 88,266 mcf for the same period of fiscal
      2008,
      an increase of 14% in oil production and a decrease of less than 1% in gas
      production.





Production
      costs increased 126% from $206,968 for the second quarter of fiscal 2007 to
      $467,336 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
      2% from $174,919 for the second quarter of fiscal 2007 to $178,918
      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 and other methods increased
      17%,
      from $156,921 for the second quarter of fiscal 2007 to $183,797 for the same
      period of fiscal 2008, primarily due to an increase to the full cost pool
      amortization base.





Interest
      expense  increased
      220% from $6,359 for the second quarter of fiscal 2007 to $20,345 for the same
      period of fiscal 2008, due to an increase in borrowings.





**Results
      of Operations - Six Months Ended September 30, 2007 and
      2006.** Net
      income decreased from  $357,825
      for the six months ended September 30, 2006 to $26,049 for the same period
      of
      fiscal 2008, a decrease of $331,776 or 93%.





Oil
      and
      gas sales increased from $1,551,110 for the six months ended September 30,
      2006
      to  $1,690,092
      for the same period of fiscal 2008. This increase of 9%, or $138,982, resulted
      from an increase in gas price and oil and gas production offset partially by
      a
      decrease in oil price. Average gas prices increased  from
      $5.84 per mcf for the first six months ended September 30, 2006 to $6.35 per
      mcf
      for the same period of fiscal 2008, while average oil prices decreased from
      $65.34 per bbl for the first six months of fiscal 2007 to $64.95 for the same
      period of fiscal 2008.  Oil
      and
      gas production quantities were 8,530 barrels (“bbls”) and 170,069 thousand cubic
      feet (“mcf”) for the first six months ended September 30, 2006 and 8,833 bbls
      and 175,805 mcf for the same period of fiscal 2008, an increase of 3% in gas
      production and 2% in oil production.





10


Production
      costs increased from $422,597 for the first six months ended September 30,
      2006
      to $800,386 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 3% from $436,412 for the first six months
      ended September 30, 2006  to  $448,543
      for the same period of fiscal 2008. This was due to an increase in salary
      expense.





Depreciation,
      depletion and amortization based on production and other methods increased
      16%,  from
      $307,450 for the first six months ended September 30, 2006 to $356,681 for
      the
      same period of fiscal 2008 primarily due to an increase to the full cost pool
      amortization base.





Interest
      expense  increased
      117% from $16,458 for the first six months ended September 30, 2006 to $35,694
      for the  same
      period of fiscal 2008 due to an increase in borrowings.





**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 September 30, 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
      September 30, 2007 we had an outstanding loan balance of $1,050,000 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
      $10,500 based on the outstanding balance at September 30, 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 September 30, 2007, our largest credit risk associated
      with
      any single purchaser was $51,971.  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 six months of fiscal 2008, our pretax income would have changed by $8,833.
      If the average gas price had increased or decreased by ten cents per mcf for
      the
      first six months of fiscal 2008, our pretax income would have changed by
      $17,581.





**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 September 30, 2007 that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.




11


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.
              RiskFactors


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


Our
      annual meeting was held on September 13, 2007. Following are the two proposals
      voted on at the meeting and  the
      results of each:




Proposal
      #1 was the election of the following directors:


Votes
                For:
            
            Votes
                Withheld:Thomas
                R. Craddick
            
            
            1,375,354
            
            19,245Thomas
                Graham, Jr.
            
            
            1,390,284
            
            4,315Arden
                R. Grover
            
            
            1,390,473
            
            4,126Jeffry
                A. Smith
            
            
            1,375,662
            
            18,937Donna
                Gail Yanko
            
            
            1,375,638
            
            18,961Jack
                D. Ladd
            
            
            1,390,471
            
            4,128Nicholas
                C. Taylor
            
            
            1,375,693
            
            18,906




Proposal
      #2 was to ratify the selection of Grant Thornton, LLP as independent registered
      public accounting firm for the Company for the fiscal year ended March 31,
      2008.
      Votes for were 1,381,751, votes against were 2,541 and votes abstained were
      10,307.





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:
                November 13, 2007
            /s/
                Nicholas C. TaylorNicholas
                C. TaylorPresidentDated:
                November 13, 2007
            /s/
                Tamala L. McComicTamala
                L. McComicVice
                President, Treasurer and Assistant
                Secretary








12