UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549





FORM
10-Q





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





For the
quarterly period ended December 31, 2009





OR





[  ]
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
      Employerincorporation
      or organization)
            Identification
      Number)





214
      West Texas Avenue, Suite 1101Midland,
      Texas
            79701(Address
      of principal executive offices)
            (Zip
      code)





(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 and (2) has been subject to such filing requirements for the
past 90 days.   YES [Ö]   NO
[  ]





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





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





Large
      Accelerated Filer [  ]
            Accelerated
      Filer [  ]Non-Accelerated
      Filer [  ]
            Smaller
      reporting company [√]





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





The
number of shares outstanding of the registrant’s common stock, par value $.50
per share, as of February 10, 2010 was 1,891,866.




Page
1




MEXCO
ENERGY CORPORATION





Table of ContentsPagePART I.  FINANCIAL
      INFORMATIONItem
      1.
            Consolidated
      Balance Sheets (Unaudited) as of December 31, 2009 and March 31,
      2009
            3Consolidated
      Statements of Operations (Unaudited) for the three months and nine months
      ended December 31, 2009 and December 31, 2008
            4Consolidated
      Statements of Changes in Stockholders’ Equity (Unaudited) as
      of
              December
      31, 2009
            5Consolidated
      Statements of Cash Flows (Unaudited) for the nine months ended December
      31, 2009 and December 31, 2008
            6Notes
      to Consolidated Financial Statements (Unaudited)
            7Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            11Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            14Item
      4.
            Controls
      and Procedures
            14PART II.  OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            15Item
      1A.
            Risk
      Factors
            15Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            15Item
      3.
            Defaults
      upon Senior Securities
            15Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            15Item
      5.
            Other
      Information
            15Item
      6.
            Exhibits
            15SIGNATURES
            16CERTIFICATIONS





Page
2




Mexco
      Energy Corporation and SubsidiaryCONSOLIDATED
      BALANCE SHEETS(Unaudited)December
      31,
            
            
            March
      31,2009
            
            
            2009ASSETSCurrent
      assetsCash
      and cash equivalents
            
            $
            167,853
            
            
            $
            223,583Accounts
      receivable:Oil
      and gas sales
            
            
            463,632
            
            
            
            351,040Trade
            
            
            66,421
            
            
            
            164,834Related
      parties
            
            
            4,383
            
            
            
            1,687Prepaid
      costs and expenses
            
            
            32,414
            
            
            
            36,610Total
      current assets
            
            
            734,703
            
            
            
            777,754Property
      and equipment, at costOil
      and gas properties, using the full cost method
            
            
            27,122,035
            
            
            
            26,735,778Other
            
            
            69,733
            
            
            
            61,36227,191,768
            
            
            
            26,797,140Less
      accumulated depreciation, depletion and amortization
            
            
            13,857,489
            
            
            
            13,066,014Property
      and equipment, net
            
            
            13,334,279
            
            
            
            13,731,126$
            14,068,982
            
            
            $
            14,508,880LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
            
            $
            357,355
            
            
            $
            555,765Long-term
      debt
            
            
            990,000
            
            
            
            1,400,000Asset
      retirement obligations
            
            
            474,359
            
            
            
            440,011Deferred
      income tax liabilities
            
            
            925,741
            
            
            
            1,185,494Stockholders'
      equityPreferred
      stock - $1.00 par value;10,000,000
      shares authorized; none outstanding
            
            
            -
            
            
            
            -Common
      stock - $0.50 par value; 40,000,000 shares authorized;1,975,866
      and 1,962,616 shares issued;
              1,891,866
      and 1,878,616 shares outstanding as ofDecember
      31, 2009 and March 31, 2009, respectively
            
            
            987,933
            
            
            
            981,308Additional
      paid-in capital
            
            
            5,747,420
            
            
            
            5,617,620Retained
      earnings
            
            
            5,012,791
            
            
            
            4,755,299Treasury
      stock, at cost (84,000 shares)
            
            
            (426,617
            )
            
            
            (426,617
            )Total
      stockholders' equity
            
            
            11,321,527
            
            
            
            10,927,610$
            14,068,982
            
            
            $
            14,508,880





The
accompanying notes are an integral part of


the
consolidated financial statements.




Page
3





Mexco
      Energy Corporation and SubsidiaryCONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)Three
      Months Ended
            
            
            Nine
      Months EndedDecember
      31
            
            
            December
      312009
            
            
            2008
            
            
            2009
            
            
            2008Operating
      revenue:Oil
      and gas
            
            $
            857,035
            
            
            $
            908,253
            
            
            $
            2,248,789
            
            
            $
            4,176,050Other
            
            
            8,134
            
            
            
            19,391
            
            
            
            20,851
            
            
            
            32,721Total
      operating revenues
            
            
            865,169
            
            
            
            927,644
            
            
            
            2,269,640
            
            
            
            4,208,771Operating
      expenses:Production
            
            
            269,154
            
            
            
            237,736
            
            
            
            779,379
            
            
            
            930,477Accretion
      of asset retirement obligation
            
            
            7,963
            
            
            
            7,291
            
            
            
            23,570
            
            
            
            21,495Depreciation,
      depletion, and amortization
            
            
            252,940
            
            
            
            271,530
            
            
            
            791,474
            
            
            
            751,337General
      and administrative
            
            
            198,527
            
            
            
            193,102
            
            
            
            628,941
            
            
            
            674,002Total
      operating expenses
            
            
            728,584
            
            
            
            709,659
            
            
            
            2,223,364
            
            
            
            2,377,311Operating
      profit
            
            
            136,585
            
            
            
            217,985
            
            
            
            46,276
            
            
            
            1,831,460Other
      income (expenses):Interest
      income
            
            
            100
            
            
            
            110
            
            
            
            328
            
            
            
            1,117Interest
      expense
            
            
            (8,516
            )
            
            
            (17,226
            )
            
            
            (26,877
            )
            
            
            (70,815
            )Net
      other expense
            
            
            (8,416
            )
            
            
            (17,116
            )
            
            
            (26,549
            )
            
            
            (69,698
            )Earnings
      before provision for income taxes
            
            
            128,169
            
            
            
            200,869
            
            
            
            19,727
            
            
            
            1,761,762Income
      tax expense (benefit):Current
            
            
            21,988
            
            
            
            67,057
            
            
            
            21,988
            
            
            
            538,187Deferred
            
            
            (60,964
            )
            
            
            2,311
            
            
            
            (259,753
            )
            
            
            42,170(38,976
            )
            
            
            69,368
            
            
            
            (237,765
            )
            
            
            580,357Net
      income
            
            $
            167,145
            
            
            $
            131,501
            
            
            $
            257,492
            
            
            $
            1,181,405Earnings
      per common share:Basic
            
            $
            0.09
            
            
            $
            0.07
            
            
            $
            0.14
            
            
            $
            0.64Diluted
            
            $
            0.09
            
            
            $
            0.07
            
            
            $
            0.13
            
            
            $
            0.61Weighted
      average common shares outstanding:Basic
            
            
            1,891,866
            
            
            
            1,874,866
            
            
            
            1,884,598
            
            
            
            1,836,999Diluted
            
            
            1,946,076
            
            
            
            1,938,746
            
            
            
            1,946,362
            
            
            
            1,928,029




The
accompanying notes are an integral part of


the
consolidated financial statements.




Page
4





Mexco
      Energy Corporation and SubsidiaryCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY(Unaudited)Common
      Stock Par Value
            
            
            Treasury
      Stock
            
            
            Additional
      Paid-In Capital
            
            
            Retained
      Earnings
            
            
            Total
      Stockholders’ EquityBalance
      at March 31, 2009
            
            $
            981,308
            
            
            $
            (426,617
            )
            
            $
            5,617,620
            
            
            $
            4,755,299
            
            
            $
            10,927,610Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (68,003
            )
            
            
            (68,003
            )Stock
      based compensation
            
            
            -
            
            
            
            -
            
            
            
            9,348
            
            
            
            -
            
            
            
            9,348Balance
      at June 30, 2009
            
            $
            981,308
            
            
            $
            (426,617
            )
            
            $
            5,626,968
            
            
            $
            4,687,296
            
            
            $
            10,868,955Net
      Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            158,350
            
            
            
            158,350Issuance
      of stock throughoptions
      exercised
            
            
            6,625
            
            
            
            -
            
            
            
            86,167
            
            
            
            -
            
            
            
            92,792Stock
      based compensation
            
            
            -
            
            
            
            -
            
            
            
            6,548
            
            
            
            -
            
            
            
            6,548Balance
      at September 30, 2009
            
            $
            987,933
            
            
            $
            (426,617
            )
            
            $
            5,719,683
            
            
            $
            4,845,646
            
            
            $
            11,126,645Net
      Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            167,145
            
            
            
            167,145Excess
      tax benefitfrom
      stock-based compensation
            
            
            -
            
            
            
            -
            
            
            
            21,988
            
            
            
            -
            
            
            
            21,988Stock
      based compensation
            
            
            -
            
            
            
            -
            
            
            
            5,749
            
            
            
            -
            
            
            
            5,749Balance
      at December 31, 2009
            
            $
            987,933
            
            
            $
            (426,617
            )
            
            $
            5,747,420
            
            
            $
            5,012,791
            
            
            $
            11,321,527SHARE
      ACTIVITYCommon
      stock shares, issued:Balance
      at March 31, 2009
            
            
            
            
            
            
            1,962,616Issued
            
            
            
            
            
            
            -Balance
      at June 30, 2009
            
            
            
            
            
            
            1,962,616Issued
            
            
            
            
            
            
            13,250Balance
      at Sept. 30, 2009
            
            
            
            
            
            
            1,975,866Issued
            
            
            
            
            
            
            -Balance
      at Dec. 31, 2009
            
            
            
            
            
            
            1,975,866Common
      stock shares, held in treasury:Balance
      at March 31, 2009
            
            
            
            
            
            
            (84,000
            )Acquisitions
            
            
            
            
            
            
            -Balance
      at June 30, 2009
            
            
            
            
            
            
            (84,000
            )Acquisitions
            
            
            
            
            
            
            -Balance
      at Sept. 30, 2009
            
            
            
            
            
            
            (84,000
            )Acquisitions
            
            
            
            
            
            
            -Balance
      at Dec. 31, 2009
            
            
            
            
            
            
            (84,000
            )Common
      stock shares, outstandingat
      December 31 2009
            
            
            
            
            
            
            1,891,866





The
accompanying notes are an integral part of


the
consolidated financial statements.




Page
5





Mexco
      Energy Corporation and SubsidiaryCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Nine Months Ended December 31,(Unaudited)2009
            
            
            2008Cash
      flows from operating activities:Net
      income
            
            $
            257,492
            
            
            $
            1,181,405Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Deferred
      income tax (benefit) expense
            
            
            (259,753
            )
            
            
            42,170Excess
      tax benefit from share based payment arrangement
            
            
            (21,988
            )
            
            
            (538,187
            )Stock-based
      compensation
            
            
            21,645
            
            
            
            44,928Depreciation,
      depletion and amortization
            
            
            791,474
            
            
            
            751,337Accretion
      of asset retirement obligations
            
            
            23,570
            
            
            
            21,495Other
            
            
            (5,849
            )
            
            
            1,809Changes
      in assets and liabilities:(Increase)
      decrease in accounts receivable
            
            
            (16,875
            )
            
            
            144,992Decrease
      (increase) in prepaid expenses
            
            
            4,196
            
            
            
            (18,938
            )Increase
      in income taxes payable
            
            
            21,988
            
            
            
            538,187(Decrease)
      increase in accounts payable and accrued expenses
            
            
            (49,843
            )
            
            
            197,488Net
      cash provided by operating activities
            
            
            766,057
            
            
            
            2,366,686Cash
      flows from investing activities:Additions
      to oil and gas properties
            
            
            (621,870
            )
            
            
            (2,709,451
            )Additions
      to other property and equipment
            
            
            (8,371
            )
            
            
            -Proceeds
      from investment in GazTex, LLC
            
            
            -
            
            
            
            18,700Proceeds
      from sale of oil and gas properties and equipment
            
            
            103,674
            
            
            
            2,205Net
      cash used in investing activities
            
            
            (526,567
            )
            
            
            (2,688,546
            )Cash
      flows from financing activities:Proceeds
      from exercise of stock options
            
            
            92,792
            
            
            
            686,928Reduction
      of long-term debt
            
            
            (485,000
            )
            
            
            (2,599,521
            )Proceeds
      from long-term debt
            
            
            75,000
            
            
            
            1,649,521Excess
      tax benefit from share based payment arrangement
            
            
            21,988
            
            
            
            538,187Net
      cash (used in) provided by financing activities
            
            
            (295,220
            )
            
            
            275,115Net
      decrease in cash and cash equivalents
            
            
            (55,730
            )
            
            
            (46,745
            )Cash
      and cash equivalents at beginning of period
            
            
            223,583
            
            
            
            303,617Cash
      and cash equivalents at end of period
            
            $
            167,853
            
            
            $
            256,872Supplemental
      disclosure of cash flow information:Cash
      paid for interest
            
            $
            27,789
            
            
            $
            76,803Income
      taxes paid
            
            $
            -
            
            
            $
            -Non-cash
      investing and financing activities:Asset
      retirement obligations
            
            $
            11,689
            
            
            $
            23,152Percentage
      of royalty interest purchase issued as payment for finder’s
      fee
            
            $
            -
            
            
            $
            31,863





The
accompanying notes are an integral part of


the
consolidated financial statements.




Page
6





MEXCO
ENERGY CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.  Nature
of Operations





Mexco
Energy Corporation (a Colorado corporation) and its wholly owned subsidiary,
Forman Energy Corporation (a New York corporation) (collectively, the “Company”)
are engaged in the exploration, development and production of natural gas, crude
oil, condensate and natural gas liquids (“NGLs”).  Most of the
Company’s oil and gas interests are centered in West Texas however 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, 2009, and the results of its operations and cash flows for the
interim periods ended December 31, 2009 and 2008.  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 SEC. However, the disclosures herein are adequate to make
the information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Form 10-K.





2.  Summary
of Significant Accounting Policies





Principles of
Consolidation.  The consolidated financial statements include
the accounts of Mexco Energy Corporation and its wholly owned
subsidiary.  Prior to fiscal 2010, balances included the Company’s
wholly owned subsidiary, OBTX, LLC (a Delaware limited liability company) which
was dissolved in March 2009.  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.  The Company recognized compensation expense of
$5,749 and $12,481 in general and administrative expense in the Consolidated
Statements of Operations for the three months ended December 31, 2009 and 2008,
respectively.  Compensation expense recognized for the nine months
ended December 31, 2009 and 2008 was $21,645 and $44,928,
respectively.





The
following table is a summary of stock option activity for the nine months ended
December 31, 2009:





Number
      of Shares
            
            
            Weighted
      Average Exercise Price Per Share
            
            
            Weighted
      Aggregate Average Remaining Contract Life in Years
            
            
            Intrinsic
      ValueOutstanding
      at March 31, 2009
            
            
            148,750
            
            
            $
            6.04
            
            
            
            3.04
            
            
            $
            813,703Granted
            
            
            -
            
            
            
            -Exercised
            
            
            13,250
            
            
            
            7.00Forfeited
      or Expired
            
            
            -
            
            
            
            -Outstanding
      at December 31, 2009
            
            
            135,500
            
            
            $
            5.95
            
            
            
            2.37
            
            
            $
            543,963Vested
      at December 31, 2009
            
            
            115,500
            
            
            $
            5.97
            
            
            
            2.29
            
            
            $
            460,938Exercisable
      at December 31, 2009
            
            
            115,500
            
            
            $
            5.97
            
            
            
            2.29
            
            
            $
            460,938





Page
7





There
were no stock options granted during the nine months ended December 31, 2009 and
2008.





During
the nine months ended December 31, 2009, employees and directors exercised
options on a total of 13,250 shares at exercise prices between $6.17 and $8.24
per share.  The Company received proceeds of $92,792 from these
exercises. The total intrinsic value of the exercised options was
$55,661.  No tax deduction is recorded when options are
awarded.  Of these exercised options, 4,750 shares resulted in a
disqualifying disposition.  The Company issued new shares of common
stock to settle these option exercises.





No
forfeiture rate is assumed for stock options granted to directors or employees
due to the forfeiture rate history for these types of awards.  There
were no stock options forfeited or expired during the nine months ended December
31, 2009.  During the nine months ended December 31, 2008, 20,000
stock options expired because they were not exercised prior to the end of their
ten-year term.





Outstanding
options at December 31, 2009 expire between March 2010 and July 2014 and have
exercise prices ranging from $4.00 to $8.24.





The total
cost related to non-vested awards not yet recognized at December 31, 2009 totals
approximately $16,080 which is expected to be recognized over a weighted
average of 1.4 years.





Fair Value of Financial
Instruments.The Company adopted FASB ASC 820 for all
financial assets and liabilities measured at fair value on a recurring
basis.  The Company adopted FASB ASC 820 effective April 1, 2009 for
all non-financial assets and liabilities.  FASB ASC 820 defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability (exit price) in an orderly transaction between market participants at
the measurement date.  The statement establishes market or observable
inputs as the preferred sources of values, followed by assumptions based on
hypothetical transactions in the absence of market inputs.  The
statement requires fair value measurements be classified and disclosed in one of
the following categories:





Level 1 –
Quoted prices in active markets for identical assets and
liabilities.





Level 2 –
Quoted prices in active markets for similar assets and liabilities, quoted
prices for identical or similar instruments in markets that are not active and
model-derived valuations whose inputs are observable or whose significant value
drivers are observable.





Level 3 –
Significant inputs to the valuation model are unobservable.





Financial
assets and liabilities are classified based on the lowest level of input that is
significant to the fair value measurement.





The
Company estimates asset retirement obligations (“AROs”) pursuant to the
provisions of FASB ASC 410, Asset Retirement and Environmental
Obligations.  The initial measurement of AROs at fair value is
calculated using discounted cash flow techniques and based on internal estimates
of future retirement costs associated with oil and gas
properties.  Given the unobservable nature of the inputs, including
plugging costs and reserve lives, the initial measurement of the ARO liability
is deemed to use Level 3 inputs.  See the Company’s note on AROs for
further discussion.  AROs incurred during the nine months ended
December 31, 2009 were approximately $12,000.





The
carrying amounts on the accompanying consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities,
and current and long-term debt are carried at cost, which approximates market
value.





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.  The fair value of a liability
for an ARO is recorded in the period in which it is incurred, discounted to its
present value using the credit adjusted risk-free interest rate, and a
corresponding amount capitalized by increasing the carrying amount of the
related long-lived asset.  The liability is accreted each period, and
the capitalized cost is depreciated over the useful life of the related
asset.





The
following table provides a rollforward of the asset retirement obligations for
the first nine months of fiscal 2010:




Carrying
      amount of asset retirement obligations as of April 1, 2009
              
              $
              490,011Liabilities
      incurred
              
              
              11,689Liabilities
      settled
              
              
              (911
              )Accretion
      expense
              
              
              23,570Carrying
      amount of asset retirement obligations as of December 31,
    2009
              
              
              524,359Less:
      Current portion
              
              
              50,000Non-Current
      asset retirement obligation
              
              $
              474,359




Page
8





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





Related Party
Transactions.Thomas Craddick, a member of the board of
directors and Company employee, invested his personal funds in a working
interest (5.0% before payout and 3.75% after payout) in the Company’s well in
Ward County, Texas.  This personal investment was made on the same
basis as an unrelated third party investor.  At December 31, 2009, Mr.
Craddick had a balance due of $2,690 for his share of the expenses on this well,
which was subsequently paid on January 26, 2010.  Revenues paid to
Mr. Craddick from this well were approximately $3,097 for the nine months
ended December 31, 2009.





On March
1, 2009, Jeff Smith, a geological consultant, entered into an amended agreement
with the Company to provide geological consulting services for a fee of
approximately $5,000 per month plus expenses.  In September 2009, this
agreement was amended a second time to $500 per month plus expenses for services
rendered without prior written approval the Company.  This agreement
was subsequently terminated in January 2010.  The Company incurred
charges from Mr. Smith for services rendered under the amended agreement of
approximately $2,000 and $24,750 for the three and nine months ended December
31, 2009, respectively.  Also as part of this agreement, Mr. Smith received
from the Company a 0.25% overriding interest in each of the two wells in Loving
County, Texas, a 1.0% overriding interest in the well in Ward County, Texas and
a .5% overriding interest in the well in Reeves County, Texas.  Mr.
Smith invested his personal funds in a working interest in the Company’s wells
in Reeves County, Texas (2.5% before payout and 1.875% after payout) and Ward
County, Texas (2.0% before payout and 1.5% after payout, on a non-promoted
basis.  At December 31, 2009, Mr. Smith had a balance due of $1,693
for his share of the expenses on these wells.  Revenues paid to Mr.
Smith from these wells were approximately $3,296 for the nine months ended
December 31, 2009.





Income Per Common
Share.  Basic net income per share is computed by dividing net
income by the weighted average number of common shares outstanding during the
period.  Diluted net income per share assumes the exercise of all
stock options having exercise prices less than the average market price of the
common stock during the period using the treasury stock method and is computed
by dividing net income by the weighted average number of common shares and
dilutive potential common shares (stock options) outstanding during the
period.  In periods where losses are reported, the weighted-average
number of common shares outstanding excludes potential common shares, because
their inclusion would be anti-dilutive.





The
following is a reconciliation of the number of shares used in the calculation of
basic income per share and diluted income per share for the three and nine month
periods ended December 31, 2009 and 2008:





Three
      Months Ended
            
            
            Nine
      Months EndedDecember
      31
            
            
            December
      312009
            
            
            2008
            
            
            2009
            
            
            2008Net
      income
            
            $
            167,145
            
            
            $
            131,501
            
            
            $
            257,492
            
            
            $
            1,181,405Shares
      outstanding:Weighted
      avg. common shares outstanding – basic
            
            
            1,891,866
            
            
            
            1,874,866
            
            
            
            1,884,598
            
            
            
            1,836,999Effect
      of the assumed exercise of dilutive stock options
            
            
            54,210
            
            
            
            63,880
            
            
            
            61,764
            
            
            
            91,030Weighted
      avg. common shares outstanding – dilutive
            
            
            1,946,076
            
            
            
            1,938,746
            
            
            
            1,946,362
            
            
            
            1,928,029Earnings
      per common share:Basic
            
            $
            0.09
            
            
            $
            0.07
            
            
            $
            0.14
            
            
            $
            0.64Diluted
            
            $
            0.09
            
            
            $
            0.07
            
            
            $
            0.13
            
            
            $
            0.61





For the
three month and nine month periods ended December 31, 2009 and 2008, no
potential common shares relating to stock options were excluded in the
computation of diluted net income per share.





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 is recognized in
net income in the period that includes the enactment date.  Current income
tax expense was $21,988 for the three and nine months ending
December 31, 2009.  There was a deferred income tax benefit of $60,964
for the third quarter of fiscal 2010 partially due to an increase in the
statutory depletion carryforward.  There was a deferred income tax
benefit of $259,753 for the nine months ended December 31, 2009.  This
was partially a result of the completion of the 2008 tax return which included a
change in the statutory depletion carryforward.  For the three and
nine months ending December 31, 2008, current income tax was $67,057 and
$538,187 and deferred income tax was $2,311 and $42,170,
respectively.




Page
9





As of
December 31, 2009, the Company has a statutory depletion carryforward of
approximately $3,418,000, which does not expire.  At December 31,
2009, there was a net operating loss carryforward for regular income tax
reporting purposes of approximately $1,678,000, which will begin expiring in
2023.  The Company’s ability to use some of the net operating loss
carryforward and certain other tax attributes to reduce current and future U.S.
federal taxable income is subject to limitations under the Internal Revenue
Code.





Any
interest and penalties related to uncertain tax positions are recorded as
interest expense and general and administrative expense,
respectively.  As of December 31, 2009, the Company has unrecognized
tax benefits of approximately $451,000.  For the nine months ending
December 31, 2008, the amount of unrecognized tax benefits was approximately
$496,000.





Long Term
Liabilities.  Long term liabilities consist of a revolving
credit agreement with Bank of America, N.A., which provides for a credit
facility of $5,000,000 with no monthly commitment reductions.  The
borrowing base is evaluated annually, on or about September
1.  Amounts borrowed under this agreement are collateralized by the
common stock of the Company’s wholly owned subsidiary and substantially all of
the Company’s oil and gas properties.   In September 2008, the
borrowing base was redetermined and set at $4,900,000.  There has been
no change to this set borrowing base through December
2009.  Availability of this line of credit at December 31, 2009 was
$3,910,000.  No principal payments are anticipated to be required
through January 31, 2011 based on the borrowing base.





In
December 2008, the credit agreement was renewed with a maturity date of October
31, 2010, which was subsequently amended in December 2009 to a maturity date of
January 31, 2011.  Under the renewed agreement, interest on the
facility accrues at an annual rate equal to the British Bankers Association
London Interbank Offered Rate (“BBA LIBOR”) daily floating rate, plus 2.50
percentage points, which was 2.73% on December 31, 2009.  Interest on the
outstanding amount under the credit agreement is payable monthly.  In
addition, the Company will pay an unused commitment fee in an amount equal to 1⁄2
of 1 percent (.5%) times the daily average of the unadvanced amount of the
commitment.  The unused commitment fee shall be payable quarterly in
arrears on the last day of each calendar quarter beginning March 31,
2009.  The loan agreement contains customary covenants for credit
facilities of this type including limitations on disposition of assets, mergers
and reorganizations.  We are also obligated to meet certain financial
covenants under the loan agreement. The Company is in compliance with all
covenants as of December 31, 2009.  In addition, this agreement
prohibits us from paying cash dividends on our common stock.





At the
end of fiscal 2009, two letters of credit for $50,000 each, in lieu of a
plugging bond covering the properties the Company operates were outstanding
under the facility, one with the Texas Railroad Commission and one with the
State of New Mexico.  These letters of credit renew
annually.  Since the Company no longer operates wells in the State of
New Mexico, the letter of credit for the State of New Mexico was not renewed and
subsequently cancelled on April 29, 2009.





The
balance outstanding on the line of credit was $990,000 as of December 31, 2009
and $950,000 as of February 10, 2010.





Subsequent
Events.As of February 10, 2010, which is the date these
financial statements were issued, the Company completed its review and analysis
of potential subsequent events and none were
identified.





Recent Accounting
Pronouncements.In December 2008, the SEC released Final
Rule, Modernization of Oil and
Gas Reporting.  The new requirements provide for consideration
of new technologies in evaluating reserves, allow companies to disclose their
probable and possible reserves to investors, report oil and gas reserves using
an average price based on the prior 12-month period rather than year-end prices,
and revise the disclosure requirements for oil and gas operations.  The
final rules are effective for fiscal years ending on or after
December 31, 2009.  The Company anticipates that the
implementation of the new rule will provide a more meaningful and
comprehensive understanding of oil and gas reserves.  The Company is
currently assessing the impact that the adoption will have on its disclosures,
operating results, financial position and cash flows.





In June
2009, the FASB issued guidance related to the accounting for transfers of
financial assets.  The guidance removes the concept of a qualifying
special-purpose entity from Codification topic, “Transfers and Servicing”,
creates a new unit of account definition that must be met for transfers of
portions of financial assets to be eligible for sale accounting, clarifies the
de-recognition criteria for a transfer to be accounted for as a sale, changes
the amount of recognized gains or losses on the transfer of financial assets
accounted for as a sale when beneficial interests are received by the transferor
and introduces new disclosure requirements. The new guidance is effective for
annual reporting periods beginning after November 15,
2009.  Presently, the Company does not anticipate that adoption of
this Standard will have an impact on its financial statements.




Page
10





In June
2009, the FASB issued guidance which requires a qualitative approach to
identifying a controlling financial interest in a variable interest entity
(“VIE”), and requires ongoing assessment of whether an entity is a VIE and
whether an interest in a VIE makes the holder the primary beneficiary of the
VIE.  The Standard is effective for annual reporting periods beginning
after November 15, 2009.  Presently, the Company does not anticipate
that adoption of this Standard will have a material impact on its financial
statements.





In
September 2009, the FASB issued an update to Extractive Activities-Oil and
Gas which makes a technical correction to an SEC Observer comment in EITF 90-22,
“Accounting for Gas-Balancing Arrangements”.  The update amends
paragraph 932-10-S99-5 of the Codification regarding the accounting and
disclosures for gas balancing arrangements because the SEC staff has not taken a
position on whether the entitlements method or sales method is preferable for
gas-balancing arrangements that do not meet the definition of a
derivative.  The update included an instruction that public companies
must account for all significant gas imbalances consistently using one
accounting method.  Both the method and any significant amount of
imbalances in units and value should be disclosed in regulatory
filings.  With the entitlements method, sales revenue is recognized to
the extent of each well partner’s proportionate share of gas sold regardless of
which partner sold the gas.  Under the sales method, sales revenue is
recognized for all gas sold by a partner even if the partner’s ownership is less
than 100% of the gas sold.  The Company utilizes the sales method to
account for gas production volume imbalances.  There are currently no
material gas imbalances.





In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements.  The
guidance requires new disclosures on the transfers of assets and liabilities
between Level 1 (quoted prices in active market for identical assets or
liabilities) and Level 2 (significant other observable inputs) of the fair value
measurement hierarchy, including the reasons and the timing of the
transfers.  Additionally, the guidance requires a roll forward of
activities on purchases, sales, issuance, and settlements of the assets and
liabilities measured using significant unobservable inputs (Level 3 fair value
measurements).  The guidance will become effective for the Company
with the reporting period beginning January 1, 2010, except for the
disclosure on the roll forward activities for Level 3 fair value measurements,
which will become effective for the Company with the reporting period beginning
April 1, 2011.    Other than requiring additional
disclosures, adoption of this new guidance will not have a material impact on
the Company’s 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
subsidiary.





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





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





Contractual
Obligations.We have no off-balance sheet debt or unrecorded
obligations and have not guaranteed the debt of any other party.  The
following table summarizes our future payments we are obligated to make based on
agreements in place as of December 31, 2009:




Page
11





Payments Due In (1):Total
              
              
              less than 1 year
              
              
              1-3 years
              
              
              3 yearsContractual
      obligations:Secured
      bank line of credit
              
              $
              990,000
              
              
              $
              -
              
              
              $
              990,000
              
              
              $
              -





(1)           Does
not include estimated interest of $27,000 less than 1 year and $81,000 1-3
years.





These
amounts represent the balances outstanding under the bank line of
credit.  These repayments assume that interest will be paid on a
monthly basis and that no additional funds will be drawn.





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.  In the past two fiscal years, we have
obtained additional financing for prospects by selling fractional working
interests to industry partners at prices in excess of our cost.





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 2010, cash flow from operations was
$766,057.  Cash of $621,870 was used for additions to oil and gas
properties and $410,000 for net reductions in long term
debt.  Accordingly, net cash decreased $55,730.





Effective
July 1, 2008, we purchased a well in Loving County, Texas which produces from
the Lower Cherry Canyon section.  We are acting as operator and have
re-entered the well and constructed a pipeline for transmission and sales of
natural gas.  Our share of the costs for our 50.2% working interest
through December 2009 was approximately $260,000.





We
currently hold royalty interests in an aggregate of 522 acres in the Newark East
(Barnett-Shale) Field of Tarrant County, Texas.  This acreage has 9
producing natural gas wells, 3 proven undeveloped well locations and 6
additional potential drill sites.  We subsequently purchased
additional royalties in this acreage on March 31, 2009 for approximately
$49,000.





During
the third quarter of fiscal 2010, a joint venture in which we are a working
interest partner drilled 4 development wells (2 of which have been completed) on
a 320 acre lease in the Brahaney Field in Andrews County, Texas. This property
currently consists of 1 well producing from the proved San Andres
formation.  Our share of the costs to drill these 4 wells through
December 2009 for our 3.75% working interest was approximately
$95,000.





Also
during the third quarter of fiscal 2010, another joint venture in which we are a
working interest partner drilled and completed 5 infill wells on a 640 acre
lease in Andrews County, Texas.  This property currently consists of
over 40 wells producing from the proved Clearfork and San Andres
formations.  Our share of the costs to drill and complete these 5
wells through December 2009 for our working interest ranging from .4% to .7% was
approximately $21,000.





We are
currently a working interest partner in a joint venture consisting of 960 acres
in Reagan County, Texas.  This joint venture consists of 9 wells
producing from the proved Spraberry and Dean formations with plans to drill an
additional 3 wells in the Wolfberry in January 2010.  The estimated
costs to drill and complete these 3 wells for our 3.75% working
interest  will be approximately $96,000.





We
continue to focus our efforts on the acquisition of royalties in areas with
significant development potential.





We are
participating in other projects and are reviewing projects in which we may
participate.  The cost of such projects would be funded, to the extent
possible, from existing cash balances and cash flow from operations. The
remainder may be funded through borrowings on the credit facility.





At
December 31, 2009, we had working capital of approximately $377,348 compared to
working capital of $221,989 at March 31, 2009, an increase of
$155,359.  This was mainly as a result of a decrease in accounts
payable and accrued expenses.





Crude oil
and natural gas prices have fluctuated significantly in recent
years.  During the second quarter of fiscal 2009, oil and gas prices
began trending downward, while drilling, completion and operating costs remained
high.  The effect of declining product prices on our business is
significant.  Lower product prices reduce our cash flow from
operations and diminish the present value of our oil and gas
reserves.  Lower product prices also offer us less incentive to assume
the drilling risks that are inherent in our business. The volatility of the
energy markets makes it extremely difficult to predict future oil and natural
gas price movements with any certainty.  For example in the last
twelve months, the West Texas Intermediate (“WTI”) posted price for crude oil
has ranged from a low of $33.98 per bbl in February 2009 to a high of $81.03 per
bbl in October 2009.  The Henry Hub Spot Market Price (“Henry Hub”)
for natural gas has ranged from a low of $1.84 per MMBtu in September 2009 to a
high of $6.10 per MMBtu in January 2009.  On December 31, 2009 the WTI
posted price for crude oil was $79.39 per bbl and the Henry Hub spot price for
natural gas was $5.82 per MMBtu.  Management is of the opinion that
cash flow from operations and funds available from financing will be sufficient
to provide adequate liquidity for the next fiscal year.




Page
12





Results of Operations – Three Months
Ended December 31, 2009 and 2008.  Net income was $167,145 for
the quarter ended December 31, 2009, an increase from $131,501 for the quarter
ended December 31, 2008.





Oil and gas
sales.  Revenue from oil and gas sales was $857,035 for the
third quarter of fiscal 2010, a 6% decrease from $908,253 for the same period of
fiscal 2009.  This resulted from a decrease in gas prices and
production partially offset by an increase in oil price and
production. Average gas prices were $3.92 per thousand cubic feet (“mcf”)
for the third quarter of fiscal 2010, a decrease from $4.54 per mcf for the same
period of fiscal 2009.  Average oil prices were $71.76 per barrel
(“bbl”) for the third quarter of fiscal 2010, an increase from $54.55 per bbl
for the same period of fiscal 2009.  Oil and gas production quantities
were 4,519 bbls and 136,073 mcf for the third quarter of fiscal 2010 and 4,190
bbls and 149,778 mcf for the same period of fiscal 2009, an increase of 8% in
oil production and a decrease of 9% in gas production.





Production and
exploration.Production costs were $269,154 for the third
quarter of fiscal 2010, a 13% increase from $237,736 for the same period of
fiscal 2009. This was primarily the result of an increase in lease operating
expenses for operated properties.





Depreciation, depletion and
amortization.  Depreciation, depletion and amortization expense
was $252,940 for the third quarter of fiscal 2010, a 7% decrease from $271,530
for the same period of fiscal 2009, primarily due to a decrease in
production.





General and administrative
expenses.General and administrative expenses were $198,527
for the third quarter of fiscal 2010, a 3% increase from $193,102 for the same
period of fiscal 2009.  This was due to an increase in legal fees in
preparation of the Form S-8 to register shares that may be issued under the
Company’s 2009 Employee Incentive Stock Plan.




Interest expense.Interest
expense was $8,516 for the third quarter of fiscal 2010, a 51% decrease
from $17,226 for the same period of fiscal 2009, due to a decrease in borrowings
and interest rate.





Income taxes.There was an
income tax benefit of $38,976 for the quarter ended December 31, 2009 compared
to an income tax expense of $69,368 for the quarter ended December 31,
2008.  This was primarily a result of the completion of the 2008 tax
return which included a change in the statutory depletion
carryforward.





Results of Operations – Nine Months
Ended December 31, 2009 and 2008.  Net income was $257,492 for
the nine months ended December 31, 2009, a decrease from $1,181,405 for the nine
months ended December 31, 2008.





Oil and gas
sales.  Revenue from oil and gas sales was $2,248,789 for the
nine months ended December 31, 2009, a 46% decrease from $4,176,050 for the same
period of fiscal 2009.  This resulted from a decrease in oil and gas
prices partially offset by an increase in oil and gas
production.  Average gas prices were $3.34 per mcf for the nine months
ended December 31, 2009, a decrease from $7.45 per mcf for the same period of
fiscal 2009.  Average oil prices were $63.44 per bbl for the first
nine months of fiscal 2010, a decrease from $96.89 per bbl for the same period
of fiscal 2009.  Oil and gas production quantities were 13,229 bbls
and 422,343 mcf for the nine months ended December 31, 2009 and 12,903 bbls and
392,921 mcf for the nine months ended December 31, 2008, an increase of 7% in
gas production and 3% in oil production.




Production and
exploration.Production costs were $779,379 for the nine
months ended December 31, 2009, a 16% decrease from $930,477 for the nine months
ended December 31, 2008.  This was the result of a decrease in
production taxes due to the decrease in oil and gas sales.





Depreciation, depletion and
amortization.  Depreciation, depletion and amortization expense
was $791,474 for the nine months ended December 31, 2009, a 5% increase from
$751,337 for the nine months ended December 31, 2008 primarily due to an
increase to the full cost pool amortization base and an increase in
production.





General and administrative
expenses.General and administrative expenses were $628,941
for the nine months ended December 31, 2009, a 7% decrease from $674,002 for the
nine months ended December 31, 2008.  This was due to a decrease in
consulting services, fees and salaries.




Page
13


Interest expense.Interest
expense was $26,877 for the nine months ended December 31, 2009, a 62% decrease
from $70,815 for the nine months ended December 31, 2008 due to a decrease in
borrowings and interest rate.





Income taxes.There was an
income tax benefit of $237,765 for the nine months ended December 31, 2009
compared to an income tax expense of $580,357 for the nine months ended December
31, 2008.  This was partially a result of the completion of the 2008
tax return which included a change in the statutory depletion
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 rates.  All of our financial instruments are for purposes
other than trading.  At December 31, 2009, 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, 2009, we had an outstanding loan balance
of $990,000 under our $5.0 million revolving credit agreement, which bears
interest at an annual rate equal to the BBA LIBOR daily floating rate, plus
2.50 percentage points.  If the interest rate on our bank debt
increases or decreases by one percentage point, our annual pretax income
would change by $9,900 based on the outstanding balance at December 31,
2009.





Credit Risk.  Credit
risk is the risk of loss as a result of nonperformance by other parties of their
contractual obligations. Our primary credit risk is related to oil and gas
production sold to various purchasers and the receivables are generally not
collateralized.  At December 31, 2009, our largest credit risk
associated with any single purchaser was $63,757.  We are also exposed
to credit risk in the event of nonperformance from any of our working interest
partners.  At December 31, 2009, our largest credit risk associated
with any working interest partner was $17,820.  We have not
experienced any significant credit losses.





Energy Price
Risk.Our most significant market risk is the pricing for
natural gas and crude oil.  Our financial condition, results of
operations, and capital resources are highly dependent upon the prevailing
market prices of, and demand for, oil and natural gas.  Prices for oil
and natural gas fluctuate widely.  We cannot predict future oil and
natural gas prices with any certainty. Historically, the markets for oil and gas
have been volatile, and they are likely to continue to be
volatile.  Factors that can cause price fluctuations 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 political and economic conditions in oil producing
countries.  Declines in oil and natural gas prices will materially
adversely affect our financial condition, liquidity, ability to obtain financing
and operating results. Changes in oil and gas prices impact both estimated
future net revenue and the estimated quantity of proved reserves.  Any
reduction in reserves, including reductions due to price fluctuations, can
reduce the borrowing base under our revolving credit facility and adversely
affect the amount of cash flow available for capital expenditures and our
ability to obtain additional capital for our exploration and development
activities.  In addition, a noncash write-down of our oil and gas
properties could be required under full cost accounting rules if prices declined
significantly, even if it is only for a short period of time.  Lower
prices may also reduce the amount of crude oil and natural gas that can be
produced economically.  Thus, we may experience material increases or
decreases in reserve quantities solely as a result of price changes and not as a
result of drilling or well performance.





Similarly,
any improvements in oil and gas prices can have a favorable impact on our
financial condition, results of operations and capital resources.  Oil and
natural gas prices do not necessarily fluctuate in direct relationship to each
other. Our financial results are more sensitive to movements in natural gas
prices than oil prices because most of our production and reserves are natural
gas.  If the average oil price had increased or decreased by one
dollar per barrel for the first nine months of fiscal 2010, our oil and gas
revenue would have changed by $13,229.  If the average gas price had
increased or decreased by one dollar per mcf for the first nine months of fiscal
2010, our oil and gas revenue would have changed by $422,343.





Item
4.  Controls and Procedures





Evaluation of Disclosure Controls and
Procedures.We maintain disclosure controls and procedures to
ensure that the information we must disclose in our filings with the SEC is
recorded, processed, summarized and reported on a timely basis.  At
the end of the period covered by this report, our principal executive officer
and principal financial officer reviewed and evaluated the effectiveness of our
disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e).  Based on such evaluation, such officers concluded
that, as of December 31, 2009, our disclosure controls and procedures were
effective in timely alerting them to material information relating to us (and
our consolidated subsidiary) required to be included in our periodic SEC
filings.




Page
14





Changes in Internal Control over
Financial Reporting.No changes in the Company’s internal
control over financial reporting occurred during the quarter ended December 31,
2009 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.








PART II –
OTHER INFORMATION




Item
      1.
              Legal
      Proceedings
 
 We may,
from time to time, be involved in litigation and claims arising out of our
operations in the normal course of business.  We are not aware of any
legal or governmental proceedings against us, or contemplated to be brought
against us, under various environmental protection statutes or other regulations
to which we are subject.
 
 Item
      1A.
              Risk
      Factors
 
 There
have been no material changes to the information previously disclosed in Item
1A. “Risk Factors” in our 2009 Annual Report on Form 10-K.
 
 Item
      2.
              Unregistered Sales of
      Equity Securities and Use of
Proceeds
 
 None.
 
 Item
      3.
              Defaults Upon Senior
      Securities
 
 None.
 
 Item
      4.
              Submission of Matters
      to a Vote of Security
Holders
 
 None.
 
 Item
      5.
              Other
      Information
 
 None.
 
 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




Page
15




SIGNATURES





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





MEXCO
      ENERGY CORPORATION(Registrant)Dated:
      February 10, 2010
              /s/ Nicholas C. TaylorNicholas
      C. TaylorPresidentDated:
      February 10, 2010
              /s/ Tamala L. McComicTamala
      L. McComicExecutive
      Vice President, Treasurer and Assistant
  Secretary






Page 16