UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 2003

                          Commission file number 0-6994


                            MEXCO ENERGY CORPORATION
             (Exact name of registrant as specified in its charter)

          Colorado                                              84-0627918
(State or other jurisdiction                                   (IRS Employer
      of incorporation)                                   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   |X|    NO   |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         State the number of shares  outstanding of each of the issuer's classes
of common stock as of the latest practicable date.

                         Common Stock, $0.50 par value:
                1,736,041 shares outstanding at February 11, 2004

<Page>

                            MEXCO ENERGY CORPORATION

                                Table of Contents

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION
------------------------------

         Item 1.      Consolidated Balance Sheets as of December
                      31, 2003 (Unaudited) and March 31, 2003                  3

                      Consolidated Statements of Operations
                      (Unaudited) for the three and nine months
                      ended December 31, 2003 and December 31,
                      2002                                                     4

                      Consolidated Statements of Cash Flows
                      (Unaudited) for the nine months ended
                      December 31, 2003 and December 31, 2002                  5

                      Notes to Unaudited Consolidated Financial
                      Statements                                               6

         Item 2.      Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations                                              10

         Item 3.      Quantitative and Qualitative Disclosures
                      About Market Risk 14

         Item 4.      Controls and Procedures                                 14


PART II.  OTHER INFORMATION                                                   15
---------------------------

         Item 1.      Legal Proceedings
         Item 2.      Changes in Securities and Use of Proceeds
         Item 3.      Defaults upon Senior Securities
         Item 4.      Submission of Matters to a Vote of Security Holders
         Item 5.      Other Information
         Item 6.      Exhibits and Reports on Form 8-K


SIGNATURES                                                                    15
----------


CERTIFICATIONS                                                                16
--------------------------------------------------------------------------------


                                     Page 2
<Page>


                     MEXCO ENERGY CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                    December 31,           March 31,
                                                        2003                 2003
                                                    ------------         ------------
                                                     (Unaudited)
<S>                                                 <C>                  <C>
ASSETS
Current assets:
   Cash and cash equivalents                        $     77,285         $     68,547
   Accounts receivable:
     Oil and gas sales                                   367,803              560,297
     Trade                                                 9,092               17,617
     Related parties                                       2,433                3,475
    Prepaid expenses                                      24,745               10,043
                                                    ------------         ------------
       Total current assets                              481,358              659,979

   Property and equipment, at cost:
   Oil and gas properties and equipment,
     using full cost method, pledged                  16,559,257           15,656,928
   Office and computer equipment
     and software                                         34,542               33,708
                                                    ------------         ------------
                                                      16,593,799           15,690,636
   Less accumulated depreciation,
     depletion and amortization                        9,212,997            8,661,977
                                                    ------------         ------------
       Property and equipment, net                     7,380,802            7,028,659
                                                    ------------         ------------
   Total assets                                     $  7,862,160         $  7,688,638
                                                    ============         ============

   LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
   Accounts payable and accrued expenses            $     66,592         $     93,434
   Current portion of long-term debt                     277,028              116,280
   Income tax payable                                     16,322                   --
   Obligations under capital leases                        2,715               61,086
                                                    ------------         ------------
 Total current liabilities                               362,657              270,800

   Long-term debt                                      1,392,972            2,033,720
   Asset retirement obligation                           391,250                   --
   Deferred income tax liability                         502,149              427,730

   Stockholders' equity:
   Preferred stock, par value $1 per share;
     10,000,000 shares authorized;
       none issued                                            --                   --
   Common stock, par value $0.50 per share;
     40,000,000 shares authorized; 1,766,566
     shares issued                                       883,283              883,283
   Additional paid in capital                          3,767,034            3,734,119
   Retained earnings                                     691,736              466,522
   Treasury stock, at cost (30,525 and
       30,244 shares, respectively)                     (128,921)            (127,536)
                                                    ------------         ------------
       Total stockholders' equity                      5,213,132            4,956,388
                                                    ------------         ------------
   Total liabilities and stockholders'
     equity                                         $  7,862,160         $  7,688,638
                                                    ============         ============
</Table>

                    The accompanying note is an integral part
                    of the consolidated financial statements.

                                     Page 3
<Page>

                     MEXCO ENERGY CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Three and Nine Months ended December 31, 2003 and 2002
                                   (Unaudited)

<Table>
<Caption>
                                                      Three Months Ended                  Nine Months Ended
                                                         December 31                          December 31
                                                    2003             2002               2003              2002
                                                -----------------------------       -----------------------------
<S>                                             <C>               <C>               <C>               <C>
Operating revenue:
   Oil and gas sales                            $   650,783       $   668,039       $ 2,186,694       $ 1,724,869
   Other                                              1,178           256,440             4,304           265,891
                                                -----------       -----------       -----------       -----------
      Total operating revenue                       651,961           924,479         2,190,998         1,990,760

Operating costs and expenses:
   Oil and gas production                           237,895           233,077           747,755           622,286

   Accretion expense                                  6,068                --            17,804                --
   Depreciation, depletion
      and amortization                              162,709           136,788           499,623
                                                                                                          383,286
   General and administrative                       121,719           203,623           394,341           450,387
                                                -----------       -----------       -----------       -----------

      Total operating costs
          and expenses                              528,391           573,488         1,659,523         1,455,959
                                                -----------       -----------       -----------       -----------

                                                    123,570           350,991           531,475           534,801
Other income and (expenses):
   Interest income                                       53                89               170               333
   Interest expense                                 (22,332)          (24,932)          (67,473)          (68,078)
                                                -----------       -----------       -----------       -----------

      Net other income and expenses                 (22,279)          (24,843)          (67,303)          (67,745)
                                                -----------       -----------       -----------       -----------

Income before income taxes                          101,291           326,148           464,172           467,056
Income tax expense(benefit)-current                  16,322           (13,026)           16,322
                                                                                                          (13,026)
Income tax expense-deferred                          27,714           101,105           120,365           144,511
                                                -----------       -----------       -----------       -----------
Income before cumulative effect
   of accounting change                              57,255           238,069           327,485           335,571
Cumulative effect of accounting
   change, net of tax                                    --                --          (102,267)               --
                                                -----------       -----------       -----------       -----------
      Net income                                $    57,255       $   238,069       $   225,218       $   335,571
                                                ===========       ===========       ===========       ===========

Net income (loss) per common share:
Basic:
   Income before cumulative effect
    of accounting change                        $      0.03       $      0.14       $      0.19       $      0.19
   Cumulative effect, net of tax                $        --       $        --       $     (0.06)      $        --
  Net income                                    $      0.03       $      0.14       $      0.13       $      0.19

Diluted:
   Income before cumulative effect
    of accounting change                        $      0.03       $      0.14       $      0.18       $      0.19
   Cumulative effect, net of tax                $        --       $        --       $     (0.06)      $        --
  Net income                                    $      0.03       $      0.14       $      0.12       $      0.19

Pro forma amounts  assuming,  the new
method of accounting for asset  retirement
obligations is applied retroactively:
   Net Income                                   $    57,255       $   232,785       $   327,485       $   319,719
      Basic earnings per share                  $      0.03       $      0.13       $      0.19       $      0.18
      Diluted earnings per share                $      0.03       $      0.13       $      0.18       $      0.18
</Table>

                    The accompanying note is an integral part
                    of the consolidated financial statements.



                                     Page 4
<Page>

                     MEXCO ENERGY CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months ended December 31, 2003 and 2002
                                   (Unaudited)

<Table>
<Caption>

                                                          2003              2002
                                                      -----------       -----------
<S>                                                   <C>               <C>
Cash flows from operating activities:
   Net income                                         $   225,218       $   335,571
     Cumulative effect of accounting change,
       net of tax                                         102,267                --
   Adjustments to reconcile net income
       to net cash provided by operating
       activities:
     Increase in deferred income taxes                    120,365           144,511
       Stock-based compensation                            32,915            46,457
       Depreciation, depletion and
           amortization                                   499,623           383,286
       Accretion of asset retirement obligations           17,804                --
       (Increase) decrease in
           accounts receivable                            202,061           (23,209)
       Increase in prepaid expenses                       (14,703)           (5,861)
       Increase in income taxes payable                    16,322                --
       Increase (decrease) in accounts payable
           and accrued expenses                           (25,643)            7,704
                                                      -----------       -----------
       Net cash provided by operating
           activities                                   1,176,229           888,459

Cash flows from investing activities:
   Additions to property and equipment                   (627,735)       (1,491,700)
                                                      -----------       -----------
       Net cash used in investing
           activities                                    (627,735)       (1,491,700)

Cash flows from financing activities:
     Acquisition of treasury stock                         (1,385)         (122,386)
     Reduction of capital lease obligations               (58,371)           (7,150)
     Reduction in long-term debt                         (480,000)         (150,000)
     Proceeds from long-term debt                              --           910,000
                                                      -----------       -----------
   Net cash (used in) provided by
       financing activities                              (539,756)          630,464
                                                      -----------       -----------

Net increase in cash                                        8,738            27,223

Cash, beginning of the period                              68,547            44,958
                                                      -----------       -----------

Cash, end of period                                   $    77,285       $    72,181
                                                      ===========       ===========
Interest paid                                         $    69,473       $    66,033
Income taxes paid                                     $        --       $        --

Supplemental Disclosure of Non-Cash Investing
  and financing activities
Fair value of warrants issued for
  oil and gas properties                              $        --       $    73,551
Acquisition of equipment under capital leases         $        --       $    56,930
</Table>

                    The accompanying note is an integral part
                    of the consolidated financial statements.


                                     Page 5
<Page>


                     MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A.  Organization and Significant Accounting Policies

Organization and Basis of Presentation

Mexco Energy  Corporation,  a Colorado  corporation,  was  organized in 1972 and
maintains its  principal  office in Midland,  Texas.  The Company and its wholly
owned   subsidiary,   Forman  Energy   Corporation,   a  New  York  corporation,
(collectively  the  "Company")  are  engaged  in the  acquisition,  exploration,
development  and  production  of oil and gas.  While the Company owns  producing
properties  and  undeveloped  acreage  in eleven  states,  the  majority  of its
activities are centered in the Permian Basin of West Texas. Although most of the
Company's oil and gas interests are operated by others,  the Company  operates a
number of 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
except for the cumulative  effect of a change in accounting  principle in fiscal
2004) necessary to present fairly the financial  position of the Company and its
wholly  owned  subsidiary  as of  December  31,  2003,  and the  results  of its
operations  and cash flows for the interim  periods ended  December 31, 2003 and
2002.  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. 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.

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned subsidiary.  All significant  intercompany accounts
and transactions have been eliminated in consolidation.

Use of Estimates

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted in the United  States of America,  management is required to
make  estimates  and  assumptions  that  affect the  amounts  reported  in these
financial statements. 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  and the  related  present  value of
estimated future net cash flows.


                                     Page 6
<Page>

Stock-based Compensation

The Company  accounts  for  employee  stock  option  grants in  accordance  with
Accounting  Principles  Board  Opinion No. 25  "Accounting  for Stock  Issued to
Employees"  ("APB  25"),  as amended by  Financial  Accounting  Standards  Board
("FASB")  Interpretation No. 44, "Accounting for Certain Transactions  involving
Stock  Compensation,"  an  interpretation  of APB  Opinion  No. 25. The  Company
applies the intrinsic  value method in accounting for its employee stock options
and records no compensation costs for its stock option awards to employees.  The
Company  recognizes  compensation  cost  related  to stock  options  awarded  to
independent consultants based on fair value of the options at date of grant. The
Company  awarded  options to  purchase  10,000  shares of its common  stock to a
consultant during the current quarter. For the quarter ending December 31, 2003,
the Company  recognized  $11,924  related to stock  options for all  independent
consultants.

The  following  pro forma  information,  as required by  Statement  of Financial
Accounting  Standards No. 123 "Accounting for Stock-Based  Compensation"  ("SFAS
123"), as amended by Statement of Financial  Accounting Standards No. 148 ("SFAS
148"), presents net income and earnings per share information as if compensation
costs for stock options  issued had been  determined  based on the fair value at
the grant dates for all employee awards under the plan:

<Table>
<Caption>
                                      Three Months Ended           Nine Months Ended
                                         December 31                  December 31
                                  -----------------------      ------------------------
                                     2003          2002           2003          2002
                                  ---------     ---------      ---------      ---------
<S>                               <C>           <C>            <C>            <C>
Net income, as reported           $  57,255     $ 238,069      $ 225,218      $ 335,571
Deduct: Stock-based employee
compensation expense determined
under fair value based method
(SFAS 123), net of tax            $ (25,563)    $ (17,475)     $ (61,578)     $ (46,933)
                                  ---------     ---------      ---------      ---------

Net income, pro forma             $  31,692     $ 220,594      $ 163,640      $ 288,638
                                  =========     =========      =========      =========
Basic earnings per share:

                  As reported     $    0.03     $    0.14      $    0.13      $    0.19
                  Pro forma       $    0.02     $    0.13      $    0.09      $    0.17

Diluted earnings per share:

                  As reported     $    0.03     $    0.14      $    0.12      $    0.19
                  Pro forma       $    0.02     $    0.13      $    0.09      $    0.17
</Table>

Asset Retirement Obligations

The  Company's  asset  retirement   obligations   relate  to  the  plugging  and
abandonment of oil and gas properties. The Company adopted SFAS No. 143 on April
1,  2003.  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 and a
corresponding  increase in the carrying amount of the related  long-lived asset.
The change  resulted in a cumulative  effect to net income of ($102,267)  net of
tax,  or  ($0.06)  per  share.  Additionally,  the  Company  recorded  an  asset
retirement  obligation  liability of $358,419 and an increase to net  properties
and equipment and other assets of $210,206 upon adoption of SFAS No. 143.

The asset retirement  obligation,  which is included on the Consolidated Balance
Sheet was $391,250 at December 31, 2003. Accretion expense during the first nine
months of fiscal 2004 was $17,804.


                                     Page 7
<Page>

The following table provides a rollforward of the asset  retirement  obligations
for the nine months ended December 31, 2003:

Carrying amount of asset retirement obligations as of
  April 1, 2003                                                      $ 358,419
Liabilities incurred                                                 $  25,348
Liabilities settled                                                  $ (10,321)
Accretion expense                                                    $  17,804
Revisions in estimated cash flows                                    $       0
                                                                     ---------
Carrying amount of asset retirement obligations as of
   December 31, 2003                                                 $ 391,250
                                                                     =========


Oil and Gas Costs

The cost of a certain oil and gas lease that the Company has  acquired,  but not
evaluated has been excluded in computing amortization of the full cost pool. The
Company  will begin to amortize  this  property  when the project is  evaluated,
which is currently  estimated to be in 2004. Costs excluded from amortization at
December 31, 2003 total  $673,890.  No  impairment  exists for this  property at
December  31,  2003.  The Company  has also begun  preliminary  negotiations  to
develop gas properties in Russia. Costs through December 31, 2003 total $19,955,
which have also been excluded from amortization.


Earnings Per Share

Basic  earnings  per share is computed by  dividing  net income by the  weighted
average number of common shares outstanding during the period.  Diluted earnings
per share 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.  The  following is a  reconciliation  of the number of shares
used in the  calculation  of basic  earnings per share and diluted  earnings per
share for the three and nine-month periods ended December 31, 2003 and 2002.

                                    Three Months Ended       Nine Months Ended
                                        December 31               December 31
                                   ---------------------   ---------------------
                                      2003        2002       2003        2002
                                   ---------   ---------   ---------   ---------
Weighted average number of
  common shares outstanding        1,736,041   1,737,322   1,736,049   1,742,955
Incremental shares from the
  assumed exercise of dilutive
  stock options                      130,809          --      88,338       3,102
                                   ---------   ---------   ---------   ---------
Dilutive potential common shares   1,866,850   1,737,322   1,824,387   1,746,057

         Options and warrants to purchase  10,000 shares at an average  exercise
price  of  $7.00  and  388,500  shares  at an  average  exercise  price of $5.54
outstanding for the three months ended December 31, 2003 and December 31, 2002,


                                     Page 8
<Page>

respectively,  and options and warrants to purchase 200,000 shares at an average
exercise price of $7.36 and 428,500 shares at an average exercise price of $5.39
for the nine month  period  ended  December  31,  2003 and  December  31,  2002,
respectively,  were not  included in the  computation  of diluted net income per
share  because the  exercise  price of the options was greater  than the average
market  price of the common  stock of the Company,  and,  therefore,  the effect
would be antidilutive.

Income Taxes

      There is $16,322 of current  income tax expense for the three months ended
December 31, 2003.  This resulted  after applying the tax loss  carryforward  of
approximately  $139,000  from the year ending March 31, 2003 to current  taxable
income for the three months ended  December  31,  2003.  The current  income tax
benefit of $13,026 for the three  months ended  December  31, 2002  represents a
refund  received  from prior income taxes paid in 1997.  There is no  additional
current  income tax expense for the three or nine months ended December 31, 2002
due to a tax loss  carryforward of  approximately  $283,000 from the year ending
March 31, 2002.

Stockholders' Equity

During the nine month period ended December 31, 2003, the Company paid $1,385 to
purchase 281 shares of its common stock for treasury.

Long Term Liabilities

On December 15, 2003,  the Company's  revolving  credit  agreement  with Bank of
America,  N.A. ("Bank"),  with an original maturity date of August 15, 2004, was
renewed with a maturity date of August 15, 2005.

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  based  determination.  On December 15, 2003,  the borrowing  base was
re-determined  and reduced to $1,938,372 with monthly  commitment  reductions of
$45,450  beginning  on January 5, 2004.  As of December  31,  2003,  the balance
outstanding under this agreement was $1,670,000.  Principal payments of $277,028
will be required through December 31, 2004 to comply with the monthly commitment
reductions.  Amounts  borrowed  under this agreement are  collateralized  by the
common  stock  of the  Company's  wholly  owned  subsidiary  and all oil and gas
properties.

The asset  retirement  obligation as of December 31, 2003 represents the present
value of the Company's estimated asset retirement obligations under SFAS 143.

Capital Lease Obligations

During  fiscal 2003,  the Company  began  leasing  three gas  compressors  under
separate  agreements  that are  classified  as capital  leases.  The cost of the
equipment  under the capital leases is included in the balance sheet as property
and equipment with a balance of $81,182 and  accumulated  amortization of $9,784
on December 31, 2003. Amortization of assets under capital leases is included in
depreciation  expense.  The lease agreements are each for a 12-month period with
equal monthly  payments.  At the end of the term, the Company will receive title
to the  compressor  under a bargain  purchase  option of $1. Two of these  lease
agreements  reached  the end of their  term  during  the third  quarter  and the
Company received title to these  compressors.  The lease  obligation  associated
with the third  compressor  was $2,715 on December 31,  2003,  all of which is a
current  liability.  Total payments  required for this lease will be $2,795,  of
which $80 represents interest.


                                     Page 9
<Page>

Lawsuit Settlement

During the third  quarter of fiscal  2003,  the  Company  received  proceeds  of
$254,862 from the settlement of a class action  lawsuit  against a gas purchaser
involving contract price disputes.

Open Disclosure Issues with the Securities and Exchange Commission

The Company is aware that the Staff of the SEC, in  consultation  with the Staff
of  the  Financial   Accounting   Standards   Board,   is  considering   certain
implementation issues in the application of provisions of Statement of Financial
Accounting Standards No. 141, Business Combinations,  and Statement of Financial
Accounting  Standards No. 142,  Goodwill and Other  Intangible  Assets (SFAS No.
142),  to  companies  in  the  extractive  industries,  including  oil  and  gas
companies.  The Staff of the SEC is  considering  whether  SFAS No. 142 requires
registrants to reclassify costs  associated with mineral rights,  including both
proved and unproved  leasehold  acquisition  costs, as intangible  assets in the
balance  sheet,  apart  from  other  capitalized  oil  and gas  property  costs.
Historically,  the Company and all other oil and gas companies have included the
cost of these oil and gas leasehold interests as part of oil and gas properties.
The Staff is also  considering  whether  SFAS No. 142  requires  registrants  to
provide the  additional  disclosures  prescribed by SFAS No. 142 for  intangible
assets for costs associated with mineral rights.

The  reclassification of these amounts would not affect the method in which such
costs are  amortized or the manner in which the Company  assesses  impairment of
capitalized  costs.  As a  result,  net  income  would  not be  affected  by the
reclassification.

                     MEXCO ENERGY CORPORATION AND SUBSIDIARY

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

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 "believes,"  "expects,"  "anticipates,"  "should,"  "estimates,"
"foresees"  or other  words and  phrases  of  similar  meaning.  Forward-looking
statements  appear  throughout this Form 10-Q and include  statements  regarding
Company  plans,  beliefs or current  expectations  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  the  Company  has  made  assumptions  that  it  believes  are
reasonable,  the  assumptions  that support its  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.  The  Company  does not
undertake to update, revise or correct any of the forward-looking information.


                                    Page 10
<Page>

Liquidity and Capital Resources

Historically,  the  Company's  sources  of  funding  have  been  from  operating
activities, bank financing and the issuance of common stock.

The Company's  focus is on increasing  profit  margins  while  concentrating  on
obtaining  gas reserves with low cost  operations  by acquiring  and  developing
primarily gas properties with potential for long-lived production.

For the first  nine  months  of fiscal  2004,  cash  flow  from  operations  was
$1,176,229  compared to $888,459 for the first nine months of fiscal  2003.  The
cash flow from  operations for the first nine months of fiscal 2004 included the
effects of a decrease in accounts payable and accrued expenses and a decrease in
accounts  receivable.  Cash of $627,735  was used for  additions to property and
equipment and cash of $480,000 was used to reduce  long-term debt.  Accordingly,
net cash increased $8,738.

During the quarter,  the Company purchased  partially developed royalty interest
in Jackson Parish, Louisiana for $80,000. These properties, operated by Anadarko
Petroleum Corporation in the Lower Cotton Valley formation,  contain 8 producing
wells and an  additional  3  permitted  and/or  drilling  wells.  This  purchase
advances the Company's primary goal of acquiring natural gas reserves.

During the quarter,  the Company began to explore the opportunity to develop gas
reserves in Russia and through  December 31, 2003 has  invested  $19,955 in this
project.

In January  2004,  the Company  paid  $214,124  for 50% interest in oil, gas and
mineral leases and/or options to acquire  approximately 4,940 net acres in Stark
County,  North Dakota.  The Company is in the process of selling one-half of its
interest  in  this  acreage,   retaining  a  2.5%  overriding  royalty  interest
proportionately  reduced. The primary objective of this project is the Lodgepole
formation at a depth of approximately 10,000'.

The  Company  has  acquired  and  is  reviewing   several  projects  for  future
participation. The cost of such projects would be funded to the extent possible,
with existing cash balances and cash flow from operations.  The remaining may be
funded through borrowings on the bank credit facility discussed below.

At December 31, 2003, the Company had working capital of approximately  $118,701
compared  to working  capital of  approximately  $389,179 at March 31,  2003,  a
decrease of $270,478 primarily as a result of a decrease in accounts  receivable
and an increase in the current portion of long-term debt.

The Company's  revolving credit agreement with Bank of America,  N.A.  ("Bank"),
was  amended  to  provide  for a credit  facility  of  $5,000,000,  subject to a
borrowing  base  determination.  On December 15, 2002, the maturity date of this
credit  agreement,  which was  originally  August 15, 2003, was extended for one
year.  The borrowing base was  re-determined  on this date and set at $2,526,744
with monthly commitment  reductions of $30,814 beginning on December 5, 2002. On
October 1, 2003 the credit  agreement  was  extended to December  15,  2004.  On
December  15,  2003 the credit  agreement  was amended  with a maturity  date of
August 15, 2005.  The borrowing  base was  redetermined  on this date and set at
$1,938,372 with monthly commitment reductions of $45,450 beginning on January 5,
2004. As of December 31, 2003, the balance  outstanding under this agreement was
$1,670,000. Principal payments of $277,028 will be required through December 31,
2004 to comply with the monthly  commitment  reductions.  A letter of credit for
$50,000,  in lieu of a plugging bond with the Texas Railroad Commission covering
the properties the Company operates, is also outstanding under the facility. The
borrowing base is subject to redetermination on or about August 1, of each year.
Amounts borrowed under this agreement are  collateralized by the common stock of


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Forman and the Company's oil and gas  properties.  Interest under this agreement
is payable  monthly at prime rate (4.00% at December 31, 2003).  This  agreement
generally  restricts the Company's  ability to transfer assets or control of the
Company, incur debt, extend credit, change the nature of the Company's business,
substantially change management personnel or pay cash dividends.

The prices of natural gas and crude oil have fluctuated  significantly in recent
years as well as in recent  months.  Fluctuations  in price  have a  significant
impact on the Company's 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 next 12 months.

Results of Operations - Three Months Ended December 31, 2003 and 2002

Net  income  decreased  from a net  profit of  $238,069  for the  quarter  ended
December 31, 2002 to a net profit of $57,255 for the quarter ended  December 31,
2003. Individual categories of income and expense are discussed below.

Oil and gas sales  decreased  from $668,039 for the third quarter of fiscal 2003
to $650,783 for the same period of fiscal 2004.  This  decrease of 3% or $17,256
resulted from a decrease in oil and gas production  and was partially  offset by
higher oil and gas prices.  Average gas prices  increased from $3.69 per mcf for
the third  quarter of fiscal 2003 to $4.36 per mcf for the same period of fiscal
2004,  while  average  oil prices  increased  from  $26.48 per bbl for the third
quarter of fiscal 2003 to $28.04 for the same period of fiscal 2004. Oil and gas
production  quantities  were 5,712 barrels  ("bbls") and 139,882  thousand cubic
feet ("mcf") for the third quarter of fiscal 2003 and 4,347 bbls and 121,350 mcf
for the same period of fiscal  2004, a decrease of 24% in oil  production  and a
decrease of 13% in gas production.

Other income  decreased  from  $256,440 for the third  quarter of fiscal 2003 to
$1,178 for the same period of fiscal 2004. This was the result of the settlement
of a class action  lawsuit  against a gas  purchaser  involving  contract  price
disputes.  The net proceeds to the Company for settlement were $254,862 received
in the third quarter of fiscal 2003.

Production costs increased 2% from $233,077 for the third quarter of fiscal 2003
to $237,895 for the same period of fiscal  2004.  This was  primarily  due to an
increased number of repairs and maintenance to operated wells during the quarter
and higher ad valorem taxes.

General and  administrative  expenses  decreased 40% from $203,623 for the third
quarter of fiscal 2003 to $121,719 for the same period of fiscal  2004.  This is
primarily the result of consulting  services incurred in relation to the lawsuit
settlement during the third quarter of fiscal 2003.

Depreciation,  depletion and amortization  based on production and other methods
increased  19%,  from  $136,788 for the third quarter of fiscal 2003 to $162,709
for the same  period of fiscal  2004  primarily  due to a  decrease  in  Company
reserves.

Interest expense decreased 10% from $24,932 for the third quarter of fiscal 2003
to $22,332 for the same period of fiscal 2004.  This is primarily  the result of
lesser borrowings combined with a lower interest rate.

Results of Operations - Nine Months Ended December 31, 2003 and December 31,
2002

Net income  decreased  33%,  from a net profit of  $335,571  for the nine months
ended  December  31, 2002 to a net profit of $225,218  for the nine months ended
December 31, 2003.  Individual  categories  of income and expense are  discussed
below.


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Oil and gas  sales  increased  27% from  $1,724,869  for the nine  months  ended
December 31, 2002 to  $2,186,694  for the same period of fiscal 2004,  primarily
because of increased prices. Average gas prices increased from $3.19 per mcf for
the first  nine  months of fiscal  2003 to $4.67 per mcf for  fiscal  2004,  and
average  oil prices  increased  from $25.46 per bbl for the first nine months of
fiscal 2003 to $27.86 for fiscal 2004.  Oil and gas production  quantities  were
16,979  bbls and 405,179 mcf for the first nine months of fiscal 2003 and 15,492
bbls and 375,559 for fiscal 2004, a decrease of 9% and 7%, respectively.

Production  costs increased 20% from $622,286 for the nine months ended December
31, 2003 to $747,755 for the same period of fiscal 2004.  This was primarily due
to the  effects  that higher oil and gas prices had on  production  taxes and an
increased number repairs and maintenance to operated wells during fiscal 2004.

Depreciation,  depletion and amortization  based on production and other methods
increased  30%,  from  $383,286  for the first  nine  months  of fiscal  2003 to
$499,623  for the same  period of fiscal  2004  primarily  due to a decrease  in
Company reserves.

Interest  expense  decreased 1% from $68,078 for the first nine months of fiscal
2003 to $67,473 for the same period of fiscal 2004.

Asset Retirement Obligations

The  Company's  asset  retirement   obligations   relate  to  the  plugging  and
abandonment of oil and gas properties. The Company adopted SFAS No. 143 on April
1,  2003.  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 and a
corresponding  increase in the carrying amount of the related  long-lived asset.
The change  resulted in a cumulative  effect to net income of ($102,267)  net of
tax,  or  ($0.06)  per  share.  Additionally,  the  Company  recorded  an  asset
retirement  obligation  liability of $358,419 and an increase to net  properties
and equipment and other assets of $210,206 upon adoption of SFAS No. 143.

The asset retirement  obligation,  which is included on the Consolidated Balance
Sheet was $391,250 at December 31, 2003. Accretion expense during the first nine
months of fiscal 2004 was $17,804.

Open Disclosure Issues with the Securities and Exchange Commission

The Company is aware that the Staff of the SEC, in  consultation  with the Staff
of  the  Financial   Accounting   Standards   Board,   is  considering   certain
implementation issues in the application of provisions of Statement of Financial
Accounting Standards No. 141, Business Combinations,  and Statement of Financial
Accounting  Standards No. 142,  Goodwill and Other  Intangible  Assets (SFAS No.
142),  to  companies  in  the  extractive  industries,  including  oil  and  gas
companies.  The Staff of the SEC is  considering  whether  SFAS No. 142 requires
registrants to reclassify costs  associated with mineral rights,  including both
proved and unproved  leasehold  acquisition  costs, as intangible  assets in the
balance  sheet,  apart  from  other  capitalized  oil  and gas  property  costs.
Historically,  the Company and all other oil and gas companies have included the
cost of these oil and gas leasehold interests as part of oil and gas properties.
The Staff is also  considering  whether  SFAS No. 142  requires  registrants  to
provide the  additional  disclosures  prescribed by SFAS No. 142 for  intangible
assets for costs associated with mineral rights.


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The  reclassification of these amounts would not affect the method in which such
costs are  amortized or the manner in which the Company  assesses  impairment of
capitalized  costs.  As a  result,  net  income  would  not be  affected  by the
reclassification.

       Item 3. Quantitative and Qualitative Disclosures About Market Risk

The  primary  sources of market  risk for the Company  include  fluctuations  in
commodity  prices and interest  rate  fluctuations.  At December  31, 2003,  the
Company had not entered into any hedge arrangements,  commodity swap agreements,
commodity futures, options or other similar agreements relating to crude oil and
natural gas.

At December 31, 2003, the Company had an outstanding  loan balance of $1,670,000
under its $5.0 million revolving credit  agreement,  which bears interest at the
prime  rate,  which  varies  from  time to  time.  If the  interest  rate on the
Company's  bank  debt  increases  or  decreases  by one  percentage  point,  the
Company's annual pretax income would change by $16,700, based on the outstanding
balance.

Credit Risk.  Credit risk is the risk of loss as a result of  nonperformance  by
other parties of their  contractual  obligations.  The Company's  primary credit
risk is related to oil and gas  production  sold to various  purchasers  and the
receivables generally are uncollateralized.  At December 31, 2003, the Company's
largest  credit risk  associated  with any single  purchaser  was  $89,169.  The
Company has not experienced any significant credit losses.

Volatility of Oil and Gas Prices. The Company's 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.  The Company  cannot  predict
future oil and gas prices with any degree of  certainty.  Sustained  weakness in
oil and gas prices may  adversely  affect our ability to obtain  capital for our
exploration  and  development  activities  and may  require a  reduction  in the
carrying  value  of  the  Company's  oil  and  gas  properties.   Similarly,  an
improvement  in oil and gas prices can have a favorable  impact on the Company's
financial condition, results of operations and capital resources.

                         Item 4. Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer (its principal
executive officer and principal financial officer, respectively) have concluded,
based on  their  evaluation  as of a date  within  90 days  prior to the date of
filing of this  quarterly  report,  that the Company's  disclosure  controls and
procedures are effective to ensure that information  required to be disclosed by
it in reports  filed or  submitted  by it under the  Securities  Exchange Act of
1934, as amended,  is recorded,  processed,  summarized and reported  within the
time periods  specified in the SEC's rules and forms, and includes  controls and
procedures designed to ensure that information required to be disclosed by it in
such  reports is  accumulated  and  communicated  to the  Company's  management,
including  its  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation.

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PART II - OTHER INFORMATION

Item 1.  Legal proceedings

         None.

Item 2.  Changes in securities

         Refer to Note A in Notes to Consolidated Financial Statements under the
         heading Stockholders' Equity.

Item 3.  Defaults upon senior securities

         None.

Item 4.  Submission or matters to a vote of security holders

         None.

Item 5.  Other Information

         On February 3, 2004 the  Chairman of the Board paid the Company  $1,075
         and  further  payment of $1,875 will be made,  representing  profits on
         stock sold which was held less than six months.  Such  payment was made
         in  accordance  with Section  16(b) of the  Securities  Exchange Act of
         1934.

Item 6.  Exhibits and Reports on Form 8-K

         a)       Exhibits

         31.1     Certification Pursuant to 302 of the Sarbanes-Oxley Act of
                  2002.

         31.2     Certification Pursuant to 302 of the Sarbanes-Oxley Act of
                  2002.

         32.1     Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

         32.2     Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

         b)       Reports on Form 8-K - No reports on Form 8-K were filed during
                  the quarter ended December 31, 2003.

                                   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 11, 2004      /s/ Nicholas C. Taylor
                              --------------------------------------------------
                              Nicholas C. Taylor
                              President

Dated: February 11, 2004      /s/ Tamala L. McComic
                              --------------------------------------------------
                              Tamala L. McComic
                              Vice President, Treasurer, and Assistant Secretary


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