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

                                   FORM 10-K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, 1999             Commission File No. 0-6694

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

                               Colorado 84-0627918
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                      214 W. Texas Avenue, Suite 1101 79701
                            Midland, Texas (Zip Code)
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (915) 682-1119

        Securities registered pursuant to Section 12(b) of the Act: None

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

    Title of Each Class                 Name of Exchange on Which Registered
 Common Stock, $0.50 par value                         None

     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  twelve (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 ninety (90) days.   Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or an amendment to this Form 10-K.[ ]

     As of May 27, 1999, the aggregate market value of the  registrant's  common
stock  held by  non-affiliates  (using  the  closing  bid price of  $7.625)  was
approximately $1,851,098.

     The number of shares outstanding of the registrant's common stock as of May
27, 1999 was 1,623,289.

                       DOCUMENTS INCORPORATED BY REFERENCE
     Part III of this Report is incorporated by reference from the  Registrant's
Information  Statement relating to its Annual Meeting of Stockholders to be held
on  September  15,  1999.  Such  Information  Statement  will be filed  with the
Commission not later than July 29, 1999.
<PAGE>

                               TABLE OF CONTENTS


                                     PART 1

Item 1.  Business .........................................................    3
Item 2.  Properties .......................................................    7
Item 3.  Legal Proceedings ................................................   10
Item 4.  Submission of Matters to a Vote of Security Holders ..............   10

                                    PART II

Item 5.  Market  for the  Registrant's  Common  Equity and
         Related  Stockholder Matters .....................................   10
Item 6.  Selected Financial Data ..........................................   11
Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ..............................   12
Item 8.  Financial Statements and Supplementary Data ......................   16
Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosures .............................   31

                                    PART III

Item 10. Directors and Executive Officers of the Registrant ...............   31
Item 11. Executive Compensation ...........................................   31
Item 12. Security Ownership of Certain Beneficial Owners
         and Management ...................................................   31
Item 13. Certain Relationships and Related Transactions ...................   31

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports
         on Form 8-K ......................................................   31
Signatures ................................................................   33


                                       2
<PAGE>


                                     PART I

Item 1.  Business

     Mexco Energy Corporation,  a Colorado  corporation,  (the "Company",  which
reference shall include the Company's wholly-owned subsidiary) is an independent
oil and gas company engaged in the  acquisition,  exploration and development of
oil and gas properties located in the United States.  Incorporated in April 1972
under the name Miller Oil Company,  the Company changed its name to Mexco Energy
Corporation  effective April 30, 1980. At the same time, the shareholders of the
Company also approved amendments to the Articles of Incorporation resulting in a
one-for-fifty reverse stock split of the Company's common stock.

     On February  25, 1997 Mexco Energy  Corporation  acquired all of the issued
and outstanding stock of Forman Energy Corporation,  a New York corporation also
engaged in the oil and gas industry.

     Since  its  inception,  the  Company  has been  engaged  in  acquiring  and
developing oil and gas properties and the  exploration for and production of oil
and gas  within  the  United  States.  The  Company  continues  to  focus on the
exploration for and development of natural gas and crude oil resources,  as well
as increased profit margins through reductions in operating costs. The Company's
long-term strategy is to increase  production and profits,  while increasing its
concentration of gas reserves.

     While the Company owns oil and gas properties in other states, the majority
of its activities are centered in West Texas. The Company acquires  interests in
producing and  non-producing oil and gas leases from landowners and leaseholders
in areas  considered  favorable  for oil and gas  exploration,  development  and
production.  In  addition,  the Company may  acquire  oil and gas  interests  by
joining in third party generated oil and gas drilling prospects. The Company may
employ a  combination  of the above methods of obtaining  producing  acreage and
related  prospects.  In recent years, the Company has placed primary emphasis on
the  evaluation  and purchase of producing oil and gas  properties  and re-entry
prospects.

OIL AND GAS OPERATIONS

     As of March 31, 1999,  gas reserves  constituted  approximately  78% of the
Company's total proved reserves and  approximately  60% of the Company's oil and
gas  revenues  for  fiscal  1999.  With the sale of the Lazy JL field  discussed
below,  gas  reserves  constitute  approximately  83%  of the  Company's  proved
reserves.   Revenues   from  oil  and  gas  royalty   interests   accounted  for
approximately 16% of the Company's oil and gas revenues for fiscal 1999.

     LAZY JL OIL FIELD properties,  encompassing 3,964 gross and 1,512 net acres
in Garza County, Texas, account for approximately 5% of the Company's discounted
future net cash flows from proved  reserves as of March 31, 1999, and for fiscal
1999,  approximately 23% of oil and gas revenues and 39% of production costs. As
part of the Company's focus on increasing  profit margins and  concentrating  on
gas  reserves  with low cost  operations,  the Company  closed the sale of these
properties in April 1999.  With an effective date of February 1, 1999, the sales
price was $600,000.  The sales  proceeds were used to reduce the Company's  bank
debt.

     GOMEZ GAS FIELD properties,  encompassing  14,476 gross and 72 net acres in
Pecos County,  Texas,  account for approximately 22% of the Company's discounted
future net cash flows from proved  reserves as of March 31, 1999, and for fiscal
1999, approximately 12% of oil and gas revenues and 5% of production costs.

                                       3
<PAGE>
     VIEJOS GAS FIELD properties,  encompassing 2,594 gross and 197 net acres in
Pecos County,  Texas,  account for approximately 20% of the Company's discounted
future net cash flows from proved  reserves as of March 31, 1999, and for fiscal
1999, approximately 30% of oil and gas revenues and 19% of production costs.

     In September 1998, the Company, as operator,  successfully re-entered a gas
well in Pecos County, Texas at a cost to the Company of approximately  $112,000.
Funds for this  project  were  provided  out of cash flow  from  operations  and
existing cash balances.  A pipeline connection was made on January 29, 1999. The
Company owns a 100% working  interest and a 75.375% net revenue interest in this
well.

     In March 1999, the Company, as operator,  successfully  re-entered a second
gas  well in  Pecos  County,  Texas at a cost to the  Company  of  approximately
$67,000.  Funds for this project were provided out of cash flow from  operations
and existing cash  balances.  A pipeline  connection was made on April 20, 1999.
The Company owns a 97% working  interest  and a 70.325% net revenue  interest in
this well.

     The Company owns  interests in and operates seven  producing  wells and one
well that is shut in. The Company also owns partial  interests in an  additional
1,592  producing  wells  located in the states of Texas,  New Mexico,  Oklahoma,
Louisiana,  Arkansas,  Wyoming, Kansas, Colorado, Alabama, Montana, North Dakota
and Utah.  The  Company  operates  one  water  injection  well and owns  partial
interests in three additional injection wells. Additional information concerning
these properties and the oil and gas reserves of the Company is provided below.

     The following  table  summarizes the net oil and natural gas production for
the  Company,  the average  sales price per barrel of oil and per mcf of natural
gas produced and the average  production  (lifting)  cost per unit of production
for the years ended March 31, 1999, 1998 and 1997.

                        PRODUCTION, PRICE AND COST DATA

                                                     Year Ended March 31,
                                            ------------------------------------
                                               1999         1998         1997
                                            ----------   ----------   ----------
Oil (a):
Production (Bbls) .......................       49,573       63,800       39,363
Revenue .................................   $  600,285   $1,129,331   $  869,337
Average Bbls per day ....................          136          175          108
Average sales price per Bbl .............   $    12.11   $    17.70   $    22.09
Gas (b):
Production (Mcf) ........................      482,948      432,343      236,034
Revenue .................................   $  903,338   $  960,786   $  583,787
Average Mcf per day .....................        1,323        1,185          647
Average sales price per Mcf .............   $     1.87   $     2.22   $     2.47
Production cost:
Production cost .........................   $  644,563   $  663,525   $  346,765
Equivalent Bbls (c) .....................      130,064      135,857       78,702
Production cost per equivalent Bbl ......   $     4.96   $     4.88   $     4.41
Production cost per sales dollar ........   $     0.43   $     0.32   $     0.24
Total oil and gas revenues ..............   $1,503,623   $2,090,117   $1,453,124

                                       4
<PAGE>
(a) Includes condensate.
(b) Includes natural gas products.
(c) Gas production is converted to equivalent bbls at the rate of 6 mcf per bbl,
    representing the estimated relative energy content of natural gas to oil.

COMPETITION

     The oil and gas industry is a highly competitive business.  Competition for
oil and gas reserve  acquisitions is  significant.  The Company may compete with
major  oil and gas  companies,  other  independent  oil  and gas  companies  and
individual producers and operators with significantly larger financial and other
resources.  Competitive  factors include price,  contract  terms,  and types and
quality of service,  including pipeline distribution.  The price for oil and gas
is widely followed and is generally subject to worldwide market factors.

MAJOR CUSTOMERS

     The Company had sales to the  following  companies  that amounted to 10% or
more of revenues for the year ended March 31:

                                                       1999    1998    1997
                                                       ----    ----    ----
     Koch Midstream Services Company ..............     30%     --      --
     Navajo Crude Oil Marketing Company ...........     25%     33%     46%
     Aquila Southwest Pipeline Corporation ........     --      15%     24%
     Sun Refining and Marketing Company ...........     --      --      10%

REGULATION

     The Company's exploration, development, production and marketing operations
are subject to  extensive  rules and  regulations  by  federal,  state and local
authorities.  Numerous  federal,  state and local  departments and agencies have
issued rules and regulations, binding on the oil and gas industry, some of which
carry substantial  penalties for  noncompliance.  State statutes and regulations
require  permits  for  drilling   operations,   bonds  and  reports   concerning
operations.   Most  states  also  have   statutes  and   regulations   governing
conservation  and safety  matters,  including the unitization and pooling of oil
and gas properties,  the  establishment  of maximum rates of production from oil
and gas wells and the spacing of such wells.  Such statutes and  regulations may
limit  the rate at  which  oil and gas  otherwise  could  be  produced  from the
Company's  properties.  The  regulatory  burden  on the  oil  and  gas  industry
increases   its  cost  of  doing   business  and,   consequently,   affects  its
profitability.

     Currently there are no laws that regulate the price for sales of production
by the Company.  However,  the rates  charged and terms and  conditions  for the
movement  of  gas in  interstate  commerce  through  certain  of its  intrastate
pipelines and production  area hubs are subject to regulation  under the Natural
Gas Policy Act of 1978 ("NGPA").  The construction of pipelines and hubs are, to
a limited extent,  also subject to regulation  under the Natural Gas Act of 1938
("NGA").  The  NGA  also  establishes  comprehensive  controls  over  interstate
pipelines,  including  the  transportation  and  resale  of  gas  in  interstate
commerce.  While these NGA controls do not apply directly to the Company,  their
effect on natural gas markets can be  significant  in terms of  competition  and
cost of  transportation  services.  The  Federal  Energy  Regulatory  Commission
("FERC") administers the NGA and NGPA.

                                       5
<PAGE>
     FERC has  taken  significant  steps to  increase  competition  in the sale,
purchase,  storage and transportation of natural gas. FERC's regulatory programs
generally  allow more accurate and timely price signals from the consumer to the
producer.  Nonetheless, the ability to respond to market forces can and does add
to  price  volatility,  inter-fuel  competition  and  pressure  on the  value of
transportation and other services.

     Additional  proposals  and  proceedings  that might  affect the natural gas
industry are considered from time to time by Congress,  FERC,  state  regulatory
bodies and the  courts.  Several  proposals  that might  affect the  natural gas
industry are pending  before  Congress and the FERC.  The Company cannot predict
when or if any such proposals will become effective and their effect, if any, on
the  Company's  operations.  Historically,  the  natural gas  industry  has been
heavily  regulated and there is no assurance that the less stringent  regulatory
approach  recently  pursued  by FERC,  Congress  and the  states  will  continue
indefinitely into the future.

ENVIRONMENTAL

     The Company, by nature of its oil and gas operations,  is subject extensive
federal,  state and  local  environmental  laws and  regulations  governing  the
protection of the  environment.  The Company is in  compliance,  in all material
respects,   with   applicable   environmental   requirements.   Although  future
environmental  obligations  are not  expected  to have a material  impact on the
results of  operations  or financial  condition of the Company,  there can be no
assurance that future developments, such as increasingly stringent environmental
laws or  enforcement  thereof,  will not cause  the  Company  to incur  material
environmental costs.

INSURANCE

     The Company is subject to all the risks  inherent in the  exploration  for,
and  development  and  production of oil and gas including  blowouts,  fires and
other  casualties.  The  Company  maintains  insurance  coverage  customary  for
operations of a similar  nature,  but losses could arise from uninsured risks or
in amounts in excess of existing insurance coverage.

EMPLOYEES

     As of March 31, 1999,  the Company had two  full-time  and three  part-time
employees.  The  Company  believes  that  relations  with  these  employees  are
generally  satisfactory.  The Company's  employees are not covered by collective
bargaining arrangements. From time to time, the Company utilizes the services of
independent contractors to perform various field and other services. Experienced
personnel are available in all  disciplines  should the need to hire  additional
staff arise.

OFFICE FACILITIES

     The Company  maintains its principal  offices at 214 W. Texas,  Suite 1101,
Midland, Texas pursuant to a month to month lease.

     The following table sets forth certain information concerning the executive
officers of the Company as of March 31, 1999.

                                        6
<PAGE>
                      EXECUTIVE OFFICERS OF THE REGISTRANT

      Name              Age           Position
      ----              ---           --------
Nicholas C. Taylor       61   President and Chief Executive Officer
Donna Gail Yanko         55   Vice President, Operations and Corporate Secretary
Linda J. Crass           44   Treasurer, Controller and Assistant Secretary

     Set forth  below is a  description  of the  backgrounds  of each  executive
officer of the Company,  including employment history for at least the last five
years.

     Nicholas C. Taylor was elected  President,  Treasurer  and  Director of the
Company in April 1983 and continues to serve as President and Director on a part
time basis,  as required.  Mr. Taylor served as Treasurer until March 1999. From
July 1993 to the  present,  Mr.  Taylor  has been  involved  in the  independent
practice of law and other business activities. For more than the prior 19 years,
he was a director and  shareholder of the law firm of Stubbeman,  McRae,  Sealy,
Laughlin & Browder, Inc., Midland, Texas, and a partner of the predecessor firm.
In 1995 he was  appointed by the Governor of Texas and serves as Chairman of the
three member State Securities Board.

     Donna Gail Yanko has worked as  part-time  administrative  assistant to the
Chief  Executive  Officer and as Assistant  Secretary of the Company  until June
1992 when she was appointed Corporate Secretary. Mrs. Yanko was appointed to the
position of Vice  President and elected to the Board of Directors of the Company
in 1990.

     Linda J. Crass has been  Controller for the Company since July 1998 and was
appointed  Assistant  Secretary  in August  1998.  In March 1999,  Ms. Crass was
appointed  Treasurer  of  the  Company  and  continues  to  serve  as  Assistant
Secretary.  From 1996 to 1998,  Ms.  Crass was  employed  in various  accounting
positions by Titan  Exploration,  Inc..  From 1989 to 1996,  Ms. Crass served as
Controller for Midland Resources, Inc.

Item No. 2.  Properties

TITLE TO OIL AND GAS PROPERTIES

     The  Company  believes  that  its  methods  of  investigating  title to its
properties are consistent with practices  customary in the oil and gas industry,
and that such  practices  are  adequately  designed to enable it to acquire good
title to such properties. The Company's properties may be subject to one or more
royalty, overriding royalty, carried and other similar interests and contractual
arrangements  customary  in the  industry.  Substantially  all of the  Company's
properties  are  currently  mortgaged  under a deed of trust to  secure  funding
through a revolving line of credit.

     The following table indicates the net oil and gas production of the Company
in each of the last  five  years,  all of which is  located  within  the  United
States.

                                       7
<PAGE>
                             OIL AND GAS PRODUCTION

                 Year          Oil (Bbls)          Gas (MCF)
                 ----          ----------          ---------
                 1999            49,573             482,948
                 1998            63,800             432,343
                 1997            39,363             236,034
                 1996            29,058             186,419
                 1995            21,844             140,010

     The following  table indicates the Company's total gross and net productive
oil and gas wells and the total gross and net producing  acreage as of March 31,
1999.
                       ACREAGE AND PRODUCING WELL SUMMARY

                                       Wells
                         --------------------------------           Producing
                               Oil               Gas                 Acreage
                         ---------------   --------------      -----------------
                         Gross     Net     Gross     Net        Gross       Net
                         -----    ------   -----    -----      -------     -----
Texas .................  1,108    16.946     80     2.092       88,581     2,439
New Mexico ............     59      .292     42      .190       15,834       128
Oklahoma ..............     13      .050     54      .177       37,622       126
Wyoming ...............      7      .041     17      .026        7,270        26
Louisiana .............     49      .015     13      .023       21,789        34
Arkansas ..............      1      .001     --        --          320        --
Kansas ................      3      .005     13      .039        9,160        27
Colorado ..............     --        --      7      .007        1,040         1
Alabama ...............      4      .008     --        --          640         1
Montana ...............     21      .018     --        --        7,189         4
North Dakota ..........     95      .083     --        --       25,744        16
Utah ..................      6      .012     --        --        3,806         9
                         -----    ------    ---     -----      -------     -----
TOTALS ................  1,366    17.471    226     2.554      218,995     2,811
                         =====    ======    ===     =====      =======     =====

(a)  A gross well or acre is one in which an  interest  is owned.  A net well or
     acre  indicates the percentage of interest of a gross well or acre owned by
     the Company.
(b)  Of these wells, one was shut in pending a pipeline  connection.  A pipeline
     connection was made on April 20, 1999.

     The following table sets forth the results of the drilling  activity by the
Company for the years ended March 31, 1999, 1998 and 1997.

                               DRILLING ACTIVITY

                         Net              Net             Net           Net
             Gross    Productive          Dry         Productive        Dry
Year         Wells    Exploratory     Exploratory     Development    Development
----         -----    -----------     -----------     -----------    -----------
1999           8           0               0              1.86            0
1998           8           0               0              2.56          .88
1997          12           0             .17              2.55            0

                                       8
<PAGE>
PROVED RESERVES

     The  estimates  of the  Company's  proved oil and gas  reserves,  which are
located entirely within the United States,  were prepared in accordance with the
guidelines  established by the SEC and Financial Accounting Standards Board. The
estimates as of March 31, 1999 are based on evaluations  prepared by Joe C. Neal
and Associates,  Petroleum  Consultants.  The estimates as of March 31, 1998 and
1997 are based on evaluations prepared by T. Scott Hickman and Associates, Inc.,
Petroleum  Engineers.  For information  concerning costs incurred by the Company
for oil and gas operations, net revenues from oil and gas production,  estimated
future net revenues attributable to the Company's oil and gas reserves,  present
value of future net revenues discounted at 10% and changes therein, see Notes to
the Company's  consolidated  financial  statements.  The Company emphasizes that
reserve  estimates are  inherently  imprecise and there can be no assurance that
the reserves set forth below will be ultimately realized.

     In estimating  reserves as of March 31, 1999,  average prices of $14.36 per
barrel  for oil and  $1.48 per mcf for gas were  used,  which  were the  average
actual prices in effect for the Company's production.

     The Company has not filed any oil or gas reserve  estimates or included any
such estimates in reports to any other federal or foreign governmental authority
or agency within the past twelve months.

     The  estimated  proved oil and gas reserves and present  value of estimated
future net  revenues  from  proved oil and gas  reserves  for the Company in the
periods ended March 31 are summarized below.

                                 PROVED RESERVES

                                                           March 31,
                                             -----------------------------------
                                                1999         1998         1997
                                             ---------    ---------    ---------
Oil (Bbls):
Proved developed - Producing ............      193,970      213,939      280,894
Proved developed - Non-producing ........         --          5,176         --
Proved undeveloped ......................         --         26,745      155,395
                                             ---------    ---------    ---------
       Total ............................      193,970      245,860      436,289
                                             =========    =========    =========
Natural gas (Mcf):
Proved developed - Producing ............    3,182,342    2,769,794    2,399,539
Proved developed - Non-producing ........    1,011,971      170,738         --
Proved undeveloped ......................         --        256,062      556,680
                                             ---------    ---------    ---------
       Total ............................    4,194,313    3,196,594    2,956,219
                                             =========    =========    =========
Present value of estimated future
  net revenues before income taxes ......   $3,485,196   $3,892,533   $5,320,610
                                            ==========   ==========   ==========

     The  preceding  tables  should  be read in  connection  with the  following
definitions:

PROVED RESERVES

     Estimated  quantities  of oil and gas,  based on geologic  and  engineering
data, appear with reasonable certainty to be economically  recoverable in future
years from known reservoirs under existing economic and operating conditions.

                                       9
<PAGE>
PROVED DEVELOPED RESERVES

     Proved oil and gas reserves expected to be recovered through existing wells
with existing equipment and operating  methods.  Developed reserves include both
producing and  non-producing  reserves.  Producing  reserves are those  reserves
expected to be recovered from existing completion  intervals producing as of the
date  of the  reserve  report.  Non-producing  reserves  are  currently  shut-in
awaiting a pipeline  connection or in  reservoirs  behind the casing or at minor
depths above or below the producing zone and are considered by production either
from wells in the field,  by successful  drill-stem  tests, or by core analysis.
Non-producing reserves require only moderate expense for recovery.

PROVED UNDEVELOPED RESERVES

     Proved oil and gas reserves  expected to be recovered from additional wells
yet to be drilled or from existing wells where a relatively major expenditure is
required for completion.

UNDEVELOPED ACREAGE

     The Company currently does not own any material inventory of non-productive
acreage except in a partially  developed prospect located in the Viejos Devonian
Field of Pecos County,  Texas. The Company owns from 8.31% to 12.02% working and
royalty  interests (net revenue interests 6.42% to 9.01%) in the Viejos Field of
Pecos County,  Texas,  consisting of 2,594 gross acres and 20 wells. The Company
is unable to determine the extent of future development, if any, in this field.

Item No. 3.  Legal Proceedings

     The  Company  is a  plaintiff  in a  class  action  lawsuit  against  a gas
purchaser  involving a contract price  dispute.  The Company does not expect any
expenses  of a  material  nature to arise  from this  class  action  claim.  The
ultimate outcome is uncertain.

Item No. 4.  Submission of Matters to a Vote of Security Holders

     There were no matters  submitted to a vote of security  holders  during the
fourth quarter ended March 31, 1999.

                                     PART II

Item No. 5.  Market  For  Registrant's  Common  Equity and  Related  Stockholder
             Matters.

     The Company's common stock is traded in the  over-the-counter  market under
the symbol  MEXC.  The  registrar  and  transfer  agent is  American  Securities
Transfer & Trust, Denver,  Colorado.  As of March 31, 1999 the Company had 1,423
shareholders of record and 1,623,289 shares outstanding.

                                       10
<PAGE>
                          PRICE RANGE OF COMMON STOCK
                                                                  Bid Price
                                                           ---------------------
                                                            High            Low
                                                           -------         -----
   1999: (1)
        April - June 1998 ........................         7 3/4           7 3/4
        July - September 1998 ....................         7 3/4           7 3/4
        October - December 1998 ..................         7 3/4           7 1/2
        January - March 1999 .....................         7 11/16         7 1/2
   1998: (1)
        April - June 1997 ........................         5 1/2           5 1/2
        July - September 1997 ....................         7 1/2           5 1/2
        October - December 1997 ..................         7 3/4           7 1/2
        January - March 1998 .....................         7 3/4           7 1/2

(1)  Reflects high and low bid  information  received  from  National  Quotation
     Bureau, LLC.
(2)  These bid  quotations  represent  prices  between  dealers,  without retail
     markup, markdown or commissions, and do not reflect actual transactions.
(3)  On May 27, 1999, the bid price was 7 5/8.

     The Company has not paid any dividends on its common  stock,  and it is the
present  policy of the  Company  not to do so,  but to retain its  earnings  for
future  growth and business  activities.  The Company is also subject to certain
loan covenants which include restrictions on payment of dividends.

Item No. 6.  Selected Financial Data
<TABLE>
<CAPTION>
                                                                                     Years Ended March 31,
                                                      ------------------------------------------------------------------------------
                                                          1999             1998             1997             1996            1995
                                                      -----------      -----------      -----------      -----------     -----------
<S>                                                   <C>              <C>              <C>              <C>             <C>
Statement of Operations Data:
Operating revenues ..............................     $ 1,510,005      $ 2,106,338      $ 1,458,741      $   816,788     $   558,587
Operating income (loss) .........................        (281,099)      (1,558,335)         521,123          195,020          99,491
Other income (expense) ..........................        (144,675)        (134,891)          (5,621)          17,285          15,334
Net income (loss) ...............................        (425,774)      (1,323,657)         377,867          200,606         104,843
Net Income (loss) per share - basic .............           (0.26)           (0.83)            0.27             0.15            0.09
Net Income (loss) per share - diluted ...........           (0.26)           (0.83)            0.27             0.15            0.09
Weighted average shares outstanding .............       1,623,289        1,594,752        1,423,229        1,342,628       1,173,229
Balance Sheet Data:
Properties and equipment, net ...................     $ 3,749,400      $ 4,078,053      $ 4,777,132      $ 2,331,344     $ 1,648,465
Total assets ....................................       4,043,015        4,542,486        5,109,199        2,612,039       1,951,896
Total debt ......................................       1,784,000        1,822,000        1,637,000             --              --
Stockholders' equity ............................       2,173,581        2,599,355        2,923,012        2,545,145       1,844,539
Cash Flow Data:
Cash provided by operations .....................     $   532,171      $ 1,118,566      $   866,931      $   396,409     $   255,649
EBITDA(1) .......................................     $   635,260      $ 1,252,539      $ 1,006,119      $   474,697     $   285,548
</TABLE>
(1)  EBITDA  represents   earnings  before  interest   expense,   income  taxes,
     depreciation,  depletion  and  amortization.   Management  of  the  Company
     believes that EBITDA may provide additional information about the Company's
     ability  to  meet  its  future  requirements  for  debt  service,   capital
     expenditures  and working capital.  EBITDA is a financial  measure commonly
     used in the oil and gas industry and should not be  considered in isolation
     or as a  substitute  for net  income,  operating  income,  cash  flows from
     operating  activities  or  any  other  measure  of  financial   performance
     presented in accordance with generally accepted accounting principles or as
     a measure of the Company's profitability or liquidity.
                                       11
<PAGE>
Item No. 7.  Management's  Discussion  and Analysis of Financial  Condition  and
             Results of Operations

     The  following   information   should  be  read  in  conjunction  with  the
information  contained in the  Consolidated  Financial  Statements and the notes
thereto included in Item 8 of this report.

LIQUIDITY AND CAPITAL RESOURCES AND COMMITMENTS

     Historically,   the  Company  has  funded  its  operations,   acquisitions,
exploration  and  development  expenditures  from cash  generated  by  operating
activities, bank borrowings and issuance of common stock.

     In fiscal 1999,  the Company used cash provided by operations  and existing
cash  balances to fund its oil and gas property  acquisitions  and  development.
Working  capital  as of March 31,  1999 was a negative  $307,819  due to current
maturities of outstanding bank debt of $516,000.  On April 21, 1999, the Company
sold all of its oil and gas  interests  in Lazy JL field  properties  located in
Garza County,  Texas for $600,000 cash,  adjusted for revenues and expenses from
the  effective  date of February 1, 1999 through the date of closing.  The sales
proceeds  were used to reduce the Company's  outstanding  debt under its line of
credit with Bank of America.

     The Company has a revolving credit agreement with Bank of America, formerly
NationsBank  of Texas,  which  provides  for a credit  facility  of  $3,000,000,
subject to a borrowing base  determination.  The credit  facility was amended on
August 15, 1998 to increase the borrowing  base to  $2,085,000,  with  scheduled
monthly  reductions of $43,000  beginning  September 5, 1998,  and to extend the
maturity  date to August 15, 2000.  At March 31, 1999,  the  borrowing  base was
$1,784,000.  On April 21, 1999,  with the sale of the Lazy JL field  properties,
the  borrowing   base  was   $1,639,107.   The  borrowing  base  is  subject  to
redetermination  on or about August 1, each year.  Interest under this agreement
is payable  monthly at prime rate (7.75% at March 31, 1999 and 8.5% at March 31,
1998).  The balance  outstanding  under this credit  facility was $1,784,000 and
$1,822,000 at March 31, 1999 and 1998,  respectively.  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 dividends.  The credit facility
is secured by substantially  all of the Company's oil and gas properties and the
common stock of it's subsidiary.

     The  Company  also has a letter of credit  with Bank of  America,  Midland,
Texas,  which  provides  for  unsecured  borrowings  up to  $25,000 in lieu of a
plugging bond with the Railroad  Commission  covering properties operated by the
Company.

     During the first quarter of fiscal 1998, the Company  increased  capital by
$1,000,000  from the  issuance  of 200,000  shares of common  stock at $5.00 per
share through a private placement.  Proceeds of $500,000 were used to reduce the
principal  borrowings  under  the line of  credit.  The  remainder  was used for
property acquisitions and drilling activity.

     Crude oil and natural gas prices have  fluctuated  significantly  in recent
years as well as in recent  months.  Fluctuations  in price  have a  significant
impact on the Company's financial condition and liquidity.  However,  management
believes the Company can maintain adequate liquidity for future needs.

RESULTS OF OPERATIONS
                                       12
<PAGE>
FISCAL 1999 COMPARED TO FISCAL 1998

     Oil and gas sales  decreased from $2,090,117 in 1998 to $1,503,623 in 1999,
a decrease of $586,494 or 28%. This decrease was primarily  attributable  to the
decline in oil and gas prices and oil production during the year, offset in part
by increased gas production  from the acquisition and development of oil and gas
properties.  The average oil price  decreased  from $17.70 in 1998 to $12.11 per
bbl in 1999, a decrease of $5.59 per bbl or 32%. The average gas price decreased
from $2.22 in 1998 to $1.87 per mcf in 1999, a decrease of $0.35 per mcf or 16%.
Oil  production  decreased  from 63,800  bbls in 1998 to 49,573 bbls in 1999,  a
decrease of 14,227 bbls or 22%.  Gas  production  increased  from 432,343 mcf in
1998 to 482,948 mcf in 1999, an increase of 50,605 mcf or 12%.

     Other revenues decreased from $16,221 in 1998 to $6,382 in 1999, a decrease
of $9,839 or 61%, primarily due to the recovery of a bad debt in 1998. There was
no such item in 1999.

     Production  costs  decreased  from  $663,525 in 1998 to $644,563 in 1999, a
decrease of $18,962 or 3%.

     Depreciation,  depletion and amortization decreased from $2,808,753 in 1998
to $909,965 in 1999,  a decrease  of  $1,898,788  or 68%,  due  primarily  to an
impairment  of oil  and gas  properties  in 1998  of  $1,742,386.  There  was an
additional  impairment of oil and gas  properties in the first quarter of fiscal
1999 of $288,393.

     General and  administrative  expenses  increased  from  $192,395 in 1998 to
$236,576 in 1999,  an increase of $44,181 or 23%.  This  increase was  primarily
attributable  to  increased  salaries and benefits  ($55,402),  franchise  taxes
($14,328),  engineering and geological costs ($11,186), officers' and directors'
insurance ($6,708),  and director fees ($6,700),  offset in part by decreases in
legal fees ($22,671), accounting fees ($16,625) and contract services ($12,407).

     Interest  income  increased  from  $2,121  in 1998 to  $6,394  in 1999,  an
increase  of $4,273,  due to the  increased  funds  invested  in a money  market
account.

     Interest  expense  increased  from $137,012 in 1998 to $151,069 in 1999, an
increase  of  $14,057  or 10%.  This  increase  was  attributable  to  increased
borrowing during 1999, offset in part by lower interest rates.

FISCAL 1998 COMPARED TO FISCAL 1997

     Oil and gas sales  increased from $1,453,124 in 1997 to $2,090,117 in 1998,
an increase of $636,993 or 44%.  This increase was primarily due to the increase
in oil and gas production  from the  acquisition  and development of oil and gas
properties,  offset in part by  declining  oil and gas  prices.  The average oil
price  decreased  from  $22.09 in 1997 to $17.70 per bbl in 1998,  a decrease of
$4.39 per bbl or 20%.  The  average  gas price  decreased  from $2.47 in 1997 to
$2.22  per mcf in 1998,  a  decrease  of $0.25  per mcf or 10%.  Oil  production
increased from 39,363 bbls in 1997 to 63,800 bbls in 1998, an increase of 24,437
bbls or 62%. Gas production increased from 236,034 mcf in 1997 to 432,343 mcf in
1998, an increase of 196,309 mcf or 83%.

     Production  costs  increased  from $346,765 in 1997 to $663,525 in 1998, an
increase  of  $316,760  or 91%. Of this  increase,  $43,920 is  attributable  to
increased  production  taxes  relating to the increase in oil and gas sales with
the remaining $272,840  attributable to increased  operating expenses due to the
acquisition and  development of oil and gas properties and the related  increase
in production in 1998.

                                       13
<PAGE>
     Other  revenues  increased  from  $5,617  in 1997 to  $16,221  in 1998,  an
increase of $10,604, primarily due to the recovery of a bad debt.

     Depreciation, depletion and amortization increased from $477,830 in 1997 to
$2,808,753  in 1997,  an increase of  $2,330,923  or 488%,  primarily  due to an
impairment  of  oil  and  gas  properties  of  $1,742,386  which  resulted  from
significantly  lower oil prices and the related downward adjustment of estimated
reserves. The acquisition and development of oil and gas properties in 1998 also
contributed to this increase.

     General and  administrative  expenses  increased  from  $113,023 in 1997 to
$192,395 in 1998,  an increase of $79,372 or 70%.  This  increase was  primarily
attributable to increased engineering and geological costs ($19,731), legal fees
($16,875),  accounting  fees  ($15,375)  and  contract and  consulting  services
($14,582).

     Interest income decreased from $7,166 in 1997 to $2,121 in 1998, a decrease
of $5,045 or 70%, due to the reduced funds invested in a money market account.

     Interest  expense  increased  from $12,787 in 1997 to $137,012 in 1998,  an
increase of $124,225, due to increased borrowings and time outstanding under the
bank line of credit.

OTHER MATTERS

FORWARDING-LOOKING STATEMENTS

     Certain  statements in this Form 10-K may be deemed to be  "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"). All statements,  other than statements
of historical facts, included in this Form 10-K that address activities,  events
or developments that the Company expects, projects, believes or anticipates will
or may occur in the  future,  including  such  matters as oil and gas  reserves,
future  drilling and  operations,  future  production of oil and gas, future net
cash  flows,   future  capital   expenditures   and  other  such  matters,   are
forward-looking  statements.  These statements are based on certain  assumptions
and analysis made by management  of the Company in light of its  experience  and
its  perception  of  historical  trends,  current  conditions,  expected  future
developments and other factors it believes are appropriate in the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
including general economic and business  conditions,  prices of oil and gas, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, changes in laws or regulations and other factors, many of which are
beyond the control of the Company.

YEAR 2000 ISSUE

     The Company is conducting an  assessment of the business  risks  associated
with the new century.  These risks relate to the  inability of certain  software
and embedded logic control devices to distinguish  between the year 1900 and the
year 2000. If not corrected, the year 2000 could cause such devices and software
to fail or create erroneous results.

                                       14
<PAGE>
     The  Company's  accounting  software  vendor has  modified  its software to
accurately  handle  the new  century,  at no  additional  cost  to the  Company.
Therefore,  the Company  does not expect to incur any  material  expense or risk
associated with its own information systems.

     To mitigate  or prevent the risk  related to the  Company's  customers  and
suppliers,  formal  communications have been initiated with key third parties in
an attempt to ascertain  their ability to continue to meet their  obligations to
the Company and the potential  impact on the Company's  operations and financial
condition.  The  responses  received  are being  evaluated,  and the Company may
choose  to  use  alternative  sources  of  supply,   markets  or  develop  other
contingency  plans.  The process of evaluating  third party Year 2000  readiness
began in November 1998, is approximately 50 percent  complete,  and is scheduled
for completion by September 30, 1999.

     The failure to correct,  on a timely  basis,  a material  Year 2000 problem
could  result  in an  interruption  in  the  Company's  operations  or  business
activities. Such interruptions could have a material adverse affect on Company's
results of operations,  liquidity and financial  condition.  Due to the inherent
uncertainty  associated with the Year 2000 issue,  particularly as it relates to
third party Year 2000  readiness,  the  Company  cannot  ascertain  at this time
whether the  consequences  of Year 2000 failures will have a material  impact on
the Company's future financial results, liquidity, condition or reporting.

RISK FACTORS

     All of the  Company's  financial  instruments  are for purposes  other than
trading.

     Interest  Rate Risk.  The following  table  summarizes  maturities  for the
Company's  variable rate bank debt, which is tied to prime rate. If the interest
rate on the Company's bank debt increases or decreases by one percentage  point,
the Company's  annual pretax income would decrease or increase by $17,840.

                                           1999           2000
                                        ---------      ----------
        Variable rate bank debt         $ 516,000      $1,268,000

     Credit Risk.  Credit risk is the risk of loss as a result of nonperformance
by counterparties of their contractual obligations. The Company's primary credit
risk is related to oil and gas  production  sold to various  purchasers  and the
receivables  are generally  uncollateralized.  At March 31, 1999,  the Company's
largest  credit risk  associated  with any single  purchaser  was  $27,510.  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  dependent  upon the prices  received  for oil and
gas. Historically, the markets for oil and gas have been volatile and are likely
to continue to be so in the future.  Various  factors  beyond the control of the
Company affect the price of oil and gas,  including but not limited to worldwide
and  domestic  supplies  of oil and  gas,  the  ability  of the  members  of the
Organization of Petroleum Exporting Countries to agree to and maintain oil price
and   production   controls,   political   instability   or  armed  conflict  in
oil-producing  regions,  the price and level of  foreign  imports,  the level of
consumer  demand,   the  price  and  availability  of  alternative   fuels,  the
availability  of pipeline  capacity,  weather  conditions,  domestic and foreign
governmental  regulation and the overall economic  environment.  Any significant
decline in prices would  adversely  affect the Company's  revenues and operating
income and may require a reduction in the carrying  value of the  Company's  oil
and gas  properties.  If the average oil price for fiscal 1999 had  increased or
decreased  by one cent,  the  Company's  pretax  loss  would have  decreased  or
increased  by $496.  If the average gas price for fiscal 1999 had  increased  or
decreased  by one cent,  the  Company's  pretax  loss  would have  decreased  or
increased by $4,829.                 15
<PAGE>
     Uncertainty  of  Reserve  Information  and Future  Net  Revenue  Estimates.
Estimates  of oil and gas  reserves,  by  necessity,  are  projections  based on
engineering data, and there are uncertainties  inherent in the interpretation of
such data as well as the projection of future rates of production and the timing
of development  expenditures.  Reserve  engineering  is a subjective  process of
estimating  underground  accumulations  of oil and gas  that  are  difficult  to
measure.  Estimates  of  economically  recoverable  oil and gas  reserves and of
future net cash flows depend upon a number of variable  factors and assumptions,
such as future  production,  oil and gas prices,  operating  costs,  development
costs  and  remedial  costs,  all of which  may vary  considerably  from  actual
results. As a result,  estimates of the economically  recoverable  quantities of
oil  and  gas  and  of  future  net  cash  flows  expected  therefrom  may  vary
substantially.  Moreover,  there can be no assurance that the Company's reserves
will ultimately be produced or that any undeveloped reserves will be developed.

     Reserve  Replacement  Risk. The Company's  future success  depends upon its
ability to find, develop or acquire additional, economically recoverable oil and
gas  reserves.  The proved  reserves of the Company  will  generally  decline as
reserves  are  depleted,  except to the extent the Company can find,  develop or
acquire replacement reserves.

     Drilling and Operating Risks. Drilling and operating activities are subject
to many risks,  including well blow outs,  cratering,  fires,  releases of toxic
gases and other  environmental  hazards and risks,  any of which could result in
substantial losses to the Company. In addition, the Company incurs the risk that
no  commercially  productive  reservoirs  will be  encountered  and  there is no
assurance  that the Company will recover all or any portion of its investment in
wells drilled or re-entered.

     Marketability of Production.  The marketability of the Company's production
depends in part on the  availability,  proximity  and  capacity  of natural  gas
gathering  systems,  pipelines  and  processing  facilities.  Federal  and state
regulation  of oil  and  gas  production  and  transportation,  tax  and  energy
policies, changes in supply and demand and general economic conditions could all
affect the Company's ability to produce and market its oil and gas.

Item No. 8.  Financial Statements and Supplementary Data

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     Report of Independent Certified Public Accountants ..............   17
     Consolidated Balance Sheets .....................................   18
     Consolidated Statements of Operations ...........................   19
     Consolidated Statements of Stockholders' Equity .................   20
     Consolidated Statements of Cash Flows ...........................   21
     Notes to Consolidated Financial Statements ......................   22

                                       16
<PAGE>




               Report of Independent Certified Public Accountants


Board of Directors
Mexco Energy Corporation

We have audited the  accompanying  consolidated  balance  sheets of Mexco Energy
Corporation  and  Subsidiary,  as of March 31,  1999 and 1998,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the three years in the period  ended  March 31,  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position of Mexco Energy
Corporation and Subsidiary,  as of March 31, 1999 and 1998, and the consolidated
results of their  operations and their  consolidated  cash flows for each of the
three  years in the period  ended March 31, 1999 in  conformity  with  generally
accepted accounting principles.






GRANT THORNTON LLP

Oklahoma City, Oklahoma
May 14, 1999

                                       17
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                                As of March 31,

                                                       1999            1998
                                                   ------------    ------------
ASSETS
  Current assets
    Cash and cash equivalents                      $     96,198    $    241,348
    Accounts receivable:
      Oil and gas sales                                 179,269         199,427
      Related parties (note I)                            3,780           8,473
    Prepaid expenses                                     14,368          15,185
                                                   ------------    ------------
      Total current assets                              293,615         464,433

  Property and equipment, at cost
    (notes C, F and K)
      Oil and gas properties,
        using the full cost method                   10,495,391       9,915,701
      Other                                              21,874          20,252
                                                   ------------    ------------
                                                     10,517,265       9,935,953
      Less accumulated depreciation,
        depletion, and amortization                   6,767,865       5,857,900
                                                   ------------    ------------
      Property and equipment, net                     3,749,400       4,078,053
                                                   ------------    ------------
      Total assets                                 $  4,043,015    $  4,542,486
                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities
    Accounts payable - trade                       $     85,434    $    121,131
    Current maturities of long term debt (note C)       516,000         322,000
                                                   ------------    ------------
      Total current liabilities                         601,434         443,131

  Long term debt (note C)                             1,268,000       1,500,000
                                                   ------------    ------------
      Total liabilities                               1,869,434       1,943,131

  Stockholders' equity
    Common stock - $0.50 par value; 40,000,000
      shares authorized; 1,623,289 shares issued
      and outstanding (note G)                          811,644         811,644
    Preferred stock - $1.00 par value;
      10,000,000 shares authorized (note G)                --              --
    Additional paid-in capital                        2,875,399       2,875,399
    Accumulated deficit                              (1,513,462)     (1,087,688)
                                                   ------------    ------------
      Total stockholders' equity                      2,173,581       2,599,355
                                                   ------------    ------------
      Total liabilities and stockholders' equity   $  4,043,015    $  4,542,486
                                                   ============    ============

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

                                       18
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                              Year ended March 31,

                                           1999           1998          1997
                                       -----------    -----------   -----------
Operating revenues:
  Oil and gas                          $ 1,503,623    $ 2,090,117   $ 1,453,124
  Other                                      6,382         16,221         5,617
                                       -----------    -----------   -----------
    Total operating revenues             1,510,005      2,106,338     1,458,741

Operating expenses:
  Production                               644,563        663,525       346,765
  Depreciation, depletion,
    and amortization (note F)              909,965      2,808,753       477,830
  General and administrative               236,576        192,395       113,023
                                       -----------    -----------   -----------
    Total operating expenses             1,791,104      3,664,673       937,618
                                       -----------    -----------   -----------
                                          (281,099)    (1,558,335)      521,123
Other income (expense):
  Interest income                            6,394          2,121         7,166
  Interest expense                        (151,069)      (137,012)      (12,787)
                                       -----------    -----------   -----------
    Net other expense                     (144,675)      (134,891)       (5,621)
                                       -----------    -----------   -----------
Earnings (loss) before income taxes       (425,774)    (1,693,226)      515,502

Income tax expense (benefit) (note D)         --         (369,569)      137,635
                                       -----------    -----------   -----------
Net earnings (loss)                    $  (425,774)   $(1,323,657)  $   377,867
                                       ===========    ===========   ===========
Basic and diluted earnings
  (loss) per share                     $     (0.26)   $     (0.83)  $      0.27
                                       ===========    ===========   ===========
Weighted average outstanding
  shares, basic and diluted              1,623,289      1,594,752     1,423,229
                                       ===========    ===========   ===========

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

                                       19
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   Years ended March 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
                                                                        Retained
                                                         Additional     earnings        Total
                                   Common stock           paid-in    (accumulated    Stockholders'
                               Shares        Amount       capital       deficit)       equity
                              ---------   -----------   -----------   -----------    -----------
<S>                           <C>         <C>           <C>           <C>            <C>
Balance at April 1, 1996      1,423,229   $   711,614   $ 1,975,429   $  (141,898)   $ 2,545,145

Net earnings                       --            --            --         377,867        377,867
                              ---------   -----------   -----------   -----------    -----------
Balance at March 31, 1997     1,423,229       711,614     1,975,429       235,969      2,923,012

Net loss                           --            --            --      (1,323,657)    (1,323,657)

Issuance of common stock        200,060       100,030       899,970          --        1,000,000
                              ---------   -----------   -----------   -----------    -----------
Balance at March 31, 1998     1,623,289       811,644     2,875,399    (1,087,688)     2,599,355

Net loss                           --            --            --        (425,774)      (425,774)
                              ---------   -----------   -----------   -----------    -----------
Balance at March 31, 1999     1,623,289   $   811,644   $ 2,875,399   $(1,513,462)   $ 2,173,581
                              =========   ===========   ===========   ===========    ===========
</TABLE>
        The accompanying notes to the consolidated financial statements
                   are an integral part of these statements.

                                       20
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (note A)
                              Year ended March 31,
<TABLE>
<CAPTION>
                                                                1999           1998           1997
                                                            -----------    -----------    -----------
<S>                                                         <C>            <C>            <C>
Cash flows provided by operating activities:
  Net earnings (loss)                                       $  (425,774)   $(1,323,657)   $   377,867
  Adjustments to reconcile net earnings (loss) to
    net cash provided by operating activities:
    Deferred income taxes                                          --         (341,181)        94,890
    Depreciation, depletion and amortization                    909,965      2,808,753        477,830
    (Increase) decrease in accounts receivable                   24,851         83,354       (182,671)
    Increase (decrease) in accounts payable                      22,312        (53,425)        58,922
    (Increase) decrease in prepaid assets                           817        (15,185)          --
    Increase (decrease) in income taxes payable                    --          (40,093)        40,093
                                                            -----------    -----------    -----------
      Net cash provided by operating activities                 532,171      1,118,566        866,931

Cash flows used in investing activities:
  Additions to oil and gas properties                          (643,377)    (2,089,136)    (1,294,556)
  Proceeds from sale of assets                                    5,678             64         32,449
  Additions to other property and equipment                      (1,622)       (13,959)        (3,791)
  Acquisition of Forman Energy Corporation                         --             --       (1,369,332)
                                                            -----------    -----------    -----------
      Net cash used in investing activities                    (639,321)    (2,103,031)    (2,635,230)

Cash flows (used in) provided by financing activities:
  Borrowings                                                       --          685,000      1,637,000
  Principal payments on long-term debt                          (38,000)      (500,000)          --
  Proceeds from issuance of common stock                           --        1,000,000           --
                                                            -----------    -----------    -----------
      Net cash (used in) provided by financing activities       (38,000)     1,185,000      1,637,000
                                                            -----------    -----------    -----------
Net increase (decrease) in cash and cash equivalents           (145,150)       200,535       (131,299)
Cash and cash equivalents at beginning of year                  241,348         40,813        172,112
                                                            -----------    -----------    -----------
Cash and cash equivalents at end of year                    $    96,198    $   241,348    $    40,813
                                                            ===========    ===========    ===========

   Interest paid                                            $   138,586    $   140,272    $     7,298
   Income taxes paid                                        $      --      $    24,731    $     2,652

Non-cash investing and financing activities:
Included in trade accounts payable at March 31:
Acquisition and development costs of oil and gas properties $    25,041    $    83,050    $    76,407
</TABLE>
The purchase of Forman Energy  Corporation  on February 25, 1997 resulted in the
assumption of a deferred tax liability and account payable as follows:

             Assets acquired         $  1,591,000
             Cash paid                  1,369,000
                                     ------------
             Liabilities assumed     $    222,000
                                     ============

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

                                       21
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

     Mexco Energy  Corporation and its  wholly-owned  subsidiary,  Forman Energy
Corporation  (collectively,  the  "Company")  is  engaged  in  the  acquisition,
exploration,  development  and  production  of  domestic  oil and  gas and  owns
producing  properties and undeveloped  acreage in twelve states. The majority of
the  Company's  activities  are  centered  in West Texas.  Although  most of the
Company's oil and gas interests are operated by others, the Company does operate
several properties in which it owns an interest.

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.  The consolidated  financial statements include the
accounts  of Mexco  Energy  Corporation  and its  wholly-owned  subsidiary.  All
significant  inter-company  balances and  transactions  have been  eliminated in
consolidation.

Cash  and Cash  Equivalents.  The  Company  considers  all  highly  liquid  debt
instruments  purchased  with a maturity of three months or less and money market
funds to be cash  equivalents.  The Company  maintains  its cash in bank deposit
accounts and money market funds,  some of which are not federally  insured.  The
Company has not  experienced  any losses in such accounts and believes it is not
exposed to any significant credit risk.

Oil and Gas Properties.  Oil and gas properties are accounted for using the full
cost method of  accounting.  Under this method,  all costs  associated  with the
acquisition,  exploration,  and  development of properties  (successful or not),
including leasehold  acquisition costs,  geological and geophysical costs, lease
rentals,  exploratory  and  developmental  drilling  and  equipment  costs,  are
capitalized. Costs are amortized using the units-of-production method based upon
estimates of proved oil and gas reserves.  If  unamortized  costs,  less related
deferred income taxes,  exceed the sum of the present value,  discounted at 10%,
of estimated future net revenues from proved  reserves,  less related income tax
effects,  the excess is charged to  expense.  Generally,  no gains or losses are
recognized on the sale or disposition of oil and gas properties.

Other Property and Equipment.  Provisions for  depreciation of office  furniture
and equipment are computed on the straight-line method based on estimated useful
lives of five to ten years.

Earnings  (Loss) Per Common Share.  Net earnings  (loss) per share is calculated
using  the  weighted  average  number  of shares  outstanding  during  each year
presented.  There were no potential common stocks outstanding for March 31, 1997
or 1998.  Potential  common stocks  (options) are excluded for March 31, 1999 as
their inclusion would have an antidilutive effect on loss per share.

Income Taxes. The Company recognizes deferred tax assets and liabilities for the
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.

                                       22
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A (CONTINUED)

Environmental.  The  Company is subject to  extensive  federal,  state and local
environmental laws and regulations.  These laws, which are constantly  changing,
regulate the  discharge of materials  into the  environment  and may require the
Company to remove or  mitigate  the  environmental  effects of the  disposal  or
release of  petroleum or chemical  substances  at various  sites.  Environmental
expenditures  are expensed or  capitalized  depending  on their future  economic
benefit.  Liabilities for expenditures of a non-capital nature are recorded when
environmental  assessment  and/or  remediation  is probable and the costs can be
reasonably estimated.  There were no significant  environmental  expenditures or
liabilities for the years ended March 31, 1999, 1998 or 1997.

Use of Estimates. In preparing financial statements in conformity with generally
accepted  accounting  principles,  management is required to make  estimates and
assumptions that affect the amounts reported in the 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 therefrom.

Stock  Options.  The  Company  accounts  for  employee  stock  option  grants in
accordance with Accounting  Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees,"  whereby  compensation costs are recognized only
in situations where stock compensatory plans award intrinsic value to recipients
at the date of grant.  The  Financial  Accounting  Standards  Board has issued a
proposed  Interpretation  of APB  Opinion  25,  which may require the Company to
recognize  compensation  costs  related  to stock  options  granted  to  outside
directors and independent  consultants.  The final Interpretation is expected in
1999.  If  adopted,  the  Interpretation  would apply to events that occur after
December 15, 1998.

Financial  Instruments.  Cash and  money  market  funds,  stated  at  cost,  are
available upon demand and approximate fair value. Interest rates associated with
the Company's  long-term debt are linked to current  market rates.  As a result,
management  believes that the carrying amount approximates the fair value of the
Company's  credit  facilities.  All financial  instruments are held for purposes
other than trading.

Reclassifications. Certain reclassifications have been made to the 1997 and 1998
financial  statements  to conform to the 1999  presentation.  For the year ended
March 31, 1999,  the Company has presented its Statement of Cash Flows using the
indirect method. The Statements of Cash Flows for prior years have been restated
using the same presentation.

NOTE B - BUSINESS COMBINATION

     On February 25, 1997, the Company acquired Forman Energy  Corporation.  The
acquisition has been accounted for under the purchase method of accounting,  and
the  operations of the acquired  company are included  subsequent to February 1,
1997.  The  purchase  price of  approximately  $1,591,000  was  allocated to the
assets,  primarily  oil and gas  properties,  acquired  on the  basis  of  their
estimated fair value.

                                       23
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B (CONTINUED)

     The following  summarized  pro forma,  unaudited  information  for the year
ended March 31, 1997 assumes the  acquisition of Forman had occurred on April 1,
1996:
       Revenues                                 $1,831,031
       Net earnings                                476,948
       Basic and diluted earnings per share            .34

NOTE C - DEBT

     The Company has a revolving  credit  agreement with Bank of America,  N.A.,
formerly  NationsBank of Texas,  N.A.,  which provides for a credit  facility of
$3,000,000,  subject to a borrowing base determination.  The credit facility was
amended on August 15, 1998 to increase the borrowing  base to  $2,085,000,  with
scheduled  monthly  reductions of $43,000  beginning  September 5, 1998,  and to
extend the maturity  date to August 15, 2000.  At March 31, 1999,  the borrowing
base  was  $1,784,000.  On  April  2,  1999,  with the sale of the Lazy JL field
properties,  the borrowing  base was  $1,639,107  and sales proceeds of $600,000
were used to reduce  the  outstanding  debt.  The  borrowing  base is subject to
redetermination  on or about August 1, each year.  Current amounts due under the
facility of $516,000 and $322,000 at March 31, 1999 and 1998, respectively,  are
reflected in the financial statements.  Interest under this agreement is payable
monthly at prime rate (7.75% at March 31, 1999 and 8.5% at March 31, 1998).  The
balance  outstanding under this credit facility was $1,784,000 and $1,822,000 at
March 31, 1999 and 1998,  respectively.  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  dividends.  The  credit  facility  is  secured by
substantially  all of the Company's oil and gas  properties and the common stock
of it's subsidiary.

     The Company also has a letter of credit with Bank of America  providing for
unsecured  borrowings  up to $25,000  in lieu of a plugging  bond with the Texas
Railroad Commission covering properties operated by the Company.

NOTE D - INCOME TAXES

     Components of income tax expense  (benefit) for years ended March 31 are as
follows:
                                            1999          1998          1997
                                         ---------     ---------     ---------
        Current:
          Federal ...................    $    --       $ (28,388)    $  40,994
          State .....................         --            --           1,751
                                         ---------     ---------     ---------
                                              --         (28,388)       42,745
        Deferred:
          Federal ...................         --        (301,814)       83,941
          State .....................         --         (39,367)       10,949
                                         ---------     ---------     ---------
                                              --        (341,181)       94,890
                                         ---------     ---------     ---------
  Income tax expense (benefit) ......    $    --       $(369,569)    $ 137,635
                                         =========     =========     =========

                                       24
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D. (CONTINUED)

     Deferred tax assets,  valuation allowance,  and liabilities at March 31 are
as follows:

                            1999                    1998
  Deferred tax assets:
    Percentage depletion carryforwards ...........    $ 169,271     $ 142,218
    Net operating loss carryforwards .............      230,763       101,780
    Valuation allowance ..........................     (271,818)     (135,890)
                                                      ---------     ---------
                                                        128,216       108,108
  Deferred tax liabilities:
    Excess financial accounting bases over
      tax bases of property and equipment ........     (128,216)     (108,108)
                                                      ---------     ---------
        Net deferred tax assets (liabilities) ....    $    --       $    --
                                                      =========     =========
  Increase (decrease) in valuation allowance
    for the year .................................    $ 135,928     $ 135,890
                                                      =========     =========

     As of March 31, 1999, the Company has statutory depletion  carryforwards of
approximately $651,000, which do not expire, and operating loss carryforwards of
approximately $888,000, which if not utilized begin to expire in 2018.

     A reconciliation of the provision for income taxes to income taxes computed
using the federal  statutory  rate for years  ended March 31 follows:

                                               1999         1998         1997
                                            ---------    ---------    ---------
Tax expense (benefit) at statutory rate ..  $(144,763)   $(575,697)   $ 175,271
Increase (decrease) in valuation allowance    135,928      135,890       (3,072)
State income taxes .......................       --           --          8,215
Prior year over accrual ..................       --        (28,388)      (4,794)
Effect of graduated rates ................     34,062      130,450      (41,241)
Other ....................................    (25,227)     (31,824)       3,256
                                            ---------    ---------    ---------
                                            $    --      $(369,569)   $ 137,635
                                            =========    =========    =========

NOTE E - MAJOR CUSTOMERS

     The Company operates exclusively within the United States and it's revenues
and operating  income are derived  predominately  from the oil and gas industry.
Oil and gas  production is sold to various  purchasers and the  receivables  are
unsecured.  Historically,  the Company has not  experienced  significant  credit
losses  on its  oil and gas  accounts  and  management  is of the  opinion  that
significant  credit risk does not exist.  Management  is of the opinion that the
loss of any one purchaser would not have an adverse effect on the ability of the
Company to sell its oil and gas production.

                                       25
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E. (CONTINUED)

     In fiscal 1999, two purchasers accounted for 30% and 25%, respectively,  of
revenues.   In  fiscal  1998,  two   purchasers   accounted  for  33%  and  15%,
respectively,  of revenues.  In fiscal 1997, three purchasers accounted for 46%,
24% and 10%, respectively, of revenues.

NOTE F - OIL AND GAS COSTS

     The  costs  related  to the oil  and gas  activities  of the  Company  were
incurred as follows:

                                       Year ended March 31,
                               ------------------------------------
                                  1999         1998         1997
                               ----------   ----------   ----------
  Property acquisition costs   $  207,325   $  751,160   $  562,363
  Development costs            $  436,052   $1,261,569   $  808,600

     The Company had the following  aggregate  capitalized costs relating to the
Company's oil and gas property activities at March 31:

                                           1999          1998          1997
                                       -----------   -----------   -----------
  Proved oil and gas properties        $10,331,594   $ 9,854,099   $ 7,698,866
  Unproved oil and gas properties          163,797        61,602       121,120
                                       -----------   -----------   -----------
                                        10,495,391     9,915,701     7,819,986
  Less accumulated depreciation,
    depletion, and amortization          6,759,416     5,853,458     3,046,602
                                       -----------   -----------   -----------
                                       $ 3,735,975   $ 4,062,243   $ 4,773,384
                                       ===========   ===========   ===========

     Depreciation,  depletion,  and  amortization  expense  included a full cost
ceiling  write-down  of  $288,393  for the  first  quarter  of  fiscal  1999 and
$1,742,386  for the fourth quarter of fiscal 1998 due to declines in oil and gas
prices and the related downward adjustment of estimated reserves.  Depreciation,
depletion,  and amortization  amounted to $6.97, $20.66 and $6.02 per equivalent
barrel  of  production  for the years  ended  March 31,  1999,  1998,  and 1997,
respectively.

NOTE G - STOCKHOLDERS' EQUITY

     In May 1997, the Company completed a private placement of 200,000 shares of
common stock at $5.00 per share.  The proceeds of $1,000,000 were used to reduce
debt and finance property acquisitions.

     In September 1997, the  shareholders  approved an amendment to the Articles
of  Incorporation  to increase the number of  authorized  shares from  5,000,000
shares of common  stock to  40,000,000  shares  of common  stock and  10,000,000
shares of preferred stock. The common stockholders  maintain the exclusive right
to vote for the election of directors and for all other purposes.  The preferred
stock may be issued in a series with certain  rights as  determined by the Board
of Directors.

                                       26
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H - EMPLOYEE BENEEFIT PLAN

     The Company adopted an employee  incentive  stock plan effective  September
15, 1997. Under the plan, 350,000 shares are available for distribution. Awards,
granted  at the  discretion  of the  compensation  committee  of  the  Board  of
Directors,  include stock options or restricted  stock.  Stock options may be an
incentive  stock  option or a  nonqualified  stock  option.  Options to purchase
common  stock under the plan are granted at the fair market  value of the common
stock at the date of  grant,  become  exercisable  to the  extent  of 25% of the
shares optioned on each of four  anniversaries of the date of grant,  expire ten
years  from the date of grant,  and are  subject  to  forfeiture  if  employment
terminates.  Restricted  stock  may be  granted  with a  condition  to  attain a
specified  goal.  The  purchase  price  will be at  least  $5.00  per  share  of
restricted  stock.  The awards of restricted stock must be accepted within sixty
days and will vest as determined by agreement.  Holders of restricted stock have
all rights of a shareholder of the Company.

     During fiscal 1999,  100,000 options were granted.  Of these 20,000 options
were  granted to a  consultant  and 10,000  options  were  granted to an outside
director.  As of March 31, 1999 there were 90,000 options outstanding under this
plan with exercise prices ranging from $7.50 to $7.75. The exercise price of all
options granted equaled or exceeded the market price of the stock on the date of
grant.

     The summary of the status of the  Company's  stock option plan at March 31,
1999 and the changes during the year then ended is presented below:

                                                              Weighted
                                                 Company       Average
                                                  Shares    Exercise Price
                                                 -------    --------------
  Options outstanding, beginning of year            --      $     --
  Options granted                                100,000         7.63
  Options forfeited                               10,000         7.75
  Options exercised                                 --            --
                                                 -------    --------------
  Options outstanding, end of year                90,000    $    7.61
                                                 =======    ==============

     No options  were  exercisable  at March 31, 1999.  At April 2, 1999,  7,500
options were exercisable with an exercise price of $7.75.

     Weighted average grant date fair value of stock options granted,  was $4.04
for 1999,  calculated in accordance with the Black-Scholes option pricing model,
using the following weighted average assumptions:

     Expected volatility                   27.89%
     Expected dividend yield                   0%
     Expected option term                  10 years
     Risk-free rate of return               5.72%

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating  the fair value of traded  options that have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input  of  highly  subjective   assumptions   including   expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
                                       27
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H. (CONTINUED)

     Options to purchase common stock outstanding were as follows:

          Number outstanding                          90,000
          Range of exercise prices               $7.50-$7.75
          Weighted average exercise price              $7.61
          Weighted average years to expiration          9.56

     Since the Company  applies the intrinsic value method in accounting for its
stock  option  plan,  it generally  records no  compensation  cost for its stock
options (note A). If  compensation  cost for the Company's stock option plan had
been determined  based on the fair value at the grant dates for awards under the
plan,  the  Company's  net loss would have been  increased  by $51,415 in fiscal
1999.  Basic and diluted  loss per share would have been  increased by $0.03 per
share in fiscal 1999.

NOTE I - RELATED PARTY TRANSACTIONS

     The  Company  serves  as  operator  of  properties  in which  the  majority
stockholder has interests and bills the majority stockholder for lease operating
expenses on a monthly basis subject to usual trade terms.  The billings  totaled
$21,981,  $50,097 and  $112,657 for the years ended March 31,  1999,  1998,  and
1997, respectively.

NOTE J - SUBSEQUENT EVENT

     On April 21,  1999,  the Company  sold all of its oil and gas  interests in
Lazy JL field  properties  located in Garza  County,  Texas for  $600,000  cash,
adjusted for revenues and expenses from the  effective  date of February 1, 1999
through  the date of  closing.  The  sales  proceeds  were  used to  reduce  the
Company's outstanding debt under its line of credit with Bank of America.

NOTE K - OIL AND GAS RESERVE DATA (UNAUDITED)

     The  estimates  of the  Company's  proved oil and gas  reserves,  which are
located entirely within the United States,  were prepared in accordance with the
guidelines  established by the Securities and Exchange  Commission and Financial
Accounting  Standards Board.  These guidelines require that reserve estimates be
prepared under existing economic and operating conditions, with no provision for
price and cost escalators,  except by contractual agreement. The estimates as of
March 31, 1999 are based on evaluations  prepared by Joe C. Neal and Associates,
Petroleum Consultants.  The estimates as of March 31, 1998 and 1997 are based on
evaluations  prepared  by T.  Scott  Hickman  and  Associates,  Inc.,  Petroleum
Engineers.

     Management  emphasizes that reserve estimates are inherently  imprecise and
are  expected to change as new  information  becomes  available  and as economic
conditions in the industry  change.  The following  estimates of proved reserves
quantities  and related  standardized  measure of  discounted  net cash flow are
estimates only, and do not purport to reflect  realizable  values or fair market
values of the Company's reserves.

                                       28
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K. (CONTINUED)

CHANGES IN PROVED RESERVE QUANTITIES (UNAUDITED):
<TABLE>
<CAPTION>
                                                    1999                        1998                        1997
                                            ---------------------       ---------------------       ---------------------
                                              Bbls         Mcf            Bbls         Mcf           Bbls          Mcf
                                            -------     ---------       -------     ---------       -------     ---------
<S>                                         <C>         <C>             <C>         <C>             <C>         <C>
Proved reserves, beginning of year          246,000     3,197,000       436,000     2,956,000       425,000     1,920,000
Revision of previous estimates               (2,000)      348,000      (132,000)      268,000      (113,000)      411,000
Purchase of minerals in place                  --         939,000         6,000       405,000        89,000       902,000
Extensions and discoveries                     --         193,000          --            --          75,000        83,000
Production                                  (50,000)     (483,000)      (64,000)     (432,000)      (40,000)     (236,000)
Sales of minerals in place                     --            --            --            --            --        (124,000)
                                            -------     ---------       -------     ---------       -------     ---------
Proved reserves, end of year                194,000     4,194,000       246,000     3,197,000       436,000     2,956,000
                                            =======     =========       =======     =========       =======     =========
PROVED DEVELOPED RESERVES (UNAUDITED):
Beginning of year                           219,000     2,941,000       281,000     2,400,000       209,000     1,593,000
End of year                                 194,000     4,194,000       219,000     2,941,000       281,000     2,400,000
</TABLE>

STANDARDIZED  MEASURE OF  DISCOUNTED  FUTURE NET CASH FLOWS  RELATING  TO PROVED
RESERVES (UNAUDITED):
                                                     March 31,
                                   --------------------------------------------
                                       1999            1998            1997
                                   ------------    ------------    ------------
Future cash inflows                $  8,994,000    $  9,794,000    $ 13,901,000
Future production and
 development costs                   (2,989,000)     (3,791,000)     (5,678,000)
Future income taxes (a)                (715,000)       (612,000)     (1,348,000)
                                   ------------    ------------    ------------
Future net cash flows                 5,290,000       5,391,000       6,875,000
Annual 10% discount for
 estimated timing of cash flows      (2,220,000)     (1,896,000)     (2,427,000)
                                   ------------    ------------    ------------
Standardized measure of
 discounted future net cash flows  $  3,070,000    $  3,495,000    $  4,448,000
                                   ============    ============    ============

(a)  Future  income taxes are computed  using  effective tax rates on future net
     cash  flows  before  income  taxes  less  the tax  bases of the oil and gas
     properties.

                                       29
<PAGE>
                    MEXCO ENERGY CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K. (CONTINUED)

CHANGES IN STANDARIZED  MEASURE OF DISCOUNTED  FUTURE NET CASH FLOWS FROM PROVED
RESERVES (UNAUDITED):

                        Year ended March 31,
                                            1999         1998          1997
                                        -----------   -----------   -----------
Sales of oil and gas produced,
  net of production costs               $  (859,000)  $(1,427,000)  $(1,106,000)
Net changes in price and
  production costs                       (1,255,000)     (519,000)     (582,000)
Previously estimated development
  costs                                     296,000          --            --
Revisions of quantity estimates             389,000      (428,000)     (237,000)
Net change due to purchases
  and sales of minerals in place            527,000       456,000     1,338,000
Extensions and discoveries, less
  related costs                              81,000          --         678,000
Net change in income taxes                  (18,000)      475,000      (425,000)
Accretion of discount                       389,000       532,000       463,000
Changes in timing of estimated
  cash flows and other                       25,000       (42,000)      138,000
                                        -----------   -----------   -----------
Changes in standardized measure            (425,000)     (953,000)      267,000

Standardized measure, beginning of year   3,495,000     4,448,000     4,181,000
                                        -----------   -----------   -----------
Standardized measure, end of year       $ 3,070,000   $ 3,495,000   $ 4,448,000
                                        ===========   ===========   ===========

                                       30
<PAGE>
Item No. 9. Changes in and  Disagreements  With  Accountants  on Accounting  and
            Financial Disclosures

     None.

                                    PART III

Item No. 10.  Directors and Executive Officers of the Registrant

     The  information   required  regarding  Directors  of  the  Registrant  and
compliance  with  Section  16(a)  of the  Securities  Exchange  Act of  1934  is
incorporated by reference to the Company's  Information Statement for its Annual
Meeting of Stockholders,  which will be filed with the Commission not later than
July 29, 1999.

     Pursuant to Item 401(b) of Regulation S-K, the information required by this
item with respect to executive officers of the Company is set forth in Part I of
this report.

Item No. 11.  Executive Compensation

     The information required in this item is incorporated by reference from the
Company's  Information  Statement for its Annual Meeting of Stockholders,  which
will be filed with the Commission not later than July 29, 1999.

Item No. 12.  Security Ownership of Certain Beneficial Owners and Management

     The information required in this item is incorporated by reference from the
Company's  Information  Statement for its Annual Meeting of Stockholders,  which
will be filed with the Commission not later than July 29, 1999.

Item No. 13.  Certain Relationships and Related Transactions

     The information required in this item is incorporated by reference from the
Company's  Information  Statement for its Annual Meeting of Stockholders,  which
will be filed with the Commission not later than July 29, 1999.

                                     PART IV

Item No. 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

        (a)     1. and 2.       Financial Statements and Schedules.

     See "Index to  Consolidated  Financial  Statements"  set forth in Item 8 of
this Form 10-K.

     No schedules  are required to be filed because of the absence of conditions
under which they would be required or because the  required  information  is set
forth in the financial statements or notes thereto referred to above.

                                       31
<PAGE>
        (a)     3.      Exhibits.

Exhibit
Number

3.1  Articles of  Incorporation  (incorporated  by  reference  to the  Company's
     Annual Report on Form 10-K dated June 24, 1998).
3.2  Bylaws  (incorporated  by reference to the Company's  Annual Report on Form
     10K dated June 23, 1995).
10.1 Stock Option Plan  (incorporated  by reference to the Amendment to Schedule
     14C Information Statement filed on August 13, 1997).
10.2 Bank Line of Credit  (incorporated  by  reference to the  Company's  Annual
     Report on Form 10-K dated June 24, 1998).
10.3 Partial  Assignment,  Bill of Sale  and  Conveyance  between  Mexco  Energy
     Corporation  and  Shenandoah  Petroleum  Corporation  dated  April 21, 1999
     (previously filed as exhibit 10.1 and incorporated by reference to Form 8-K
     dated April 21, 1999).
21   Subsidiaries  of the Company  (incorporated  by reference to the  Company's
     Annual Report on Form 10-K dated Jun 24, 1998).


        (b)     Reports on Form 8-K.

     No report on Form 8-K was filed by the  Company  during the  quarter  ended
March 31,  1999.  A report on Form 8-K dated April 21, 1999 was filed under Item
2. Disposition of Assets.

                                       32
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
behalf of the undersigned thereunto duly authorized.

                               MEXCO ENERGY CORPORATION

                               Registrant

                               By: /s/ Nicholas C. Taylor
                               -------------------------------------------------
                               Nicholas C. Taylor
                               President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below as of June 15, 1999,  by the  following  persons on
behalf of the Company and in the capacity indicated.

 /s/ Nicholas C. Taylor
 ---------------------------------------------------
     Nicholas C. Taylor
     President, Chief Executive Officer and Director

 /s/ Donna Gail Yanko
 ---------------------------------------------------
     Donna Gail Yanko
     Vice President, Operations and Director

 /s/ Linda J. Crass
 ---------------------------------------------------
     Linda J. Crass
     Controller, Treasurer and Assistant Secretary

 /s/ Thomas Graham, Jr.
 ---------------------------------------------------
     Thomas Graham, Jr.
     Chairman of the Board of Directors

 /s/ Thomas R. Craddick
 ---------------------------------------------------
     Thomas R. Craddick
     Director

 /s/ William G. Duncan, Jr.
 ---------------------------------------------------
     William G. Duncan, Jr.
     Director

 /s/ Jack D. Ladd
 ---------------------------------------------------
     Jack D. Ladd
     Director

 /s/ Gerald R. Martin
 ---------------------------------------------------
     Gerald R. Martin
     Director

                                       33
<PAGE>
                                INDEX TO EXHIBITS

 Exhibit
 Number      Exhibit                                                        Page
 ------      -------------------------------------------------------        ----
  3.1**      Articles of Incorporation.
  3.2*       Bylaws.
 10.1***     Stock Option Plan.
 10.2**      Bank Line of Credit.
 10.3****    Partial Assignment, Bill of Sale and Conveyance between
             Mexco Energy Corporation and Shenandoah Petroleum
             Corporation dated April 21, 1999.
 21**        Subsidiaries of the Company.





*    Incorporated by reference to the Company's Annual Report on Form 10-K dated
     June 23, 1995.
**   Incorporated by reference to the Company's Annual Report on Form 10-K dated
     June 24, 1998.
***  Incorporated  by  reference to the  Amendment  to Schedule 14C  Information
     Statement filed on August 13, 1998.
**** Previously  filed as exhibit 10.1 and incorporated by reference to Form 8-K
     dated April 21, 1999.