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<SEC-DOCUMENT>0001001614-05-000042.txt : 20050811
<SEC-HEADER>0001001614-05-000042.hdr.sgml : 20050811
<ACCEPTANCE-DATETIME>20050811093952
ACCESSION NUMBER:		0001001614-05-000042
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20050630
FILED AS OF DATE:		20050811
DATE AS OF CHANGE:		20050811

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TENGASCO INC
		CENTRAL INDEX KEY:			0001001614
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				870267438
		STATE OF INCORPORATION:			TN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-15555
		FILM NUMBER:		051015289

	BUSINESS ADDRESS:	
		STREET 1:		603 MAIN AVE
		STREET 2:		SUITE 500
		CITY:			KNOXVILLE
		STATE:			TN
		ZIP:			37902
		BUSINESS PHONE:		4235231124

	MAIL ADDRESS:	
		STREET 1:		630 MAIN AVENUE
		STREET 2:		SUITE 500
		CITY:			KNOXVILLE
		STATE:			TN
		ZIP:			37902
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>june30_05q.htm
<DESCRIPTION>2ND QUARTER 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>
<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Microsoft Word 11.0.5604; </FONT></P>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S. Securities and
Exchange Commission </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form 10-Q </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE SECURITIES
EXCHANGE ACT OF 1934 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the Quarterly
period ended <u>June 30, 2005</u> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commission File No.
0-20975 </FONT></H1>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><u><B>Tengasco, Inc. and
Subsidiaries</b></U></font> <BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (Exact name of small business issuer as specified in its charter) </FONT></P>




<TABLE width = 100% BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH><u>Tennessee</u><br>State or other jurisdiction of<br>Incorporation or organization </TH>
     <TH></TH>
     <TH></TH>
     <TH><u>87-0267438</u><br> (IRS Employer Identification No.)</TH></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD></TD>
     <TD></TD>
     <TD></TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD></TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>







<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>10215 Technology Drive
N.W. Suite 301 <br>Knoxville, TN 37932</b><br>(Address of principal
executive offices) </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>(865-675-1554)</b><br>(Issuer&#146;s
telephone number, including area code) </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. </FONT></P>

Yes X   No__

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).  Yes____  No     X

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate the number of shares
outstanding of each of the issuer&#146;s classes of common stock, as of the latest
practicable date: <U>48,677,828 common shares at June 30, 2005.</U> </FONT></P>


<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>









<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC. AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT></P>



















<TABLE width=100% BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>PART I. </TD>
     <TD>FINANCIAL INFORMATION   </TD>
     <TD> PAGE</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 1.  FINANCIAL STATEMENTS</TD>
     <TD></TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>*     Condensed Consolidated Balance Sheets as of  June 30, 2005 and December 31, 2004  </TD>
     <TD><br> 3-4</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>*    Condensed Consolidated Statements of Loss for the three and six
                 months ended June 30, 2005 and 2004 </TD>
     <TD><br>5</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br> *   Condensed  Consolidated Statements of Stockholders' Equity for the six
                 months ended June 30, 2005</TD>
     <TD><br> 6</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>*    Condensed Consolidated Statements of Cash Flows for the six months
                 ended June 30, 2005 and 2004 </TD>
     <TD><br>7</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD> <br>*     Notes to Condensed  Consolidated Financial Statements </TD>
     <TD><br>8-14</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                 RESULTS OF OPERATIONS</TD>
     <TD> <br>14-19
</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br> ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</TD>
     <TD><br>  19-20</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 4.  CONTROLS AND PROCEDURES</TD>
     <TD><br>20</TD></TR>
<TR VALIGN="TOP">
     <TD><br>PART II.</TD>
     <TD><br> OTHER INFORMATION</TD>
     <TD></TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</TD>
     <TD><br> 20</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 5. OTHER INFORMATION  </TD>
     <TD><br> 21</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br>ITEM 6. EXHIBITS </TD>
     <TD><br> 22</TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
     <TD><br> *      SIGNATURES  <br> <br>*      CERTIFICATIONS</TD>
     <TD><br> 22<br><br>23-26</TD></TR>
</TABLE>






<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>



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<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONDENSED CONSOLIDATED
BALANCE SHEETS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ASSETS </FONT></H1>







<TABLE align=center CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3>June 30, 2005 <br> (Unaudited)</TH>
     <TH COLSPAN=3>December 31,2004</TH></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>


<TR VALIGN=Bottom>
     <TH align=left COLSPAN=3>Assets </TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><b>Current</b></TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=14% ALIGN=RIGHT></TD>
        <TD WIDTH=4% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=14% ALIGN=RIGHT></TD>
        <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Cash and cash equivalents</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    102,100</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    267,735</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Accounts receivable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>734,316</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>706,752</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Participant receivables</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>18,819</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>73,016</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Inventory</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>425,423</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>341,745</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Other current assets</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>26,447</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>67,526</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Total current assets</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,307,105</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,456,774</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Oil and gas properties,</b> net (on the basis</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;of full cost accounting)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>10,096,837</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>12,826,903</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Pipeline facilities,</b> net</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>14,237,243</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>14,602,639</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Other property and equipment,</b> net</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>304,331</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>323,433</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT><br><br><br><br><br><br>$</TD><TD ALIGN=RIGHT> 25,945,516</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> 29,209,749</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying
notes to condensed consolidated financial statements </I></FONT></P>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>



<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC. AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONDENSED CONSOLIDATED
BALNCE SHEETS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIABILITIES AND
STOCKHOLDERS EQUITY </FONT></H1>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>              </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT>




<TABLE align=center CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3>June 30, 2005<br>(Unaudited)</TH>
     <TH COLSPAN=3> December 31,2004 </TH></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=67% ALIGN=LEFT><b>Current liabilities</b></TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=11% ALIGN=RIGHT></TD>
        <TD WIDTH=4% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=11% ALIGN=RIGHT></TD>
        <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Current maturities of long-term debt</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>      63,661</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>      26,672</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Accounts payable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>430,111</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>319,820</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Accrued interest payable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>7,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>25,367</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Other accrued liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>231,472</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>211,622</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Notes payable to related parties (Note 5)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>700,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>3,050,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Drilling program (Note 6)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>658,351</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,316,702</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Current shares subject to mandatory redemption (Note 6)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>3,429,552</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>3,260,312</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Total current liabilities</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>5,520,147</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>8,210,495</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Shares subject to mandatory redemption (Note 6)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,464,068</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,395,301</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Drilling program (Note 6)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>438,901</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>438,901</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Asset retirement obligations (Note 7)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>596,283</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>708,677</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Long term debt, less current maturities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>127,321</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>106,688</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Total liabilities</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>8,146,720</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>10,860,062</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Stockholders' equity</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Common stock, $.001 par value; authorized 100,000,000 shares;</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;48,677,828 and 48,927,828 shares issued and outstanding</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,678</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,928</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Additional paid-in capital</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>51,686,533</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>51,686,283</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Accumulated deficit</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(33,936,415</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(33,385,524</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Total stockholders' equity</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>17,798,796</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>18,349,687</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  25,945,516</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  29,209,749</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying
notes to condensed consolidated financial statements </I></FONT></P>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>



<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>










<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC. AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONDENSED CONSOLIDATED
STATEMENTS OF LOSS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Unaudited) </FONT></H1>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=6>For the Three Months Ended<br>June 30,<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>

     <TH COLSPAN=6>For the Six Months Ended<br>June 30,<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>

     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3>2005<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>2004<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>2005<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>2004<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT>Revenues and other income</TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=8% ALIGN=RIGHT></TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=8% ALIGN=RIGHT></TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=8% ALIGN=RIGHT></TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=8% ALIGN=RIGHT></TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=8% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=3% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=1% ALIGN=RIGHT></TD>
        <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Oil and gas revenues</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>   1,589,693</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>   1,380,289</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>   2,997,342</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>   2,712,639</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Pipeline transportation  revenues</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>21,973</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>24,676</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>44,655</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>47,917</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Interest income</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>431</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,695</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,118</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,446</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Total revenues and other income</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,612,097</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,406,660</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>3,043,115</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,763,002</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Cost and other deductions</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Production costs and taxes</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>696,361</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>667,851</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,481,483</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,539,432</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Depletion, depreciation and amortization</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>477,846</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>564,984</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>957,154</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,173,148</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Interest expense</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>196,918</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>274,854</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>352,990</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>779,239</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;General and administrative cost</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>315,740</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>282,266</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>606,850</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>570,626</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Public Relations</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>546</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,750</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,181</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>4,032</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Professional fees</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>57,226</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>233,403</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>194,348</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>531,278</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Total cost and other deductions</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,744,637</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,025,108</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>3,594,006</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>4,597,755</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Gain from extinguishment of debt</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>0</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>336,820</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>0</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>336,820</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net loss attributable to commom shareholders</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    (132,540</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    (281,628</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    (550,891</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  (1,497,933</TD>
        <TD ALIGN=LEFT>)</TD></tr>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>



<tr>
     <TD ALIGN=LEFT>Net loss attributable to common shareholders</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>per share basic and diluted:</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Operations</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> (0.00</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> (0.01</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> (0.01</TD>
        <TD ALIGN=LEFT>)&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>(0.05</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=LEFT></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT></TD></tr>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>



<tr>
     <TD ALIGN=LEFT>Total</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;</TD><TD ALIGN=RIGHT>(0.00</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$&nbsp;</TD><TD ALIGN=RIGHT>(0.01</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$&nbsp;</TD><TD ALIGN=RIGHT>(0.01</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>(0.05</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=LEFT></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT></TD><TD ALIGN=RIGHT>   </TD>
        <TD ALIGN=LEFT></TD></tr>
<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>



<tr>
     <TD ALIGN=LEFT>Weighted average share outstanding</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,677,828</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,506,977</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,677,828</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>33,115,395</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>




</TABLE>


<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying
notes to condensed consolidated financial statements </I></FONT></P>


<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>



<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>






<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC. AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Unaudited) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U> </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>
                                 </U></FONT></P>










<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=760>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>

     <TH COLSPAN=6><u>Common Stock</u></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3>Shares<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>Amount<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>Additional Paid<br>in Capital <HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>Accumulated<br> Deficit<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3>Total<HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Balance at December 31,</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>2004 &nbsp;&nbsp;&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,927,828</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>      48,928</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  51,686,283</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> (33,385,524</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  18,349,687</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Rescinded Shares</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(250,000</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(250</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>250</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>0</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net Loss</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(550,891</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(550,891</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Balance June 30, 2005</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>(Unaudited)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>48,677,828</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>      48,678</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  51,686,533</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT> (33,936,415</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  17,798,796</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>

     </TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying notes
to condensed consolidated financial statements </I></FONT></P>


<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>



<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>





<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TENGASCO, INC. AND
SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS </FONT></H1>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=760>
<TR VALIGN=Bottom>
     <TH COLSPAN=3></TH>
     <TH COLSPAN=3>For the Six Months Ended<br>June 30, 2005 <br>(unaudited)</TH>
     <TH COLSPAN=3>For the Six Months Ended<br>June 30, 2004 <br>(unaudited)</TH></TR>


<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=65% ALIGN=LEFT><b>Operating activities</b></TD>
     <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=12% ALIGN=RIGHT></TD>
        <TD WIDTH=4% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD><TD WIDTH=12% ALIGN=RIGHT></TD>
        <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Net loss</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>    (550,891</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>  (1,497,933</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in operating activities:</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation, depletion and amortization</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>957,154</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,173,148</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of redeemable shares</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>246,007</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>404,292</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion on Asset Retirement Obligation</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>39,007</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>36,684</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on extinguishment of Asset Retirement Obligation</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(72,399</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on sale of vehicles/equipment</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>12,670</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(7,500</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of pipeline facilities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(17,605</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Changes in assets and liabilities:</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(27,564</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(81,109</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participant receivables</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>54,197</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(4,730</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other  current assets</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>41,079</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>223,003</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(83,678</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(115,247</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>60,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>110,291</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(758,598</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(18,367</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(209,322</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>19,850</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>129,304</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Settlement on Asset Retirement Obligations</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(18,004</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>691,747</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(648,008</TD>
        <TD ALIGN=LEFT>)</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;<b>Investing activities</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Increase/decrease to other property & equipment</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(86,583</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>14,834</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Net additions to oil and gas properties</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(219,934</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(720,397</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Sale of Kansas gas field (See Note 8)</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,350,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Increase/decrease in pipeline facilities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>97,395</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(8,511</TD>
        <TD ALIGN=LEFT>)</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;Net cash provided by (used in) investing activities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,140,878</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(714,074</TD>
        <TD ALIGN=LEFT>)</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><b>Financing activities</b></TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Proceeds from exercise of options</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>71,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Proceeds from borrowings</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>106,721</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>2,725,000</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Repayments of borrowings</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(2,438,630</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(10,088,254</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Decrease in Drilling Program liability</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(658,351</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Dividends paid  on redeemable liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(8,000</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(319,750</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Loan fee amortization</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>107,955</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Net proceeds from rights offering</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>8,858,827</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Net cash (used in) provided by  financing activities</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(2,998,260</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>1,354,778</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>

<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Net change in cash and cash equivalents</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(165,635</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>(7,304</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Cash and cash equivalents, beginning of period</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>267,735</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>&nbsp;</TD><TD ALIGN=RIGHT>312,666</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;Cash and cash equivalents, end of period</TD><TD ALIGN=LEFT>&nbsp;</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>     102,100</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$</TD><TD ALIGN=RIGHT>     305,362</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>

     <TD COLSPAN=8 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>See accompanying
notes to condensed consolidated financial statements </I></FONT></P>

<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>



<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<DIV STYLE="page-break-after:always"></DIV>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tengasco, Inc. and
Subsidiaries </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to Condensed Consolidated
Financial Statements </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Unaudited) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Sub 1 Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;(1)
<u>Basis of Presentation</u> </b></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Item 210 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended June 30, 2005
are not necessarily indicative of the results that may be expected for the year ended
December 31, 2005. Additionally, deferred income taxes and income tax expense is not
reflected in the Company&#146;s financial statements due to the fact that the Company has
had recurring losses and deferred tax assets arising from net operating gross
carry-forwards have been fully reserved. Certain prior year amounts have been reclassified
to conform with current year presentation. For further information, refer to the
Company&#146;s consolidated financial statements and footnotes thereto for the year ended
December 31, 2004 included in the Company&#146;s annual report on Form 10-K. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(2) <u>Going Concern</u> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern and assume realization of
assets and the satisfaction of liabilities in the normal course of business. The Company
has incurred continuous losses through operations and has an accumulated deficit of
$33,936,415 and a working capital deficit of $4,213,042 as of June 30, 2005. During 2002,
the Company was informed by its primary lender (Bank One) that the entire amount of its
outstanding credit facility was immediately due and payable, as provided for in the Credit
Agreement. The Company disputed its obligation to make this payment and has resolved the
dispute by settlement of the debt in May 2004. As a result, the Company continues to pursue other long-term financing. The
Company also has significant redemption amounts due to be satisfied in 2005 related to its
Mandatorily Redeemable Series B Preferred Shares (see Note 6). These circumstances raise
substantial doubt about the Company&#146;s ability to continue as a going concern. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 2005, the Company sold its gas producing properties in Rush County, Kansas for
$2.4 million and used the net proceeds of the sale to pay down the $2.5 million debt to
Dolphin Offshore Partners, L.P. (&#147;Dolphin&#148;), incurred by the Company to fund the
settlement of the litigation with Bank One in May, 2004. This has the effect of reducing
the payment of high interest on this note, and reducing the total secured debt owed by the
Company to $700,000 as of the date of this Report, consisting of about $150,000 remaining
principal of the $2.5 million note, and the principal of the $550,000 note used for the
cash exchange to holders of the Company&#146;s Series A 8% Cumulative Convertible
Preferred Stock (&#147;Series A Shares&#148;). See Note 5 to the financial statements. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the payment of this secured and unsecured debt, and the exchange of most of
its Series A Shares, management believes the Company is now better positioned to both
establish a banking relationship with an institutional lender on acceptable terms to fund
the Company&#146;s activities. Although the Company is hopeful that as a result of the
substantial reduction of its debt position that it will soon be able to establish such a
relationship, there is no assurance it will be able to do so. Until the Company is able to
establish such a relationship, it will be necessary to fund its operations, including
capital expenditures for the acquisition, exploration and development of oil and gas
reserves from other sources, such as equity investment, private loans or a joint venture
with other companies, as to which there can be no assurances. In addition to its
operational cash requirements, the Company also has a significant amount of loans and
other obligations which will either become due or mature on August 20, 2005, including
secured promissory notes due to Dolphin in the principal amount of $700,000 plus interest
thereon, as well as the payment of the accrued distributions on the Company&#146;s Series
B 8% Cumulative Convertible Preferred Stock (&#147;Series B Shares&#148;) and the
scheduled redemption of both the Series B shares and Series C 6% Cumulative Convertible
Preferred Stock which become due on September 5, 2005 and April 30, 2007. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s
plans also include the continuation of its drilling efforts. The Company plans to drill
wells in new locations it has identified in Kansas on its existing leases in response to
drilling activity in the area establishing new areas of oil production. In September 2004,
the Company drilled and completed the Lewis No. 3 well in Kansas using only funds from the
proceeds of the Company&#146;s ongoing operations. By using the Company&#146;s own funds,
it was not necessary to permit any third party to either participate in financing of
drilling or to acquire any interest in the well. The Company receives all proceeds of
production attributable to the working interest in the Lewis No. 3 well. The Company has
also drilled three wells in the six months of 2005 as part of a drilling program in
Kansas. See Part II, Item 5. </FONT>
</TD>
</TR>
</TABLE>
<BR>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)<u> Earnings per Share</u></FONT></H1>





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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with Statement of Financial Accounting Standards (SFAS) No. 128, &#147;Earnings
Per Share&#148; (&#147;SFAS 128&#148;), basic and diluted loss per share are based on
48,677,828 and 48,506,977 weighted average shares outstanding for the quarters ended June
30, 2005 and June 30, 2004 respectively, and 48,677,828 and 33,115,395 for the six months
ended June 30, 2005 and June 30, 2004 respectively. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the three-month and six month periods ended June 30, 2005 and 2004, the Company had no
vested, unexercised, in the money options. As the Company was in a net loss position, any
potential common share equivalents would have been anti-dilutive. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company adopted the disclosure provision of the Statement of Financial Accounting
Standards (SFAS or statement) No.148, &#147;Accounting for Stock-Based
Compensation-Transition and Disclosure&#148; (&#147;SFAS 148&#148;), which amends SFAS No.
123 &#147;Accounting for Stock-Based Compensation&#148;, (&#147;SFAS 123&#148;). SFAS 148
provides alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation, which was originally provided
under SFAS 123. The Statement also improves the timeliness of disclosures by requiring the
information be included in interim, as well as annual, financial statements. The adoption
of </FONT>
</TD>
</TR>
</TABLE>
<BR>


<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>



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<DIV STYLE="page-break-after:always"></DIV>




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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>these disclosure provisions did not have an affect on the Company&#146;s June 30, 2005
consolidated results of operations, financial position, or cash flows, as there were no
options granted in 2004 or the first six months of 2005. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS
123 encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to continue
to account for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, &#147;Accounting for Stock Issued to
Employees&#148;, and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company&#146;s stock at the date of the grant over the amount an employee must pay to
acquire the stock. The option price of all the Company&#146;s stock options is equal to
the market value of the stock at the grant date. As such, no compensation expense is
recorded in the accompanying consolidated financial statements. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;(4)
<u>Recent Accounting Pronouncements</u></b></FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2004, The Emerging Issues Task Force (&#147;EITF&#148;) reached a consensus that
mineral rights, as defined in EITF Issue No. 04-02, &#147;Whether Mineral Rights are
Tangible or Intangible Assets,&#148;(&#147;EITF 04-02&#148;) are tangible assets and that
they should be removed as examples of intangible assets in SFAS Nos. 141 and 142. The
Financial Accounting Standards Board (&#147;FASB&#148;) has recently ratified this
consensus and directed the FASB staff to amend SFAS Nos. 141 and 142 through the issuance
of FASB Staff Positions FSP FAS 141-1 and FSP FAS 142-1. Historically the Company has
included the cost of such mineral rights as tangible assets, which is consistent with the
EITF&#146;s consensus. As such, EITF 04-02 will not affect Tengasco&#146;s consolidated
condensed financial statements. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Staff
Accounting Bulletin (&#147;SAB&#148;) No. 106, (&#147;SAB 106&#148;) regarding the
application of SFAS No. 143, &#147;Accounting for Asset Retirement Obligations&#148;
(&#147;SFAS 143&#148;), by oil and gas producing companies following the full cost
accounting method was issued in September 2004. SAB 106 provided an interpretation of how
a company, after adopting SFAS 143, should compute the full cost ceiling to avoid
double-counting the expected future cash outflows associated with asset retirement costs.
The provisions of this interpretation have been applied by the Company and adoption of
this bulletin has no impact on the financial statements. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December&nbsp;2004, the FASB issued SFAS No.&nbsp;123(R), &#147;Share-Based Payment.&#148;
This statement revised SFAS No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; and superseded APB Opinion No.&nbsp;25, &#147;Accounting for Stock
Issued to Employees,&#148; and its related implementation guidance. SFAS No.&nbsp;123(R)
requires companies to recognize on the income statement the grant-date fair value of stock
options and other equity-based compensation issued to employees. The SEC recently adopted
a new rule that defers the effective date of SFAS No.&nbsp;123(R) and allows companies to
implement the provisions of the Statement at the beginning of their next fiscal year. As a
result, the Company currently expects to adopt SFAS No.&nbsp;123(R) as of
January&nbsp;1,&nbsp;2006, using the modified prospective transition method. Under the
modified prospective method, awards that are granted, modified or settled after
January&nbsp;1,&nbsp;2006 will be measured in accordance with SFAS No.&nbsp;123(R).
Unvested equity-classified awards that were granted prior to January&nbsp;1,&nbsp;2006
will be accounted for in accordance with SFAS No.&nbsp;123, except that the amounts will
be recognized on the Company&#146;s consolidated</FONT>
</TD>
</TR>
</TABLE>
<BR>


<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>



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<DIV STYLE="page-break-after:always"></DIV>




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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> statements of operations. The Company is
currently evaluating the impact of SFAS No.&nbsp;123(R) and expects that it will recognize
additional compensation expense during first quarter 2006. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;(5)
<u>Related Party Transactions</u></b></FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
December 2002 through December 9, 2003, Dolphin Offshore Partners, L.P.
(&#147;Dolphin&#148;) acquired a total of an 85% undivided interest in the Company&#146;s
Tennessee and Kansas pipelines as collateral for a series of seven loans totaling
$2,125,000. On December 24, 2003, Dolphin loaned the Company the sum of $1,000,000 which
was used for working capital and to pay all interest and principal in full of convertible
loans to the Company then being held by several persons. On February 2, 2004, Dolphin
loaned the Company the sum of $225,000 which was used for making payment of principal and
interest to the Company&#146;s former lender, Bank One, for February, 2004. All of the
aforementioned notes to Dolphin were repaid in full on March 30, 2004 from the proceeds
received by the Company from its Rights Offering. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 18, 2004, Dolphin loaned the Company $2,500,000 bearing interest at 12% per annum with
interest payable monthly beginning June 18, 2004 and principal payable on May 20, 2005,
which loan is secured by a first lien on the Company&#146;s Tennessee and Kansas producing
properties and the Tennessee pipeline. The proceeds of the loan were used to fund in part
the settlement with the Company&#146;s former lender, Bank One. On December 30, 2004,
Dolphin loaned the Company $550,000 bearing interest at 12% per annum with interest
payable monthly and principal payable on May 20, 2005, which loan is secured by the first
lien on the Company&#146;s Tennessee and Kansas properties and the Tennessee pipeline. On
March 4, 2005, Dolphin was paid $2,350,000 to reduce the principal of the promissory note
dated May 18, 2004 in the original amount of $2,500,000, to $150,000 from the proceeds
received from the sale of the Company&#146;s Kansas gas fields (See Note 8). The balance
owed on the two outstanding notes to Dolphin at March 31, 2005 was $700,000. These notes
were replaced with a new note to Dolphin Offshore Partners for $700,000 payable on August
20, 2005, which is the balance due as of June 30, 2005. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(6)<u> Cumulative
Convertible Redeemable Preferred Stock and Drilling Program</u> </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has issued three classes of convertible preferred stock (Series A, Series B and
Series C). The Company is required to redeem one-twentieth of the maximum number of Series
A Preferred Stock outstanding commencing on October 1, 2003 and at each quarterly date
thereafter. The Company is required to redeem all outstanding Series B Preferred Stock on
the fifth anniversary of the issuance of those shares which is September 2005. The Company
is required to redeem any remaining Series C Preferred Stock together with any accrued and
unpaid dividends in May 2007. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company adopted the provisions of SFAS No. 150 &#147;Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Debt&#148; (&#147;SFAS 150&#148;)
on July 1, 2003. Under SFAS 150, mandatorily redeemable preferred stock shall be
reclassified at fair value to a liability. The Company determined that each of the Series
A, Series B and Series C preferred stock qualify as shares subject to mandatory
redemption, and as such, were reclassified as liabilities upon adoption of SFAS 150.
Accordingly, the difference between the carrying amount at the date of adoption and the
fair value of the shares (discounted at rates between 12% and 12.5%) was recognized as a
cumulative effect of a change in accounting principle of $365,675 effective July 1, 2003.
</FONT>
</TD>
</TR>
</TABLE>
<BR>




<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></P>



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<DIV STYLE="page-break-after:always"></DIV>





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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The difference between the carrying amount of shares subject to mandatory redemption and
the face value amount of preferred stock is being accreted at rates between 12% and 12.5%
into interest expense and the liability until conversion or redemption of the shares.
Accretion associated with these shares subject to mandatory redemption was $224,722 in the
first quarter of 2004 and $123,003 in the first quarter of 2005. The Company has dividends
in arrears as of December 31, 2004 of $649,692 and $803,365 as of June 30, 2005. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December, 2004, the Company completed an exchange offer to the thirteen holders of the
Company&#146;s Series A 8% Cumulative Convertible Preferred Stock in the amount of
$2,867,900. Seven of the thirteen Series A holders elected the cash exchange option, and
the face amount of $1,085,000 of Series A shares was exchanged on or before December 31,
2004 for cash payments of $723,370. A gain was recorded on this transaction in the amount
of $458,310, the difference between the carrying amount and the cash settlement amount.
The Company obtained funds for the exchange from cash on hand and the proceeds of a loan
from Dolphin Offshore Partners, L.P.&nbsp; The loan from Dolphin was in the form of a note
in principal amount of $550,000 bearing 12% interest per annum payable interest only until
due on May 20, 2005 and secured by a lien on the Company&#146;s Tennessee and Kansas
assets. This note has been replaced and extended until August 20, 2005.&nbsp; Five of the
thirteen Series A holders elected to participate in a drilling program in exchange for
their Series A Shares, and on December 31, 2004 the amount of $1,582,900 of Series A
Shares plus accrued dividends of $31,658 were exchanged for approximately 6.5 Units in an
eight-well drilling program in Kansas (the &#147;Drilling Program&#148;).&nbsp; A
liability was recorded for the Drilling Program in the amount of $1,755,603 and
&#147;Shares subject to mandatory redemption&#148; was reduced by the same amount. The
Drilling Program liability recorded represents the estimated fair value of the liability
calculated upon adoption of SFAS 150 less accretion, from such date to the date of the
exchange. The remaining 1.5 units in the Drilling Program continue to be owned by the
Company. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the terms of the Drilling Program, the former Series A holders participating in the
Drilling Program will receive all the cash flow from each of eight wells to be drilled in
Kansas, until they have recovered 80% of the value of the Series A Shares exchanged. At
that point, the Company will begin to receive 85% of the cash flow from these wells as a
management fee, and the former Series A owners will continue to receive 15% of the cash
flow for the productive life of the wells. In summary twelve of the 13 holders of Series A
holders exchanged their Series A Shares.&nbsp; As a result, the Company has remaining only
one Series A shareholder, holding Series A Shares, in the face amount of $200,000. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first six months of 2005 the Company completed three wells of the eight well Drilling
Program. The Company reduced the Drilling Program liability by $658,351 and offset oil and
gas properties by the corresponding amount. This represents 37.5% of the Drilling Program
liability on December 31, 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(7)<u> Asset Retirement
Obligation </u></FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with SFAS 143, the Company has recorded a liability and corresponding increase
in long-lived assets for the present value of material obligations associated with the
retirement of tangible long-lived assets. Over the passage of time, accretion of the
liability is recognized as an operating expense and the capitalized cost is depleted over
the estimated useful life of the related asset. The Company&#146;s asset</FONT>
</TD>
</TR>
</TABLE>
<BR>




<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></P>



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<DIV STYLE="page-break-after:always"></DIV>






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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> retirement
obligations relate primarily to the plugging, dismantling and removal of wells drilled to
date. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
determined that the following assumptions in estimating the initial recording of the
Company&#146;s Asset Retirement Obligation were appropriate using a credit-adjusted risk
fee rate of 12%; an estimated useful life of wells ranging from 30-40 years and estimated
plugging and abandonment cost ranging from $5,000 per well to $10,000 per well. Management
continues to evaluate the appropriateness of these assumptions periodically. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the first six months of 2005 and 2004, the Company recorded accretion expenses of $39,007
and $36,684 associated with this liability. These expenses are included in interest
expense in the consolidated statements of loss. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 2005 the Company sold the Kansas gas wells, therefore the asset and the
corresponding liability relating to asset retirement obligations on these wells was
extinguished. The asset account was credited for $60,998 and the liability was removed in
the amount of $133,397, therefore creating a gain on the extinguishment of future
obligations in the amount of $72,399, which was credited to interest expense. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(8)<u> Sale of Gas Wells </u></FONT></H1>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 2005 the Company sold the Kansas gas wells, oil and gas leases and the associated
gathering system in place in Rush County, Kansas to Bear Petroleum, Inc. for $2.4
million.&nbsp;The Company&#146;s gas producing properties in Kansas were physically
separated from the oil properties, and were all located in Rush County, Kansas consisting
of 51 producing wells and associated gathering system. All proceeds of this sale, being
the sales price less a sales commission of $50,000, were immediately paid to Dolphin
Offshore Partners, L.P. to reduce the principal of the promissory note to Dolphin in the
amount of $2.5 million to $150,000. The Company recorded a credit to oil &amp; gas
properties of $2,350,000, the sale price net of commission. </FONT>
</TD>
</TR>
</TABLE>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(9) <u>Rights Offering</u>  </FONT></H1>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 17, 2003, the Company filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission (&#147;SEC&#148;). On February 13, 2004, the SEC deemed
the Registration Statement on Form S-1 effective. </FONT>
</TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Rights Offering was a distribution to the holders of the Company&#146;s common stock
outstanding at the record date, February 27, 2004, at no charge, of nontransferable
subscription rights at the rate of one right to purchase three shares of the
Company&#146;s common stock for each share of common stock owned at the subscription price
of $0.75 in the aggregate, or $0.25 per each share purchased.&nbsp; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
subscription right, in addition to the right to purchase three shares of common stock,
carried with it an over-subscription privilege. The over-subscription privilege provided
stockholders that exercise all of their basic subscription privileges with the opportunity
to purchase those shares that were not purchased by other stockholders through the
exercise of their basic subscription privileges, at the same subscription price per
share.&nbsp; In no event could any subscriber purchase shares of the Company&#146;s common
stock in the offering that, when aggregated with all of the shares of the Company&#146;s
</FONT>
</TD>
</TR>
</TABLE>
<BR>

<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></P>



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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
common stock otherwise owned by the subscriber and his, her or its affiliates, would
immediately following the closing represent more than 50% of the Company&#146;s issued and
outstanding shares.&nbsp; </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
provided in the Rights Offering, 7,029,604 rights were exercised pursuant to the basic
subscription privilege, resulting in the purchase of 21,088,812 shares at $0.25 per share
for gross proceeds to the Company of $5,272,203 resulting from the basic subscription
privilege. A total of 15,211,118 rights were exercised pursuant to the oversubscription
privilege, resulting in additional gross proceeds to the Company of $3,802,797. Of the
shares purchased pursuant to the Rights Offering 14,966,344 shares were purchased by
Directors, Officers and owners of 10% of the Company&#146;s outstanding common stock. </FONT>
</TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the time the Rights Offering closed on March 18, 2004 all 36.3 million shares offered had
been subscribed and, as a result, the Company raised approximately $9.1 million. The total
number of shares subscribed actually exceeded the 36.3 million shares available for
issuance under the offering. Consequently, all shares subscribed for under the basic
privilege were issued and the number of shares issued under the over-subscription
privilege was proportionately reduced to equal the number of remaining shares. The
allocation and issuance of the oversubscribed shares was made by Mellon Investor Services,
the Company&#146;s subscription agent who also returned payments for those over-subscribed
shares that were not available. </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of the Rights Offering were used to pay non-bank indebtedness in the
aggregate amount of&nbsp;approximately $6 million (including up to $3,850,000 in principal
amount plus accrued interest owed by the Company to Dolphin) and to pay $1,157,000 as a
portion of the Company&#146;s settlement with Bank One. The balance of the net
proceeds&nbsp;was used for working capital purposes, including the drilling of additional
wells. Costs incurred in connection with the Rights Offering were $223,003. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
2 MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</b></FONT></P>

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<H1 ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Results of Operations and Financial Condition </FONT></H1>

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<H1 ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;<u>Kansas</u> </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first six months of 2005, the Company produced and sold 59,042 barrels of oil and
20,729 Mcf of natural gas from its Kansas Properties comprised of 131 producing oil wells
and 51 producing gas wells. The gas production was only for the month of January as the
gas field was sold on March 4, 2005 with production retroactive to February of 2005. (See
&#147;Liquidity and Capital Resources&#148;). The first six months production of 59,042
barrels of oil compares to 58,742 barrels produced in the first six months of 2004. In
summary, the six months production reflected expected continued production levels from the
Kansas Properties, which have been in production for many years. The Company has begun
drilling in Kansas as discussed in Part II Item 5 of this report. The revenues from the
Kansas properties were $2,331,567 in the first six months of 2005 compared to $1,958,859
in 2004. This increase was due to the higher prices for oil, but was partially offset by
only one month of gas revenues. </FONT>
</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;<u>Tennessee</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first six months of 2005, the Company produced gas from 23 wells in the Swan Creek
field, which it sold in Kingsport, Tennessee to Eastman Chemical Company . </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural
gas production from the Swan Creek field for the first six months of 2005 was an average
of 483 Mcf per day during that period as compared to 635 Mcf per day in the first six
months of 2004. The first six months production reflected expected natural decline in
production from the existing Swan Creek gas wells which were first brought into production
in mid-2001 upon completion of the Company&#146;s pipeline. For the first six months of
2005 the Company produced 5,657 barrels of oil as compared to 7,211 in 2004. This natural
decline is normal for any producing oil and gas well, and this decline as experienced on
existing wells in Swan Creek was not unexpected. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;<u>Comparison
of the Six Months Ended June 30, 2005 and 2004.</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recognized $2,997,342 in oil and gas revenues from its Kansas Properties and the
Swan Creek Field during the first six months of 2005 compared to $2,712,639 in the first
six months of 2004. The increase in revenues was due to an increase in oil prices in 2005.
The revenue increase due to oil price increases were offset by Kansas gas production for
only one month due to the sale of the gas field in Kansas. Kansas gas sales in 2005 were
$72,471 (one month) as compared to $405,498 (six months) in 2004. Oil prices in the first
six months of 2005 averaged $49.10 per barrel as compared to $34.72 per barrel in the
first six months of 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company realized a net loss attributable to common shareholders of $550,891 ($0.01) per
share of common stock, during the first six months of 2005 compared to a net loss in the
first six months of 2004 to common shareholders of $1,497,933 ($0.05) per share of common
stock. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Production
costs and taxes in the first six months of 2005 of $1,481,483 decreased from $1,539,432 in
the first six months of 2004. The difference is due to management&#146;s cost-controlling
efforts and the sale of the Kansas gas field. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation,
depletion, and amortization expense for the first six months of 2005 was $957,154 compared
to $1,173,148 in the first six months of 2004. This is due to a reduction in depletion and
depreciation taken due to the sale of the Kansas gas field and equipment becoming fully
depreciated in late 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the first six months of 2005, general and administrative costs remained at 2004 levels.</FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional
fees, in the first six months of 2005 were $194,348 compared to $531,278 in the same
period in 2004. These fees have substantially decreased as a result of the settlement of
the Bank One and Paul Miller lawsuits in 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense for the first six months of 2005 decreased from the first six months of 2004 to
$352,990 from $779,239. The substantial decrease is the result of the payoff of the Bank
One loan and the Dolphin notes and the conversion of shares subject to mandatory
redemption into a drilling program and cash payoff in 2004. Additionally</FONT>
</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></P>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the Company
recorded a gain of $72,399 in the first quarter of 2005 relating to the extinguishment of
asset retirement obligation on the wells that were sold in Kansas that was offset to
interest expense. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recorded a gain from extinguishment of debt in the amount of $336,820 in the
second quarter of 2004, which was the difference between the carrying amount of the Bank
One loan less the settlement amount. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;<u>Comparison
of the Quarters Ended June 30, 2005 and 2004.</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recognized $1,589,693 in oil and gas revenues from its Kansas Properties and the
Swan Creek Field during the second quarter of 2005 compared to $1,380,289 in the second
quarter of 2004. The increase in revenues was due to an increase in oil prices in 2005.
The revenue increase due to oil price increases were offset by zero Kansas gas production.
Kansas gas sales were $191,295 in 2004. Oil prices in the second quarter of 2005 averaged
$50.29 per barrel as compared to $36.29 per barrel in the second quarter of 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company realized a net loss attributable to common shareholders of $(132,540) ($0.00) per
share of common stock, during the second quarter of 2005 compared to a net loss in the
second quarter of 2004 to common shareholders of $(281,628) ($0.01) per share of common
stock. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Production
costs and taxes in the second quarter of 2005 of $696,361 remained stable from $667,851 in
the second quarter of 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation,
depletion, and amortization expense for the second quarter of 2005 was $477,846 compared
to $564,984 in the second quarter of 2004. This is due to a reduction in depletion and
depreciation taken due to the sale of the Kansas gas field and equipment becoming fully
depreciated in late 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the second quarter of 2005, general and administrative costs only slightly increased above
2004 levels. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional
fees, in the second quarter of 2005 were $57,226 compared to $233,403 in the same period
in 2004. These fees have substantially decreased as a result of the settlement of the Bank
One and Paul Miller lawsuits in 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense for the second quarter of 2005 decreased from the second quarter of 2004 to
$196,918 from $274,854. The substantial decrease is the result of the payoff of the Bank
One loan and the Dolphin notes and the conversion of shares subject to mandatory
redemption into a drilling program and cash payoff in 2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recorded a gain from extinguishment of debt in the amount of $336,820 in the
second quarter of 2004, which was the difference between the carrying amount of the Bank
One loan less the settlement amount. </FONT>
</TD>
</TR>
</TABLE>
<BR>


<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Liquidity and Capital
Resources</b></u></FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November 8, 2001, the Company signed a credit facility agreement with the Energy Finance
Division of Bank One, N.A. in Houston, Texas. The Company instituted litigation in May
2002 based on certain actions taken by Bank One. On May 13, 2004, the Company resolved its
dispute with Bank One. The Company had anticipated that when its dispute with Bank One was
resolved it would be able to obtain financing from other institutional lenders to allow
the Company to continue to both develop existing properties and locate and purchase
additional properties. To date, however, due to the financial status of the Company
including debt obligations owed, the Company&#146;s credit history, and the inability of
the Company to pay accrued distributions on its preferred stock, the Company has not been
able to establish a banking relationship with another institutional lender. Although
management continues to attempt to locate a source or sources of institutional financing
for Company operations, there can be no assurances that such relationships can be
established or that bank financing will be obtained or of the terms of such relationship. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 2005, the Company sold its gas producing properties in Rush County, Kansas for
$2.4 million and used the net proceeds of the sale to pay down the $2.5 million debt to
Dolphin, incurred by the Company to fund the settlement of the litigation with Bank One in
May, 2004. This had the effect of reducing the payment of high interest on this note, and
reducing the total secured debt owed by the Company to $700,000 as of the date of this
report, consisting of about $150,000 remaining principal of the $2.5 million note, and the
principal of the $550,000 note used for the cash exchange of Series A Shares. See Note 5
to the financial statements. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the payment of this secured and unsecured debt, and the exchange of most of
its Series A Shares, management believes the Company is now better positioned to both
establish a banking relationship with an institutional lender on acceptable terms to fund
the Company&#146;s activities. Although the Company is hopeful that as a result of the
substantial reduction of its debt position that it will soon be able to establish such a
relationship, there is no assurance it will be able to do so. Until the Company is able to
establish such a relationship, it will be necessary to fund its operations, including
capital expenditures for the acquisition, exploration and development of oil and gas
reserves from other sources, such as the rights offering as well as equity investment,
private loans or a joint venture with other companies, as to which there can be no
assurances. In addition to its operational cash requirements, the Company also has a
significant amount of loans and other obligations which will either become due or mature
on August 20, 2005, including secured promissory notes due to Dolphin in the principal
amount of $700,000 plus interest thereon, as well as the payment of the accrued
distributions on the Company&#146;s Series B 8% Cumulative Convertible Preferred Stock and
the scheduled redemption of both the Series B and Series C 6% Cumulative Convertible
Preferred Stock which become due on September 5, 2005 and April 30, 2007. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 17, 2003, the Company filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission (&#147;SEC&#148;). On February 13, 2004, the SEC deemed
the Registration Statement on Form S-1 effective. The Rights Offering closed on March 18,
2004 all 36.3 million shares offered had been subscribed and, as a result, the Company
raised approximately $9.1 million </FONT>
</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17</FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Critical Accounting
Policies</b></u></FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company prepares its Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America, which requires the Company
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates. The Company considers the following
policies to be the most critical in understanding the judgments that are involved in
preparing the Company&#146;s financial statements and the uncertainties that could impact
the Company&#146;s results of operations, financial condition and cash flows. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Revenue Recognition </b></u></FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recognizes revenues based on actual volumes of oil and gas sold and delivered to
its customers. Natural gas meters are placed at the customers&#146; location and usage is
billed each month. Crude oil is stored and at the time of delivery to the customers,
revenues are recognized. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Full Cost Method of
Accounting </b></u></FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company follows the full cost method of accounting for oil and gas property acquisition,
exploration and development activities. Under this method, all productive and
non-productive costs incurred in connection with the acquisition of, exploration for and
development of oil and gas reserves for each cost center are capitalized. Capitalized
costs include lease acquisitions, geological and geophysical work, daily rentals and the
costs of drilling, completing and equipping oil and gas wells. Costs, however, associated
with production and general corporate activities are expensed in the period incurred.
Interest costs related to unproved properties and properties under development are also
capitalized to oil and gas properties. Gains or losses are recognized only upon sales or
dispositions of significant amounts of oil and gas reserves representing an entire cost
center. Proceeds from all other sales or dispositions are treated as reductions to
capitalized costs. The capitalized oil and gas property, less accumulated depreciation,
depletion and amortization and related deferred income taxes, if any, are generally
limited to an amount (the ceiling limitation) equal to the sum of: (a) the present value
of estimated future net revenues computed by applying current prices in effect as of the
balance sheet date (with consideration of price changes only to the extent provided by
contractual arrangements) to estimated future production of proved oil and gas reserves,
less estimated future expenditures (based on current costs) to be incurred in developing
and producing the reserves using a discount factor of 10% and assuming continuation of
existing economic conditions; and (b) the cost of investments in unevaluated properties
excluded from the costs being amortized. No ceiling write-downs were recorded in 2005 or
2004. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Oil and Gas
Reserves/Depletion Depreciationand <BR>Amortization of Oil and Gas Properties</b></u></FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
capitalized costs of oil and gas properties, plus estimated future development costs
relating to proved reserves and estimated costs of plugging and abandonment, net of
estimated salvage value, are amortized on the unit-of-production method based on total
proved reserves. The costs of unproved properties are excluded</FONT>
</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 from amortization until the
properties are evaluated, subject to an annual assessment of whether impairment has
occurred. There are no unproved properties as of this report. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s proved oil and gas reserves as at December 31, 2004 were estimated by Ryder
Scott, L.P., Petroleum Consultants. Projecting the effects of commodity prices on
production, and timing of development expenditures include many factors beyond the
Company&#146;s control. The future estimates of net cash flows from the Company&#146;s
proved reserves and their present value are based upon various assumptions about future
production levels, prices, and costs that may prove to be incorrect over time. Any
significant variance from assumptions could result in the actual future net cash flows
being materially different from the estimates. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</b></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Commodity
Risk</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s major market risk exposure is in the pricing applicable to its oil and gas
production. Realized pricing is primarily driven by the prevailing worldwide price for
crude oil and spot prices applicable to natural gas production. Historically, prices
received for oil and gas production have been volatile and unpredictable and price
volatility is expected to continue. Monthly oil price realizations ranged from a low of
$29.77 per barrel to a high of $51.12 per barrel during 2004. Gas price realizations
ranged from a monthly low of $4.11 per Mcf to a monthly high of $7.78 per Mcf during the
same period. The Company did not enter into any hedging agreements in 2004 or in the first
six months of 2005, to limit exposure to oil and gas price fluctuations. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Interest
Rate Risk</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
June 30, 2005, the Company had debt outstanding of approximately $700,000 at a fixed rate.
The Company did not have any open derivative contracts relating to interest rates at June
30, 2005. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Forward-Looking
Statements and Risk</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
statements in this report, including statements of the future plans, objectives, and
expected performance of the Company, are forward-looking statements that are dependent
upon certain events, risks and uncertainties that may be outside the Company&#146;s
control, and which could cause actual results to differ materially from those anticipated.
Some of these include, but are not limited to, the market prices of oil and gas, economic
and competitive conditions, inflation rates, legislative and regulatory changes, financial
market conditions, political and economic uncertainties of foreign governments, future
business decisions, and other uncertainties, all of which are difficult to predict. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are numerous uncertainties inherent in estimating quantities of oil and gas reserves and
in projecting future rates of production and the timing of development expenditures. The
total amount or timing of actual future production may vary significantly from reserves
and production estimates. The drilling of exploratory or developmental wells can involve
significant risks, including those related to timing, success rates and cost overruns.
Lease and rig availability, complex geology and other factors can also affect these risks.
Additionally, fluctuations in oil and gas prices, or a</FONT>
</TD>
</TR>
</TABLE>
<BR>





<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 prolonged period of low prices, may
substantially adversely affect the Company&#146;s financial position, results of
operations and cash flows. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
4 CONTROLS AND PROCEDURES</b></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Controls
and Procedures</u></b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act, is recorded, processed, summarized and reported within
the time periods specified in the SEC&#146;s rules and forms and that such information is
accumulated and communicated to our management, including the Company&#146;s Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosures. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. As of the
end of the period covered by this Report, and under the supervision and with the
participation of the management, including its Chief Executive Officer and Chief Financial
Officer, management evaluated the effectiveness of the design and operation of these
disclosure controls and procedures. Based on this evaluation and subject to the foregoing,
the Company&#146;s Chief Executive Officer and Chief Financial Officer concluded that the
Company&#146;s disclosure controls and procedures were effective in reaching a reasonable
level of assurance of achieving management&#146;s desired controls and procedures
objectives. </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Changes
in Internal Controls</u> </b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the period covered by this Report, there have not been any changes in the Company&#146;s
internal controls that have materially affected or are reasonably likely to materially
affect, the Company&#146;s internal controls over financial reporting. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
part of a continuing effort to improve the Company&#146;s business processes management is
evaluating its internal controls and may update certain controls to accommodate any
modifications to its business processes or accounting procedures. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PART
II OTHER INFORMATION</b></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</b></FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 19, 2005, the Company issued 100,000 shares of its common stock each to two of its
Directors and 50,000 to another Director for their services as members of the
Company&#146;s Audit Committee to rectify a prior issuance to these Directors in April,
2005 for the same amount of shares that had been rescinded. The Company also issued 4,000
shares of its common stock as part of the consideration for settlement of a minor lawsuit
brought by a landowner regarding the Company&#146;s right-of-way with respect to its
pipeline. </FONT>
</TD>
</TR>
</TABLE>
<BR>





<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
5 OTHER INFORMATION</b></FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company currently owns approximately 19% of the working interest in an 8-well drilling
program, with the remaining 81% working interest owned by certain of the former holders of
the Company&#146;s Series A preferred stock who exchanged that stock for their drilling
program interests in December, 2004.&nbsp; Three of the eight wells in this drilling
program wells in Kansas have been drilled and completed. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
three wells are currently producing oil from the Arbuckle formation. The third well, the
Ridgway A No.4, began production on June 16, 2005 and has produced 1,954 barrels as of the
end of July, 2005, a &nbsp;44 barrel per day average with very little water being produced
with the oil to date. &nbsp;As of July 31, 2005 the three wells drilled in this program
have produced 3,780 barrels of oil.&nbsp; It is anticipated that the drilling of three
additional wells in this eight-well program will begin late in August or September, 2005. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
three drilling program wells were located using a combination of three dimensional seismic
analysis and the Company&#146;s Kansas geologic database. The last five wells, including
the three drilling program wells discussed above, drilled by the Company using these
techniques have all been successful.&nbsp; The Company anticipates that it will continue
to drill wells primarily targeting oil production in Kansas based on these recent drilling
results and current economic conditions. &nbsp; </FONT>
</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
6 EXHIBITS</b></FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;
          The following exhibits are filed with this report </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.1
Certification of the President, pursuant to Exchange Act Rule, Rule 13a-14a/15d-14a. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.2 Certification of Chief Financial Officer, pursuant Exchange Act Rule, Rule 13a-14a/15d-14
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.1 Certification of the President, pursuant to 18 U.S.C Section 1350 as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.</FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002</FONT></P>






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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SIGNATURES</b></FONT></P>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the Registrant duly caused
this report to be signed on its behalf by the undersigned hereto duly authorized<B>.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated:
August 11, 2005</FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TENGASCO,
INC.</b></FONT></P>










<TABLE align = center BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Jeffrey R. Bailey</u><br>Jeffrey R. Bailey<br>President/Director</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>
<br>
<br>
<br>

<TABLE align = center BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Mark A. Ruth</u><br>Mark A. Ruth<br>Chief Financial Officer</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>





<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></P>



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<DIV STYLE="page-break-after:always"></DIV>






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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit
31.1 CERTIFICATION</b></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I,
Jeffrey R. Bailey</FONT></P>


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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 1. &nbsp;&nbsp;&nbsp;&nbsp; I have reviewed  this  Quarterly  Report on Form 10-Q of Tengasco,  Inc. for the quarter ended June
       30, 2005.</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2.&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
3.&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, the financial statements, and other information included in this
report, fairly present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the periods presented in this
report; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
4.&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant&#146;s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
(13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: </FONT></TD>
</TR>
</TABLE>
<BR>

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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                   (a)&nbsp; Designed such disclosure controls and procedures, or caused such disclosure
                    controls and procedures to be designed under our supervision, to ensure that
                    material information relating to the registrant, including its consolidated
                    subsidiaries, is made know to us by others within those entities, particularly
                    during the period in which this report is being prepared: </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>



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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;
                     Designed such internal control over financial reporting, or caused such
                    internal control over financial reporting to be designed under our supervision,
                    to provide reasonable assurance regarding the reliability of financial reporting
                    and the preparation of financial statements for external purposes in accordance
                    with generally accepted accounting principles; </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>

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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)&nbsp;
                     Evaluated the effectiveness of the registrant&#146;s disclosure controls and
                    procedures and presented in this report our conclusions about the effectiveness
                    of the disclosure controls and procedures, as of the end of the period covered
                    by this report based on such evaluation, and; </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>



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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)&nbsp;
                     Disclosed in this report any change in the registrant&#146;s internal control
                    over financial reporting that the occurred during the registrant&#146;s most
                    recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case
                    of an annual report) that has materially affected, or is reasonably likely to
                    materially affect, the registrant&#146;s internal control over financial
                    reporting; and </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
5.&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant&#146;s other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the Registrant&#146;s board of directors (or persons
performing the equivalent functions); </FONT></TD>
</TR>
</TABLE>
<BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;
               All significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the Registrant&#146;s ability to record, process, summarize and
               report financial information; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>



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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;
                     Any fraud, whether or not material, that involves management or other employees
                    who have a significant role in the Registrant&#146;s internal control over
                    financial reporting. </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated:
August 11, 2005</FONT></P>



<TABLE align = center BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Jeffrey R. Bailey</u><br>Jeffrey R. Bailey<br>President/Director</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit
31.2 CERTIFICATION </b></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I,
Mark A. Ruth, certify that: </FONT></P>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
1. &nbsp;&nbsp;&nbsp;&nbsp;    I have  reviewed  this  Quarterly  Report on Form 10-Q of Tengasco,  Inc. for the quarter  ended
       June 30, 2005.</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2.&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
3.&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge, the financial statements, and other information included in this
quarterly report, fairly present in all material respects the financial condition, results
of operations and cash flows of the Registrant as of, and for, the periods presented in
this report; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
4.&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant&#146;s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
(13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: </FONT></TD>
</TR>
</TABLE>
<BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               Designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made know to us by others within those entities, particularly
               during the period in which this report is being prepared: </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>



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                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Designed such internal control over financial reporting, or caused such
                    internal control over financial reporting to be designed under our supervision,
                    to provide reasonable assurance regarding the reliability of financial reporting
                    and the preparation of financial statements for external purposes in accordance
                    with generally accepted accounting principles; </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>



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               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  Evaluated the effectiveness of the registrant&#146;s disclosure controls and
                    procedures and presented in this report our conclusions about the effectiveness
                    of the disclosure controls and procedures, as of the end of the period covered
                    by this report based on such evaluation, and; </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>



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                    <TR VALIGN=TOP>
                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disclosed in this report any change in the registrant&#146;s internal control
                    over financial reporting that the occurred during the registrant&#146;s most
                    recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case
                    of an annual report) that has materially affected, or is reasonably likely to
                    materially affect, the registrant&#146;s internal control over financial
                    reporting; and </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
5.&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant&#146;s other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the Registrant&#146;s board of directors (or persons
performing the equivalent functions); </FONT></TD>
</TR>
</TABLE>
<BR>

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               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               All significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the Registrant&#146;s ability to record, process, summarize and
               report financial information; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>



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                    <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
                    <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

                     Any fraud, whether or not material, that involves management or other employees
                    who have a significant role in the Registrant&#146;s internal control over
                    financial reporting. </FONT></TD>
                    </TR>
                    </TABLE>
                    <BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated:
August 11, 2005</FONT></P>

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<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Mark A. Ruth</u><br>Mark A. Ruth<br>Chief Financial Officer</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit
32.1</b></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CERTIFICATION</b></FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:
I have reviewed the Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. To the best of my knowledge this Quarterly Report on Form 10-Q (i) fully complies with the
 requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m (a) or
78o (d)); and, (ii) the information contained in this Report fairly present, in all
material respects, the financial condition and results of operations of Tengasco, Inc. and its subsidiaries during the period covered by this report.
</FONT></TD>
</TR>
</TABLE>
<BR>




<P ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dated: August 11, 2005</FONT></P>


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<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Jeffrey R. Bailey</u><br>Jeffrey R. Bailey<br>President/Director</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit
32.2</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CERTIFICATION</b></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>

<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:
I have reviewed the Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. To the best of my knowledge this Quarterly
Report on Form 10-Q (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m (a) or
78o (d)); and, (ii) the information contained in this Report fairly present, in all
material respects, the financial condition and results of operations of Tengasco, Inc. and
its subsidiaries during the period covered by this report. </FONT></TD>
</TR>
</TABLE>
<BR>


<P ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dated: August 11, 2005</FONT></P>



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<TR VALIGN="BOTTOM">
     <TH></TH>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD>By:<u>  s/ Mark A. Ruth</u><br>Mark A. Ruth<br>Chief Financial Officer</TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>




<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26</FONT></P>



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