U.S. Securities and Exchange Commission
Washington,D.C. 20549

Form 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OFTHEOF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2003March 31, 2004

Commission File No. 0-20975

Tengasco, Inc. and Subsidiaries

(ExactnameExact name of small business issuer as specified in its charter)

Tennessee		87-0267438
State or other jurisdiction of Incorporation or organization		(IRS Employer Identification No.)

Tennessee
State or other jurisdiction of
Incorporation or organization

87-0267438
(IRS Employer Identification No.)
603 Main Avenue, Suite 500, Knoxville, TN 37902

(Address of principal executive offices)

(865-523-1124)
(Issuer’s telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. YesXNo__

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:~~12,049,977~~48,506,977 common shares at ~~September 30, 2003.~~March 31, 2004.

Transitional Small Business Disclosure Format (check one): Yes ___ No X

TENGASCO, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	PAGE

	ITEM 1. FINANCIAL STATEMENTS
	* Condensed Consolidated Balance Sheets as of ~~June 30, 2003 (unaudited)~~March 31, 2004 and 3-4 December 31, ~~2002~~ 2003	~~3-4~~

3
	* Consolidated Statements of Loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2004 and 2003 ~~and 2002~~	5


	* Consolidated Statements of Stockholders Equity for the ~~six~~three months ended ~~June 30, 2003 and 2002~~March 31, 2004	6


	* Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~ March 31, 2004 and 2003 ~~and 2002~~	7

	* Condensed Notes to ~~Condensed~~ Consolidated Financial Statements	~~8-14~~ 8
	ITEM 2. ~~MANAGEMENTS~~MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATION~~ OPERATIONS	~~14-19~~
		12
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	~~19-20~~ 13
	ITEM 4. CONTROLS AND PROCEDURES	20 14
PART II.	OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS	14
	~~ITEM 1. LEGAL PROCEEDINGS~~	21
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS	~~21-22~~ 15
	ITEM ~~3. DEFAULTS UPON SENIOR SECURITIES~~ 5. OTHER INFORMATION	22 16
	ITEM ~~4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~ 6. EXHIBITS AND REPORTS ON FORM 8-K	22
		16
	* ~~EXHIBITS~~ SIGNATURES	23 17
	~~SIGNATURES~~ EXHIBITS	24 18

TENGASCO, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	(Unaudited)				March 31, 2004 (Unaudited)		December 31, 2003
	September 30, 2003		December 31, 2002
Current Assets:
Cash and cash equivalents	$	332,185	$	184,130	$	3,015,863	$	312,666
Investments		34,500		34,500		60,000		60,000
Accounts receivable net		795,916		730,667
Accounts receivable, net						607,126		508,378
Participants receivable		63,297		70,605		63,304		68,402
Inventory		262,748		262,748		280,693		280,693

Current portion of loan fees, net		210,380		323,856		107,956		151,136
Other
		67,352		0


Other current assets						--		223,003
Total current assets		1,766,378		1,606,506		4,134,942		1,604,278
Oil and gas properties, net (on the basis of
full cost accounting)		13,096,898		13,864,321		12,662,100		12,989,443
Completed pipeline facilities, net		15,312,212		15,372,843
Pipeline facilities, net						15,005,789		15,139,789
Other property and equipment, net		1,482,202		1,685,950		808,396		870,730
Loan fees, net of accumulated amortization		0		40,158
Other		5,213		14,613		86,322		--
						$ 32,697,549		$ 30,604,240

	$	31,662,903	$	32,584,391

See accompanying notes to condensed consolidated financial ~~statements~~statements.

TENGASCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

	(Unaudited)						March 31, 2004 (Unaudited)			December 31, 2003
	September 30, 2003			December 31, 2002
Current Liabilities
Current maturities of long-term debt	$	6,724,998		$	7,861,245		$	4,553,264		$	6,127,290
Accounts payable-trade		839,553			1,396,761			370,310			1,075,948
Accrued interest payable		167,227			61,141			489,081			835,059
Accrued dividends payable		470,543			254,389
Notes payable to related parties		2,234,000			750,000			--			3.709,000
Other accrued liabilities		627,016			31,805			597,664			18,560
Current shares subject to mandatory redemption								692,739			549,344
Total current liabilities								6,703,058			12,315,201
Shares subject to mandatory redemption								5,367,121			5,510,516
Asset retirement obligations								669,928			668,556
Long-term debt less current maturities								205,950			221,635
Total liabilities								12,946,057			18,715,908
Stockholders' Equity
Common stock, $.001 per value, 50,000,000 shares authorized
								48,507			12,080
Total current liabilities		11,063,337			10,355,341
Asset retirement obligations		666,421			0
Long term debt less current maturities		590,055			1,256,209

Total liabilities		12,319,813			11,611.550

Preferred Stock
Cumulative convertible redeemable preferred; redemption value
$7,072,000; 70,720 shares outstanding
		6,884,257			6,762,218

Stockholders Equity
Common stock, $.001 per value, 50,000,000 shares authorized,
12,049,977; 11,444,779 outstanding		12,065			11,460
Additional paid-in-capital		42,855,693			42,237,276			51,673,801			42,721,290
Accumulated deficit		(30,147,538	)		(27,776,726	)		(31,880,816	)		(30,755,038	)
Accumulated other comprehensive loss		(115,500	)		(115,500	)		(90,000)			(90,000)
Treasury stock, at cost		(145,887	)		(145,887	)
Total stockholders' equity								19,751,492			11,888,332
								$ 32,697,549			$ 30,604,240
Total stockholders equity		12,458,833			14,210,623

	$	31,662,903		$	32,584,391

See accompanying notes to condensed consolidated financial ~~statements~~statements.

TENGASCO, INC. AND SIBSIDIARIESCONSOLIDATED
SIBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSS

	September, 30, (Unaudited)						September 30, (Unaudited)						For the Three Months Ended March 31,2004 (Unaudited)		For the Three Months Ended March 31, 2003 (Unaudited)
	For the Three Months Ended						For the Nine Months Ended
	2003			2002			2003			2002			2004		2003
Revenues and other income
Oil and gas revenues	$	1,546,453			1,450,133		$	4,907,216		$	3,859,050		$	1,332,350	$	1,923,915
Pipeline transportation revenues		52,749			56,088			145,472			197,333			23,241		47,504
Interest income		259			1,087			766			2,782			751		184


Total revenues and other income		1,599,461			1,507,308			5,053,454			4,059,165			1,356,342		1,971,603
Cost and other deductions
Production costs and taxes		944,019			815,293			2,571,898			2,084,597			871,581		769,909
Depletion, depreciation and amortization		628,195			756,486			1,887,333			1,731,182			608,164		630,942
Interest expense		168,420			146,382			462,518			448,046			413,858		153,356
General and administrative cost		301,794			401,829			1,112,289			1,527,988			288,360		511,337
Public Relations		954			15,809			29,131			176,098			2,282		4,779
Professional fees		64,326			93,388			485,270			539,198			297,875		209,426
Total cost and other deductions														2,482,120		2,279,749
Net loss before cumulative effect of change in
accounting principle														(1,125,778)		(308,146)
Cumulative Effect of a change in accounting
principle														--		(351,204)
Net loss														(1,125,778)		(659,350)
Dividends on preferred stock														--		(134,195)
Net loss attributable to common stockholders
													$	(1,125,778)	$	(793,545)

Total cost and other deductions		2,107,708			2,229,187			6,548,439			6,507,109

Net loss		(508,247	)		(721,879	)		(1,494,985	)		(2,447,944	)

Dividends on preferred stock		134,194			134,195			402,583			372,595


Net loss attributable to common shareholders
Before cumulative effect of a change in
accounting principle	$	(642,441	)	$	(856,074	)	$	(1,897,568	)	$	(2,820,539	)

Net loss attributable to common stockholders
per share basic and diluted:
Operations													$	(0.06)	$	(0.03)
Cumulative effect of a change in accounting
principle		0			0			(351,204	)		0			--	$	(0.03)


Net loss attributable to common shareholders
	$	(642,441	)	$	(856,074	)	$	(2,248,772	)	$	(2,820,539	)

Net loss attributable to common shareholders
per share basic and diluted:
Operations	$	(0.05	)	$	(0.08	)	$	(0.16	)	$	(0.26	)

Cumulative effect of a change in accounting
principle		0			0		$	(0.03	)	$	0


Total	$	(0.05	)	$	(0.08	)	$	(0.19	)	$	(0.26	)	$	(0.06)	$	(0.07)

Weighted average shares outstanding		12,047,823			11,365,431			11,919,477			10,933,588			17,723,812		11,764,321

See accompanying notes to condensed consolidated financial ~~statements~~statements.

TENGASCO, INC. AND SUBSIDIARIES

CONSILIDATEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Common Stock
Shares
Amount
Additional
Paid in Capital
Accumulated Other
Comprehensive Loss
Balance December 31, 2002 11,459,279 $ 11,460 $ 42,237,276 $ (115,500 )
Net Loss 0 0 0
Common Stock Issued in Private
Placements Net of Related Expenses
227,275 227 249,773
Common Stock Issued for exercised
options 94,000 94 46,906
Common Stock Issued in Conversion of
Debt 60,528 61 69,538
Common Stock Issued for Preferred
Dividend in Arrears 154,824 154 170,155
Common Stock Issued for Charity 3,571 4 5,710
Retained Earnings-Accretion of Issue
Cost on Preferred Stock
Common Stock Issued for Services 55,000 55 69,945
Common Stock Issued for Litigation
Settlement 10,000 10 6,390
Dividends on Convertible Redeemable
Preferred Stock 0 0 0
Cumulative effect of a change in
accounting principle 0 0 0
Balance September 30, 2003 12,064,477 $ 12,065 $ 42,855,693 $ (115,500 )
Accumulated
Deficit
Shares

Amount
Total
Balance December 31, 2002 $ (27,776,726 ) (14,500 ) $ (145,887 ) $ 14,210,623
Net Loss (1,494,985 ) 0 0 (1,494,985 )
Common Stock Issued in Private
Placements Net of Related Expenses
0 0 0 250,000
Common Stock Issued for exercised
options 0 0 0 47,000
Common Stock Issued in Conversion o
Debt 0 0 0 69,599
Common Stock Issued for Preferred
Dividend in Arrears 170,309
Common Stock Issued for Charity 5,714
Retained Earnings-Accretion of Issu
Cost on Preferred Stock (122,040 ) (122,040)
Common Stock Issued for Services 0 0 70,000
Common Stock Issued for Litigation
Settlement 6,400
Dividends on Convertible Redeemable
Preferred Stock (402,583 ) 0 0 (402,583 )
Cumulative effect of a change in
accounting principle (351,204 ) 0 0 (351,204 )
Balance September 30, 2003 $ (30,147,538 ) (14,500 ) $ (145,887 ) $ 12,458,833

		Amount		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive	Total
Balance December 31, 2003	12,064,977	$	12,080	$	42,721,290	$	(30,755,038	)	$ (90,000)	$	11,888,332
Net Loss	--		--		--		(1,125,778	)	--		(1,125,778	)

Common Stock Issued for exercised
options	142,000		142		70,858		--		--		71,000
Common Stock Issued in
Rights Offering	36,300,000		36,285		8,881,653		--		--		8,917,938


	48,506,977	$	48,507	$	51,673,801	$	(31,880,816	)	$ (90,000)	$	19,751,492

See accompanying notes to condensed consolidated financial ~~statements~~statements.

TENGASCO, INC. AND SUBSIDIARIESCONSOLIDATED
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Unaudited)						For the Three Months Ended March 31, 2004 (Unaudited)			For the Three Months Ended March 31, 2003 (Unaudited)
	For the Nine Months Ended September 30, 2002			For the Nine Months Ended September 30, 2003
Operating Activities
Net Loss	$	(1,494,985	)	$	(2,447,944	)	$	(1,125,778	)	$	(308,146	)

Adjustments to reconcile net loss to net cash
Provided by (used in) operating activities:
used in operating activities:
Depletion, depreciation and amortization		1,887,333			1,731,182			608,164			630,942
Charitable donation, services paid in stock, stock options		122,714			48,620			--			75,714
Gain on Sale of Equipment								(7,500	)		--
Changes in assets and liabilities
Accounts receivable		(65,249	)		(41,340	)		(98,748	)		(411,719	)

Participants receivable		7,308			0			5,098			(1,245	)

Other Current Assets								223,003			--
Other Assets								(86,322	)		--
Accounts payable		(557,208	)		(5,021	)		(705,638	)		(61,231	)
Accrued interest payable		106,086			(9,581	)		(345,978	)		(14,824	)
Other accrued liabilities		595,211			0			579,104			(31,805	)
Other		(57,952	)		0			--			9,602


Net cash provided by (used in) operating activities		543,258			(724,084	)

Net cash used in operating activities								(954,595)			(112,712)

Investing activities
Additions to property and equipment		0			(154,526	)
Net additions to oil and gas properties		(45,312	)		(1,796,600	)		(32,435	)		26,800
Net additions to pipeline facilities		(341,369	)		(739,162	)		--			(37,362	)
Decrease in restricted cash		0			120,872
Other assets		0			19,432


Net cash used in investing activities		(386,681	)		(2,549,984	)		(32,435)			(10,562)


Financing activities
Proceeds from exercise options								71,000			--
Repayments of borrowings		(1,742,522	)		(2,129,256	)		(5,526,711	)		(634,236	)
Proceeds from borrowings		1,484,000			1,703,103			228,000			500,000
Dividends on convertible redeemable preferred stock		0			(350,859	)
Proceeds from private placements of common stock		250,000			2,677,000
Proceeds from private placements of preferred stock		0			1,303,168
Net proceeds from issuance of common stock								--			250,000
Net proceeds from rights offering								8,917,938			--


Net cash provided by (used in) financing activities		(8,522	)		3,203,156


Net cash provided by financing activities								3,690,227			115,764
Net change in cash and cash equivalents		148,055			(70,912	)		2,703,197			(7,510	)
Cash and cash equivalents, beginning of period		184,130			393,451			312,666			184,130


Cash and cash equivalents, end of period	$	332,185		$	322,539			$ 3,015,863			$ 176,620

See accompanying notes to condensed consolidated financial ~~statements~~statements.

Tengasco, Inc. And SubsidiariesCondensed
Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

(1)Basis of Presentation

The accompanying ~~un-audited~~unaudited 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 ~~nine~~three months ended ~~September 30, 2003~~March 31, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2003.~~2004. Additionally, deferred income taxes and income tax expense is not reflected in the Company’s financial statements due to the fact that the Company has had recurring losses and deferred tax assets arising from net operating ~~loss carry forwards~~gloss carry-forwards have been fully reserved. For further information, refer to the Company’s consolidated financial statements and footnotes thereto for the year ended December 31, ~~2002~~2003 included in the Company’s annual report on Form 10-K.

(2) ~~Going Concern Uncertainty~~

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates 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 since commencing its operations and has an accumulated deficit of $30,147,538 and a working capital deficit of $9,296,959 as of September 30, 2003. During 2002, the Company was informed by its primary lender that the entire amount of it outstanding credit facility was immediately due and payable, as provided for in the Credit Agreements. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.

The Company has disputed its obligation to make this payment and is attempting to resolve the dispute or to obtain alternate refinancing arrangements to repay this current obligation. There can be no assurance that the Company will be successful in its plans to obtain the financing necessary to satisfy its current obligation.

~~(3)~~Earnings Per Share

In accordance with Statement of Financial Accounting Standards (SFAS) No. 128, ~~Earnings~~“Earnings Per ~~Share,~~Share”, basic and diluted loss per share are based on ~~12,047,823~~17,723,812 and ~~11,365,431~~11,764,321 weighted average shares outstanding for the ~~quarters~~quarter ended ~~September 30, 2003~~March 31, 2004 and 2002, respectively. Basic and diluted loss per share are based on 11,919,477 and 10,933,588 weighted average shares outstanding for the nine months ended September 30, 2003 and 2002. During the nine month period ended September 30, 2003 and year ended December 31, ~~2002 potential weighted average stock equivalents outstanding were approximately 1,473,000. These shares are not included~~2003, respectively.

For the three-month periods ending March 31, 2004 and 2003, the Company had no vested, unexercised, in the ~~computation of the diluted loss per share amount because~~money options. As the Company was in a net loss position, ~~and their effect~~any potential common share equivalents would have been ~~antidilutive.~~anti-dilutive.

The Company adopted the disclosure provision of the Statement of Financial Accounting Standards (SFAS or statement) No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”, which amends SFAS No. 123. “Accounting for Stock-Based Compensation”, SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for ~~stock- based~~stock-based employee compensation, which was originally provided under SFAS No. 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 these disclosure provisions did not have a material ~~effect~~affect on the Company’s ~~2002~~March 31, 2004 consolidated results of operations, financial position, or cash flows.

SFAS No. 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, ~~Accounting~~“Accounting for Stock Issued to ~~Employees,~~Employees”, and related ~~Interpretations.~~interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’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’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.

Had compensation cost been determined based upon the fair value at the grant date for awards under the stock option plan consistent with the methodology prescribed under SFAS No. 123, the Company’s pro forma net ~~income (loss)~~loss and net ~~income (loss)~~loss per share would have differed from the amounts reported as follows:

	Three Months September 30, 2003			Three Months September 30, 2002			Nine Months September 30, 2003			Nine Months September 30, 2002			Year Ended December 31, 2003			Three Months March 31, 2003			Three Months March 31, 2004
Net loss as reported	$	(642,441	)	$	(856,074	)	$	(2,248,772	)	$	(2,820,539	)	$	(2,815,119	)	$	(793,545	)	$	(1,125,778	)

Stock-based employee
compensation expense
determined under fair value
basis	$	(0	)	$	(8,400	)	$	(47,209	)	$	(202,846	)


Stock-based employee compensation
expense determined under fair value basis													$	(22,650)		$	(47,209	)	$	(0	)
Pro forma net loss	$	(642,441	)	$	(864,474	)	$	(2,295,981	)	$	(3,023,385	)	$	(2,837,769)		$	(840,754	)	$	(1,125,778	)

Earning per share:
Basic and diluted as reported			$	(0.24	)	$	(0.07	)	$	(0.06	)
	$	(0.05	)	$	(0.08	)	$	(0.19	)	$	(0.26	)

Basic and diluted pro forma			$	(0.24	)	$	(0.07	)	$	(0.06	)
	$	(0.05	)	$	(0.08	)	$	(0.19	)	$	(0.28	)

~~(4)~~ (3) Liquidity~~New Accounting Pronouncements:~~

~~A reporting issue has arisen regarding the application of certain provisions of SAFS No. 141 and SFAS No. 142~~The Company continues to ~~companies~~be in the extracting industries including oil and gas companies. The issue is whether SFAS No. 142 regulates registrants to classify the costs of mineral rights held under lease or other contractual arrangement associated with extracting oil and gas as intangible assets in the balance sheet, apart from other capitalized oil and gas property owned and provide specific footnote disclosures. Historically, the Company had included the costs of such mineral rights associated with extracting oil and gas as a component of oil and gas properties. If it is ultimately determined that SFAS No. 142 requires oil and gas companies to classify cost of mineral rights held under lease or other contractual arrangement associated with extracting oil and gas as a separate intangible asset line item on the balance sheet, the Company would be required to reclassify approximately $453,000 at September 30, 2003 and $346,000 at December 31, 2002, respectively, out of oil and gas properties and into a separate intangible asset line item. The Company’s cash flows and results of operations would not be affected since such intangible assets would continue to be depleted and amortized for impairment in accordance with full cost accounting rules. Further, the Company does not believe the classification of the cost of mineral rights associated with extracting oil and gas as intangible assets would have any impact on compliance with covenants under its debt agreements.

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations “SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement cost. This statement requires companies to record the present value of obligations associated with the retirement of tangible long-lived assets in the periods in which it is incurred. The liability is capitalized as part of the related long-lived assets carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Company’s asset retirement obligations relate primarily to the plugging, dismantlement, removal site reclamation and similar activitiesearly stages of its oil and gas related operating history as it endeavors to expand its operations. Accordingly, the Company has incurred continuous losses through these operating stages and has an accumulated deficit of $31,860,816 and a working capital deficit of $2,448,957 as of March 31, 2004. During 2002, the Company was informed by its primary lender 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 as discussed in Note 10. The Company believes that now that its dispute has been resolved and that it has obtained additional funds through its Rights Offering discussed in Note 9, it will be able to obtain long-term financing to allow the Company to continue drilling and to locate and develop other properties. ~~Prior~~If such funding for additional drilling becomes available, the Company plans to ~~adoption~~drill new wells in locations it has identified in Kansas on its existing leases in response to drilling activity in the area, which it believes will establish new areas of ~~this statement,~~oil production. However, no assurances can be made that such ~~obligations were accrued ratably over the productive lives~~financing will be obtained. The inability of the ~~assets through~~Company to obtain additional long-term financing could impair the Company’s ability to meet its ~~depreciation, depletion and amortization for oil and gas properties without recording a separate liability for such amounts. The impact of applying this statement~~other obligations as ~~of January 1, 2003 and September 30, 2003 is discussed in footnote 10.~~they become due.

(4) New Accounting Pronouncements

In ~~April 2002,~~March 2004, The Emerging Issues Task Force (“EITF”) reached a consensus that mineral rights, as defined in EITF Issue No. 04-02, “Whether Mineral Rights are Tangible or Intangible Asset,” are tangible assets and that they should be removed as examples of intangible assets in SFAS Nos. 141 and 142. The FASB has recently ratified this consensus and directed the ~~Financial Accounting Standards Board issued~~FASB staff to amend SFAS ~~No. 145, “Rescission~~Nos. 141 and 142 through the issuance of ~~SFAS No. 4, 44, 64, Amendment~~FASB Staff Positions FSP FAS 141-1 and FSP FAS 142-1. Historically the Company has included the cost of ~~SFAS No. 13, and Technical Corrections” (“SFAS 145”). SFAS 4,~~such mineral rights as tangible assets, which ~~was amended by SFAS 64, required all gains and losses from~~is consistent with the ~~extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect.~~EITF’s consensus. As a result of SFAS 145, the criteria in Accounting Principles Board opinion 30 will now be used to classify those gains and losses. SFAS 13 was amended to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of SFAS 145such, EITF 04-02 will not ~~have a current impact on the Company’s~~affect Tengasco’s consolidated condensed financial statements.

~~In July 2002,~~During December 2003, the FASB issued ~~SFAS~~Interpretation No. ~~146, Accounting for Cost Associated with Exit or Disposal Activities. The standard~~46R, “Consolidation of Variable Interest Entities” (“FIN 46”), which requires ~~companies to recognize cost associated with exit or disposal activities when they are incurred rather than at~~ the ~~date~~consolidation of ~~commitment to an exit or disposal plan. Examples of cost covered by the standard include lease termination costs and~~ certain ~~employee severance costs~~entities that are associated with restructuring, discontinued operation, plant closing, or other exit or disposal activity. Previous accounting guidance was provided by EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Statement 146 replaces Issue 94-3. Statement 146 isdetermined to be ~~applied prospectively~~variable interest entities (“VIE’s”). An entity is considered to ~~exit~~be a VIE when either (i) the entity lacks sufficient equity to carry on its principal operations, (ii) the equity owners of the entity cannot make decisions about the entity’s activities or ~~disposal activities initiated after December 31, 2002.~~(iii) the entity’s equity neither absorbs losses or benefits from gains. The Company ~~does not currently have any plans for exit or disposal activities,~~owns no interests in variable interest entities, and therefore ~~does~~this new interpretation has not ~~expect this standard to have a material effect on~~affected the Company’s consolidated financial statements ~~upon adoption.~~

In November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45. “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, which clarifies disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued after December 15, 2002 and here cognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The application of the requirements of FIN 45 did not have an impact on the Company’s financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based compensation — Transition and Disclosure — an amendment of FASB Statement No. 123 (“Statement 148”). This amendment provides two additional methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Additionally, more prominent disclosures in both annual and interim financial statements are required for stock-based employee compensation. The transition guidance and annual disclosure provisions of Statement 148 are effective for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of Statement 148 did not have a material impact on the Company’s consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities.” This interpretation of Accounting Research Bulletin No. 51 “Consolidated Financial Statements” consolidation by business enterprises of variable interest entities, which possess certain characteristics. The Interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity must be included in the consolidated financial statements with those of the business enterprise. This Interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. The Company does not have any ownership in any variable interest entities.

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”). SFAS ~~No.~~ 150 ~~requires three types~~establishes standards for how an issuer classifies and measures in its statement of ~~freestanding~~financial position certain financial instruments ~~to be classified as~~with characteristics of both liabilities ~~in statements of~~and equity and it requires that an issuer classify a financial position. One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type, which includes put options and forward purchase contracts, involves instruments that do or may require the issuer to buy back some ofinstrument within its shares in exchange for cash or other assets. The third type of instrument is obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominately to a variable suchscope as a ~~market index, or varies inversely with the value of the issuer’s shares. The majority of the guidance in~~liability. SFAS ~~No.~~ 150 iswas effective for ~~all~~ financial instruments entered into or modified after May 31, 2003 for public companies. Restatement is not permitted. Adoption of this standard during 2003 resulted in a reclassification to a liability and ~~otherwise is effective at the beginning~~restatement of the ~~first interim~~Company’s assets to restricted fair values of the Company’s Series A, B and C preferred stock subject to mandatory redemption. Accordingly, for the year ended December 31, 2003, the Company recognized cumulative gain from a change in accounting principle of approximately $1,247,000. This cumulative gain results from the difference between the carrying amount of the preferred shares and the fair value of the shares after adoption. Accretion totaling $354,735 has been recognized as interest expense for the period ~~beginning after June 15,~~from July 1, 2003 through December 31, 2003. In ~~accordance with SFAS No. 150,~~ the ~~Company adopted this standard on July 1, 2003. Adoption~~first quarter of ~~SFAS No. 150 did not have a material impact on the Company’s consolidated financial position and results of operations.~~2004, $134,194.50 was recognized as interest expense.

(5)Letter of Credit Agreement

On November 8, 2001, the Company signed a credit facility with the Energy Finance Division of Bank One, N.A. in Houston, Texas whereby Bank One extended to the Company a revolving line of credit of up to $35 million. The initial borrowing base under the facility was $10 million. The interest rate is the Bank One base rate plus one-quarter percent.

On November 9, 2001, funds from this credit line were used to (1) refinance existing indebtedness on the Company’s Kansas properties, (2) to repay the internal financing provided by directors and shareholders on the Company’s completed 65-mile Tennessee intrastate pipeline system, (3) to repay a note payable to Spoonbill, Inc., (4) to repay a purchase money note due to M.E. Ratliff, who at the time was the Company’s ~~chief executive officer~~Chief Executive Officer and Chairman of the Board of Directors, for purchase by the Company of a drilling rig and related equipment, (5) to repay in full the remaining principal of the working capital loan due December 31, 2001 to Edward W.T. Gray III, who at that time was a director of the Company. All of these obligations incurred interest at a rate substantially greater than the rate being charged by Bank One under the ~~Credit~~credit facility.

On April 5, 2002, the Company received a notice from Bank One stating that it had redetermined and reduced the borrowing base under the Credit Agreement by $6,000,000 to $3,101,766. Bank One demanded that the Company pay the $6,000,000 within thirty days of the notice. The Company filed a lawsuit in Federal Court to prevent Bank One ~~from~~form exercising any rights under the Credit Agreement. The Company has been paying $200,000 per month toward the outstanding balance of the credit ~~facility and any accrued interest until this situation is resolved.~~facility. As of May1, 2004, the outstanding balance due to Bank One under the Credit Agreement was $ 4,101,796.66. On May 13, 2004 the Company entered into an agreement, settling its lawsuit with Bank One. See ~~note 2.~~Note 10, Bank One Litigation Settlement.

(6)Notes Payable~~Supplemental Disclosure of Non Cash Investing and Financing Activities:~~

~~During~~From December 2002 through December 9, 2003, Dolphin Offshore Partners, L.P. (“Dolphin”) acquired a total of an 85% undivided interest in the ~~three months ended March 31, 2003,~~Company’s Tennessee and Kansas pipelines as collateral for a series of seven loans. In the first five of these transactions totaling $1,650,000, Peter E. Salas, a Director of the Company ~~converted $60,000~~and the general partner and controlling person of ~~debt~~Dolphin, negotiated the terms of the loans directly with management, which terms were approved by management in view of the Company’s immediate needs, financial condition and ~~$9,600~~prospective alternatives and under circumstances in which Dolphin was not generally engaged in the business of ~~accrued~~lending money. These loans were made on terms that management believes were at least as favorable to the Company as it could have obtained through arms-length negotiations with unaffiliated third parties. The Company’s Board approved the sixth and seventh loans on December 3 and 9, 2003, in the amounts of $225,000 and $250,000, respectively, with no participation by Mr. Salas in the meeting or the vote, which was unanimous by the seven other Directors present at the meeting. In addition, the Company has entered into a continuing security agreement, which was approved by the Board with no participation by Mr. Salas in the meeting or vote, which was unanimous by the seven other Directors present at the meeting, providing the terms of Dolphin’s security interest ~~owed to holders~~collateralizing all of ~~convertible notes into 60,528 shares of common stock.~~its loans.

~~During the six months ended June 30,~~On December 24, 2003, ~~the Company converted $170,309 of accrued dividends payable into 154,824 shares of common stock.~~

~~During the three months ended March 31, 2003, the Company issued 55,000 shares of common stock for payment for consulting services performed in the amount of $70,000.~~

~~During the three months ended March 31, 2003, the Company donated 3,571 shares of stock as a charitable contribution valued at $5,710.~~

~~During the three months ended March 31, 2003 the Company capitalized $260,191 into oil and gas properties associated with estimated future asset retirement obligations.~~

~~During the three months ended September 30, 2003 the Company issued 10,000 shares of common stock for a litigation settlement. The stock value on date of issue was $16,400.~~

~~(7)~~ ~~Notes Payable~~

~~On February 3, 2003 and February 28, 2003,~~ Dolphin ~~Offshore Partners, LP which owns more than 10% of the Company’s outstanding common stock and whose general partner, Peter E. Salas, is a Director of the Company,~~ loaned the Company the sum of ~~$250,000 on each such date (cumulatively, $500,000)~~$1,000,000 which ~~the Company~~was used ~~to pay the principal and interest due to Bank One for February and March 2003 and~~ for working capital ~~needs. On May 20, 2003 an additional loan of $834,000 was loaned by a combination of Dolphin ($750,000)~~ and ~~Jeffrey R. Bailey who is a Director~~to pay all interest and ~~President ($84,000)~~principal in full of the ~~Company. On August 6, 2003 an additional~~1998 convertible loan ~~of $150,000 was loaned~~to the Company refereed to as the Lutheran note then being held by ~~Dolphin. Each of these loans~~several persons. This loan is evidenced by a separate promissory note ~~each~~ bearing interest at the rate of 12% per annum, with payments of interest only payable quarterly and the principal balance payable on ~~January~~April 4, 2004. ~~Each of~~The obligations under the ~~February and March 2003 promissory notes is~~loan are secured by an undivided ~~10%~~ interest in the Company’s ~~pipelines.~~Tennessee and Kansas pipelines and the security agreement referred to above.

On February 2, 2004, Dolphin loaned the Company the sum of $225,000 which was used for making payment of principal and interest to Bank One for February, 2004. This loan is evidenced by a separate promissory note bearing interest at the rate of 12% per annum, with payments of interest only payable quarterly and the principal balance payable on April 4, 2004. The ~~May 20, 2003 loans provides Dolphin with a 30% interest and Bailey with a 3.36%~~obligations under the loan are secured by an undivided interest in the Company’s ~~pipelines. The August note provides~~Tennessee and Kansas pipelines and the security agreement referred to above. All notes payable to Dolphin ~~with a 6%~~and secured by an interest in the ~~Company’s pipelines.~~pipelines were repaid on March 30, 2004 from the proceed received by the Company from its Rights Offering.

~~(8)~~(7) Litigation Settlements ~~Reclassifications~~

~~Certain prior period amounts have been reclassified to conform to the current period’s presentation.~~

~~(9)~~ ~~Law Suit Settlement~~

On April 2, 2003 and by agreed order filed May 5, 2003, all claims were settled and the lawsuit was dismissed in C.H. Fenstermaker & Associates, Inc. v. Tengasco, Inc.: No. 3:01-CV-283, in the United States District Court for the Eastern District of Tennessee, at Knoxville. The settlement provides that the amount claimed to be owed by the Company to Caddum was reduced to $297,000 which is to be paid by note due May 1, 2004, with interest only payable monthly at an annual interest rate of 4.75 percent. This note was repaid on March 31, 2004, from the proceeds received by the Company from its Rights Offering.

On May 10, 2004 the Court entered its final order approving the fairness of the settlement to the class, dismissing the action pursuant to a Settlement Stipulation, and fully releasing the claims of the class members in Paul Miller v. M. E. Ratliff and Tengasco, Inc.,Number 3:02-CV-644 in the United States District Court for the Eastern District of Tennessee, Knoxville, Tennessee. This action sought certification of a class action to recover on behalf of a class of all persons who purchased shares of the Company’s common stock between August 1, 2001 and April 23, 2002, unspecified damages allegedly caused by violations of the federal securities laws. In January, 2004 all parties reached a settlement subject to court approval. On April 29, 2004, a final hearing for approval of the settlement was held. The Court entered its order approving the settlement on May 10, 2004. Class members may file their claims against the settlement fund through July 15, 2004. The fund will be disbursed in accordance with the claims filed. Under the settlement, the Company paid into a settlement fund the amount of $37,500 to include all costs of administration, contributed 150,000 shares of stock of Miller Petroleum, Inc. owned by the Company and will issue 300,000 warrants to purchase a share of the Company’s common stock for a period of three years from date of issue at $1 per share subject to adjustments. All expenses including attorney’s fees are to be paid out of these settlement funds.

~~(10)~~(8) Cumulative Effect of a Change Inin Accounting Principle

Effective January 1, 2003, the Company implemented the requirements of Statement of Financial Accounting Standards No. 143 (SFAS 143), “Accounting for Asset Retirement Obligations”. Among other things, SFAS 143 requires entities to record 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 operation expense and the capitalized cost is depleted over the estimated useful life of the related asset. Additionally, SFAS ~~No.~~ 143 requires that upon initial application of these standards, the Company must recognize a cumulative effect of a change in accounting principle corresponding to the accumulated accretion and depletion expense that would have been recognized had this standard been applied at the time the long-lived assets were acquired or constructed. The Company’s asset retirement obligations relate primarily to the plugging, dismantling and removal of wells drilled to date.

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, the Company has recorded a non-cash charge related to the cumulative effect of a change in accounting principle of $351,204 in its statement of operations. Oil and gas properties were increased by $260,191, which represents the present value of all future obligations to retire the wells at January 1, 2003, net of accumulated depletion on this cost through that date. A corresponding obligation totaling $611,395 has also been recorded as of January 1, 2003.

(9) Rights Offering

~~For the nine month period ended September 30,~~On October 17, 2003, the Company ~~recorded accretion~~filed a Registration Statement on Form S-1 with the Securities and ~~depletion expenses of $77,952 associated with this liability and its corresponding asset. These expenses are included in depletion, deprecation, and amortization in~~Exchange Commission (“SEC”). On February 13, 2004, the ~~consolidated statements of loss. Had~~SEC deemed the ~~provisions of this statement been reflected in the financial statements for the year ended December 31, 2002, an asset retirement obligation of $476,536 would have been recorded as of January 1, 2002.~~Registration Statement on Form S-1 effective.

The ~~following is~~Rights Offering was a ~~roll-forward~~distribution to the holders of ~~activity impacting~~ the ~~asset retirement obligation~~Company’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’s common stock for each share of common stock owned at the ~~nine months ended September 30, 2003:~~subscription price of $0.75 in the aggregate, or $0.25 per each share purchased.

Balance, January 1, 2003: $ 611,395
Accretion expense through September 30, 2003 55,026
Balance, September 30, 2003 $ 666,421

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. In no event could any subscriber purchase shares of the Company’s common stock in the offering that, when aggregated with all of the shares of the Company’s 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’s issued and outstanding shares.

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’s outstanding common stock.

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’s subscription agent who also returned payments for those over-subscribed shares that were not available.

The net proceeds of the Rights Offering have been used to pay non-bank indebtedness in the aggregate amount of approximately $6 million (including up to $3,850,000 in principal amount plus accrued interest owed by the Company to Dolphin) and to pay $1,157,00 as a portion of the Company’s settlement with Bank One. The balance of the net proceeds will be used for working capital purposes, including the drilling of additional wells.At December 31, 2003, the Company incurred costs in connection with the Rights Offering of $223,003, which are reflected in the consolidated balance sheet in other current assets. This asset was offset against gross proceeds in March 2004, when such proceeds were received by the Company.

(10) Bank One Litigation Settlement

As of May 1, 2004, the principal amount owed by the Company under the credit facility with Bank One signed on November 8, 2001 was $4,101,601.61. On Thursday, May 13, 2003, the Company and the Bank One executed a written agreement resolving all claims against each other. Pursuant to that agreement, the Company agreed to pay the sum of $3,657,000 to the Bank by May 18, 2004, in full satisfaction of its obligations to the Bank and to immediately release all claims against the Bank and to dismiss the litigation. In turn, Bank One agreed to immediately release all its claims against the Company, dismiss the litigation and to execute releases of its liens on all of the Company’s properties securing the credit facility upon receipt of the agreed payment. Bank One retained a right to seek specific performance of the May 13, 2004 agreement if payment were not made by May 18, 2004 and to recover attorney’s fees if such relief were sought. The Company and the Bank each agreed to bear all of its own costs, expenses, and attorneys’ fees incurred to date.

On May 18, 2004, the Company paid Bank One, the agreed upon settlement in the amount of $3,657,000. The funds were obtained from proceeds of a bridge loan from Dolphin Offshore Partners, LP (“Dolphin”) (the managing partner of Dolphin is Peter E. Salas, a member of the Board of Directors), in the principal amount of $2,500,000 bearing interest at 12% per annum and payable interest only monthly beginning June 18, 2004 with the principal amount due May 20, 2005. The loan is secured by a first lien on the Company’s Tennessee and Kansas producing properties and the Tennessee pipeline. The balance of the settlement amount of $1,157,000 was paid from funds available to the Company from the proceeds of the rights offering. Upon receipt this payment, an agreed order signed by the Company and the Bank dismissing all claims in litigation was filed with the court on May 20, 2004 and entry by the court is anticipated immediately. No hearing or approval of the settlement by tbe court is required.

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~b.Results~~Results of Operations and Financial Condition

Kansas

During the first ~~nine~~three months of ~~2003,~~2004, the Company produced and sold ~~94,782~~29,635 barrels of oil and ~~196,373~~67,582 Mcf of natural gas from its Kansas Properties comprised of 149 producing oil wells and 59 producing gas wells. The first ~~nine~~three months production of ~~94,782~~29,635 barrels of oil compares to ~~106,683~~32,807 barrels produced in the first ~~nine~~three months of ~~2002.~~2003. The first ~~nine~~three months production of ~~196,373~~67,582 Mcf of gas compares to ~~214,859~~64,438 Mcf produced in the first ~~nine~~three months of ~~2002.~~2003. In summary, the first ~~nine~~three months production reflected expected continued ~~stable~~ production levels from the Kansas Properties, which have been in production for many years. The decrease in oil production reflects a normal decline curve for the Kansas properties. This decline has not been offset by additional drilling and well work-overs due to the Bank One litigation. The revenues from the Kansas properties were ~~$2,959,430~~$999,707 in the first ~~nine~~three months of ~~2003 as~~2004 compared to ~~$2,438,136~~$1,165,422 in ~~2002. The increase in revenues is due to a significant increase in the price of oil and gas for~~ 2003.

Tennessee

During the first ~~nine~~three months of ~~2003,~~2004, the Company produced gas from 23 wells in the Swan Creek field, which it sold ~~to its two industrial customers~~ in Kingsport, Tennessee ~~BAE SYSTEMS Ordnance Systems Inc. as operator of the Holston Army Ammunition Plant (“BAE”) and~~to Eastman Chemical Company (“Eastman”).

Natural gas production from the Swan Creek field for the first ~~nine~~three months of ~~2003~~2004 was an average of ~~1.195 million cubic feet~~617 Mcf per day during that period as compared to ~~2.114 million cubic feet~~1,241 Mcf per day in the first ~~nine~~three months of ~~2002.~~2003. The first ~~nine~~three 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’s pipeline. This natural decline is normal for any producing well, and this decline as experienced on existing wells in Swan Creek was not unexpected; however, volumes were not replaced as expected. In order for overall field production to remain steady or grow, new wells must be brought online. Any of the new wells drilled by the Company would also experience the same harmonic (i.e. a relatively steep initial decline curve followed by longer periods of relatively flat or stable production) decline as does every natural well in a formation similar to the Knox formation, so continuous drilling is vital to maintaining or increasing earlier levels of production. No new gas wells have been drilled by the Company to date in 2003 because it does no have the funds necessary for such drilling, due to the destabilized lending arrangements caused by the actions of Bank One and ongoing litigation regarding that matter. The Company anticipates that the natural decline of production from existing wells is now predictable in Swan Creek, that the total volume of the Company’s reserves remains largely intact, and that these reserves can be extracted through existing wells and also by steady additional drilling brought on by reliable financial arrangements to fund drilling. Upon conclusion of the Bank One litigation, the Company is hopeful that additional or replacement financing may more easily be obtainable to allow drilling to increase; however, no assurances can be made that such financing will be obtained. See, Liquidity and Capital Resources discussion, below.unexpected.

Comparison of the Nine MonthsQuarters Ending September 30March 31, 2004 and 2003 and 2002

The Company recognized ~~$5,053,454~~$1,332,350 in oil and gas revenues from its Kansas Properties and the Swan Creek Field during the first ~~nine~~three months of ~~2003~~2004 compared to ~~$4,059,165~~$1,923,915 in the first ~~nine~~three months of ~~2002.~~2003. The ~~increase~~decrease in revenues was due to a decrease in production from Kansas and Swan Creek oil sales and from gas sales in Swan Creek. Kansas gas sales also declined by approximately $130,297 due to an ~~increase~~unusually high price received in ~~price from oil and gas sales. Oil prices to date in~~March of 2003 ~~have averaged $28.60~~of $8.64 per ~~barrel in 2003~~Mcf, as compared to ~~$22.98~~$4.11 in 2002. Gas prices to date in 2003 have averaged $5.31 per Mcf in 2003 as compared to $2.89 for 2002. The Swan Creek Field produced 322,739 Mcf and 570,883 Mcf in the first nine months of 2003 and 2002, respectively. This decrease was due to natural declines in production which could not be offset as the Company did not have the funds to continue drilling new wells, due to it’s dispute with it’s primary lender, Bank One NA.2004. The decrease in pipeline transportation revenues is directly related to the decrease in gas ~~volumes.~~volumes in Swan Creek.

The Company realized a net loss attributable to common shareholders of ~~$2,248,772 (($.19)~~$1,125,778 ($0.06) per share of common stock), during the first ~~nine~~three months of ~~2003~~2004 compared to a net loss in the first ~~nine~~three months of ~~2002~~2003 to common shareholders of ~~$2,820,539 (($.26)~~$793,545 ($0.07) per share of common stock). ~~A non-cash charge of $351,204 was recognized as a cumulative effect of a change in accounting principle during the first quarter of 2003 relating to the implementation of SFAS 143.~~

Production costs and taxes in the first ~~nine~~three months of ~~2003~~2004 of ~~$2,571,898 were consistent with production costs and taxes of $2,084,597~~$871,581 increased from $769,909 in the first ~~nine~~three months of ~~2002.~~2003. The difference of ~~$487,301~~$101,672 was due to a reclassification of insurance cost ~~relating~~related to field activities of ~~$148,098~~$98,369 from ~~G&A to production~~general and administrative costs. ~~The increase~~An additional $20,633 was paid in production costs in 2003 was also due to the fact that the Company’s field personnel cost was capitalized as the Company was drilling new wells in 2002, as compared to 2003 when all employees were working to maintain production. Field salaries in Swan Creek were $209,563 in the first nine months of 2003. The remaining increase is due to increased property taxes ~~on the pipeline because it has been assessed at a higher value after completion.~~in Kansas.

Depreciation, ~~Depletion,~~depletion, and ~~Amortization~~amortization expense for the first ~~nine~~three months of ~~2003~~2004 was ~~$1,887,333~~$608,164 compared to ~~$1,731,182~~$630,942 in the first ~~nine~~three months of 2002. The December 31, 2002, Ryder Scott reserve reports were used as a basis for the 2003 estimate. The Company reviews its depletion analysis and industry oil and gas prices on a quarterly basis to ensure that the depletion estimate is reasonable. The depletion taken in the first nine months of 2003 was $1,072,926 as compared to $1,019,138 in the first nine months of 2002. The Company also amortized $153,633 of loan fees relating to the Bank One note and convertible notes, in 2003 as compared to $129,540 in 2002. The remaining increase relates to the implementation of SFAS No. 143 as explained in footnote 10.2003.

During the first ~~nine~~three months the Company reduced it general and administrative costs ~~significantly~~by $222,977 from ~~2002 by~~2003.This was due to the ~~amount of $415,699.~~insurance reclassifications. Management has also made an effort ofto control ~~cost~~costs in every aspect of its ~~operations. Some of these cost reductions included the closing of the Company’s New York office and~~operations, including a reduction in personnel from ~~2002~~2003 levels. ~~The Company’s public relation costs were reduced by $146,967 from 2002, as the Company continues cost cutting measures.~~

Professional fees, in the first ~~nine~~three months of ~~2003~~2004 have remained at a high level, primarily due to costs incurred for legal and accounting services as a result of the Bank One ~~lawsuit and the class action~~ lawsuit.

Interest expense for the first quarter of 2004 increased from the first quarter of 2003 to $413,858 from $153,356. The increase was due to the issuance of notes to Dolphin during the first quarter of 2004. These notes were paid on March 20, 2004. Dividends on ~~preferred stock have increased from $372,595 in 2002 to $402,583 in 2003 as a result of~~ the ~~increase~~Company’s Preferred Stock in the amount of ~~preferred stock outstanding from preferred stock sold pursuant to private placements during~~$134,194 were recognized as interest expense in the ~~second~~first quarter of ~~2002.~~

Comparison of the Quarters Ending September 30 2003 and 2002

The Company recognized $1,599,461 in oil and gas revenues from its Kansas Properties and the Swan Creek Field during the third quarter of 2003 compared to $1,507,308 in the third quarter of 2002. The increase in revenues was due to an increase in price from oil and gas sales. Oil prices to date in 2003 averaged $27.82 per barrel in 2003 as compared to $25.77 in 2002. Gas prices to date in 2003 averaged $4.71 per Mcf in 2003 as compared to $3.06 for 2002. The Swan Creek Field produced 115,683 Mcf and 162,290 Mcf in the third quarter of 2003 and 2002, respectively. This decrease was due to natural declines in production which could not be offset as the Company did not have the funds to continue drilling new wells, due to it’s dispute with it’s primary lender, Bank One. The decrease in pipeline transportation revenues is directly related to the decrease in gas volumes.

The Company realized a net loss attributable to common shareholders of $642,441 (($.05) per share of common stock) during the third quarter of 2003 compared to a net loss in the third quarter of 2002 to common shareholders of $856,074 (($.08) per share of common stock).

~~Production costs and taxes in the third quarter of 2003 of $944,019 increased from $815,293 in the third quarter of 2002. The increase in production cost in 2003 was also~~2004 due to the ~~fact that part~~Company’s adoption of SFAS 150, discussed in Note 4 of the Company’s ~~field personnel cost was capitalized as the Company was drilling new wells in 2002, as compared~~Condensed Notes to 2003 when all employees were working to maintain production. Field salaries in Swan Creek were $57,345 in the third quarter of 2003. The remaining increase relates to a higher property tax on the Company’s completed pipeline.Consolidated Financial Statements.

Depreciation, Depletion, and Amortization expense for the third quarter of 2003 was $628,195 compared to $756,486 in the third quarter of 2002. The December 31, 2002, Ryder Scott reserve reports were used as a basis for the 2003 estimate. The Company reviews its depletion analysis and industry oil and gas prices on a quarterly basis to ensure that the depletion estimate is reasonable. The depletion taken in the third quarter of 2003 was $357,642 as compared to $519,138 in the third quarter of 2002. The Company also amortized $51,211 of loan fees relating to the Bank One note and convertible notes, in 2003 as compared to $43,180 in 2002.

During the third quarter the Company reduced its general and administrative costs significantly from 2002 by the amount of $100,035. Management has made an effort to control costs in every aspect of its operations. Some of these cost reductions included the closing of the Company’s New York office and a reduction in personnel from 2002 levels. The Company’s public relations costs were reduced by $14,855 from 2002, as the Company continues cost cutting measures.

Professional fees, in the third quarter of 2003 have remained at a high level, primarily due to cost incurred for legal and accounting services as a result of the Bank One lawsuit and the class action against the Company.

Liquidity and Capital Resources

On November 8, 2001, the Company signed a credit facility agreement (the “Credit Agreement”) with the Energy Finance Division of Bank One, N.A. in Houston ~~Texas.~~Texas (“Bank One”). The Company instituted litigation in May 2002 based on certain actions taken by Bank One under the agreement.

In November 2002, the Company and Bank One concluded a series of meetings and correspondence by reaching preliminary agreement upon the basic terms of a potential settlement. Any settlement is conditioned upon execution of final settlement documents, and the parties agreed to attempt to close the settlement by November 29, 2002. The principal element of the settlement proposal is for the Bank and the Company to enter into an amended and restated agreement for a new term loan to replace the prior revolving credit facility. As of the date of this report, the Company and Bank One continue to negotiate the terms of a mutually satisfactory settlement agreement.

Even if the Company concludes a settlement with Bank One, the Company does not anticipate that it will be able to borrow any additional sums from Bank One. To fund additional drilling and to provide additional working capital, the Company would be required to pursue other options. Such options include debt financing, sale of equity interests in the Company, a joint venture arrangement, and/or the sale of oil and gas interest. The inability of the Company to obtain the necessary cash funding on a timely basis will have an unfavorable effect on the Company’s financial condition and will require the Company to materially reduce the scope of its operating activities.

The harmful effects upon operations of the Company caused by the actions of Bank One and the ~~ongoing~~ litigation with Bank One ~~have been~~were dramatic. First, the action of Bank One had the effect of totally cutting off any additional funds to the Company to support Company operations. Further, the funds loaned to the Company by Bank One ~~have been used~~were to refinance the Company’s indebtedness and no funds were then available to pay this large repayment obligation to Bank One, even if such action by the Bank ~~was~~had been proper, which the Company ~~has~~ vigorously and continually denied. The principal reason the Company had entered into the Bank One credit agreement was to provide for additional funds to promote the growth of the Company. Consequently, as a result of Bank One’s unwarranted actions no additional funds under the credit facility agreement ~~have been~~were available for additional drilling that the Company had anticipated performing in ~~the Swan Creek Field in~~ 2002 and 2003, which were critical to the development of that Field. In order for overall field production to remain steady or grow in a field such as the Swan Creek Field, new wells must be brought online. Since 2002 only two gas wells have been added by the Company due to the destabilized lending arrangements caused by the actions of Bank One and ongoing litigation.2003.

Second, the existence of the dispute with Bank One, compounded by the fact that an effect of Bank One’s action was to cause the Company’s auditors to indicate that ~~their~~there was an uncertainty over the Company’s ability to continue as a going concern, ~~has~~ significantly discouraged other ~~institution~~institutional lenders from considering a variety of additional or replacement financing options for drilling and other purposes that may have ordinarily been available to the Company. Third, the dispute ~~has~~ caused Bank One to fail to grant permission under the existing loan agreements with the Company to permit the Company to formulate drilling programs involving potential third party investors that may have permitted additional drilling to occur. Finally, ~~the~~this dispute has caused the Company to incur significant legal fees to protect the Company’s rights.

~~Although no assurances can be made,~~On May 13, 2004, the Company resolved its dispute with Bank One. See, Part II, Item 1, Legal Proceedings. The Company believes that now that its dispute has been resolved it will ~~either~~ be able to ~~resolve the Bank One dispute or~~ obtain ~~additional or replacement~~long term financing to allow the Company to continue drilling and to ~~increase,~~locate and ~~once new wells are drilled, production from the Swan Creek Field will increase.~~develop other properties. However, no assurances can be made that such financing will be ~~obtained or that overall produced volumes will increase.~~obtained.

~~Similarly, when~~When funding for additional drilling becomes available, the Company plans to drill wells in ~~five~~ new locations it has identified in ~~Ellis and Rush Counties,~~ Kansas on its existing leases in response to drilling activity in the area establishing new areas of oil production. Although the Company successfully drilled the Dick No. 7 well in Kansas in 2001 and completed the well as an oil well, it ~~has~~was not ~~been~~ able to drill any new wells in Kansas in 2002 or 2003 due to lack of funds available for such drilling caused by the Bank One situation. ~~As with Tennessee, the~~The Company is hopeful now that ~~once~~ the Bank One matter ishas been resolved that it will soon be able to obtain financing necessary to resume drilling and well work-overs in Kansas to maximize production from the Kansas Properties.

Critical Accounting Policies

The methods, estimates and judgments the Company’s management uses in applying Company accounting policies may have a significant effect on the results the Company reports in its financial statements. The estimates and judgments in applying those accounting policies which may have the most significant effect on the Company’s financial statements and operating results include: determinations of impairment of long-lived assets. Please refer to “Management’s Discussion and Analysis of Financial Condition Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, for a more complete description of the Company’s critical accounting policies.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Risk

The Company’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 ~~$18.56~~$23.44 per barrel to a high of ~~$27.49~~$33.60 per barrel during ~~2002.~~2003. Gas price realizations ranged from a monthly low of ~~$1.91~~$3.69 per Mcf to a monthly high of ~~$4.01~~$9.11 per Mcf during the same period. The Company did not enter into any hedging agreements in 2003 or the first quarter of 2004, to limit exposure to oil and gas price fluctuations.

Interest Rate Risk

At December 31, ~~2002,~~2003, the Company had debt outstanding of approximately ~~$9.9 million.~~$16.1 million including, as of that date, $5.1 million owed on its revolving credit facility with Bank One. The interest rate on the Bank One revolving credit facility ~~of $7.5 million~~ is variable based on the financial institution’s prime rate plus 0.25%. The Company’s remaining debt of ~~$2.4~~$11 million has fixed interest rates ranging from 6% to ~~11.95%~~12%. As a result, the Company’s annual interest ~~cost~~costs in ~~2002~~2003 fluctuated based on ~~short term~~short-term interest rates on approximately ~~78%~~32% of its total debt outstanding at December ~~31,2002.~~31, 2003. The impact on interest expense and the Company’s cash flows of a ~~10%~~10 percent increase in ~~the financial institution’s~~Bank One’s prime rate (approximately 0.5 basis points) would be approximately ~~$32,000;~~$22,000, assuming borrowed amounts under the Bank One credit facility ~~remain~~remained at ~~$7.5 million.~~the same amount owed as of December 31, 2003. The Company did not have any open derivative contracts relating to interest rates at ~~September 30,~~December 31, 2003.

Forward-Looking Statements and Risk

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’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.

There are numerous uncertainties inherent in estimating quantities of ~~proved~~ 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 prolonged period of low prices, may substantially adversely affect the Company’s financial position, results of operations and cash flows.

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The ~~Company’s~~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’s rules and forms and that such information is accumulated and communicated to our management, including the Company's Chief Executive Officer and Chief Financial Officer, ~~have evaluated~~as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the ~~effectiveness of the Company’s~~ disclosure controls and procedures, ~~(as such~~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 ~~defined~~required to apply its judgment in ~~Rules 13 a-14(c)~~evaluating the cost-benefit relationship of possible controls and ~~15d-14(c) under the Securities Exchange Act~~procedures. As of ~~1934, as amended (the “Exchange Act”)) as~~ the end of the period covered by this ~~quarterly~~ report, ~~(the “Evaluation Date”).~~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 ~~such~~this evaluation ~~such officers have~~and subject to the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that ~~as of~~ the ~~Evaluation Date, the Company’s~~Company's disclosure controls and procedures ~~are~~were effective in ~~alerting them on~~reaching a ~~timely basis to material information relating to the Company (including the Company’s consolidated subsidiaries) required to be included~~reasonable level of assurance of achieving management’s desired controls and procedures objectives.

There have been no changes in the ~~Company’s reports filed~~Company's internal controls over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or ~~submitted under~~are reasonably likely to affect, the ~~Exchange Act.~~Company's internal control over financial reporting.

As part of a continuing effort to improve the Company'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.

Changes in Internal Controls

During the period covered by this quarterly report, there have not been any changes in the Company’s internal controls that have materially affected or are reasonably likely to materially affect, ~~The Company's~~the Company’s internal controls over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company that would have a result materially adverse to the Company. To the knowledge of management, no director, executive officer or affiliate of the Company or owner of record or beneficially of more than 5% of the Company’s common stock is a party adverse to the Company or had a material interest adverse to the Company in any proceeding.

1. Tengasco, Inc., Tengasco Land and Mineral Corporation and Tengasco Pipeline Corporation v. ~~James E. Larkin~~Bank One, NA, Docket No. 2:02-CV-118 in the Eastern District of Tennessee, Northeastern Division at Greeneville.

On November 8, 2001, the Company signed a credit facility with Bank One, N.A. in Houston, Texas whereby Bank One extended to the Company a revolving line of credit of up to $35 million. The initial borrowing base under the facility was $10 million.

On April 5, 2002, the Company received a notice from Bank One stating that it had re-determined and ~~Kathleen A. O’Connor, No. 4929J, Circuit Court~~reduced the then-existing borrowing base under the Credit Agreement by $6,000,000 to $3,101,777. Bank One demanded that the Company pay the $6,000,000 within thirty days. On May 2, 2002, the Company filed suit in federal court to restrain Bank One from taking any steps pursuant to its Credit Agreement to enforce its demand that the Company reduce its loan obligation or else be deemed in default and for ~~Hawkins County, Tennessee. This was~~damages resulting from the wrongful demand. The Company sought a ~~condemnation proceeding brought~~jury trial and actual damages sustained by ~~Tengasco Pipeline Corporation to acquire~~it as a ~~right of way for a 3000-foot long portion of Phase I~~result of the ~~Company’s pipeline~~wrongful demand, in ~~Hawkins County, TN. The right~~the amount of ~~way was appraised at $4,000. The landowners contested~~$51,000,000 plus punitive damages in the ~~appraised value~~amount of $100 million.

On July 1, 2002, Bank One filed its answer and counterclaim, alleging that its actions were proper under the terms of the ~~property~~Credit Agreement, and ~~claimed incidental damages~~in the counterclaim, seeking to ~~fishponds there, despite~~recover all amounts it alleges to be owed under the Credit Agreement, including principal, accrued interest, expenses and attorney’s fees in the approximate amount of $9 million. The Company continued to pay the sum of $200,000 per month of principal due under the original terms of the Credit Agreement, plus interest.

As of May 1, 2004, the principal amount owed by the Company under the credit facility, with Bank One was $4,101,601.61. On Thursday, May 13, 2003, the Company and Bank One executed a ~~lack of evidence of any fish farm business actually having been operated on the property or of any losses~~written agreement resolving all claims against each other. Pursuant to such a business. By counterclaim, the landowners sought $867,585 in compensatory damages and $2.6 million in punitive damages under various legal theories. The Court ordered the parties to conduct a second mediation session, which session occurred on June 2, 2003. At the mediation, settlement was reached wherebythat agreement, the Company agreed to pay the sum of ~~$20,000~~$3,657,000 to ~~plaintiffs~~Bank One by May 18, 2004, in full satisfaction of its obligations to Bank One and ~~plaintiff’s counsel,~~each of the parties agreed to the dismissal of the lawsuit and ~~issue~~ to ~~them~~release their claims against each other. Bank One agreed to execute releases of its liens on all of the Company’s properties securing the credit facility upon receipt of the agreed payment. The Company and the Bank agreed to bear all of their own costs, expenses, and attorneys’ fees incurred to date. The settlement payment was made by the Company on May 18, 2004. See Part II, Item 5, Other Information.

2. Paul Miller v. M. E. Ratliff and Tengasco, Inc.,Docket Number 3:02-CV-644 in the ~~aggregate 10,000 shares~~United States District Court for the Eastern District of ~~restricted~~Tennessee, Knoxville, Tennessee.

This action was commenced in November 2002 and sought certification of a class action to recover on behalf of a class of all persons who purchased shares of the Company’s common stock between August 1, 2001 and April 23, 2002, damages in an amount not specified which were allegedly caused by violations of the federal securities laws, specifically Rule 10b-5 issued under the Securities Exchange Act of 1934 as to the Company and Malcolm E. Ratliff, the Company’s former Chief Executive Officer and a Director, and Section 20(a) the Securities Exchange Act of 1934 as to Mr. Ratliff. The complaint alleges that documents and statements made to the investing public by the Company and Mr. Ratliff misrepresented material facts regarding the business and finances of the Company. As of January 30, 2004, a written stipulation of settlement documenting the settlement terms was signed by counsel for all parties. The stipulation of settlement was presented to the Court on February 27, 2004 for a determination of initial fairness and initiation of other procedures leading to a final hearing. At the hearing, the Court granted initial approval of the settlement as proposed and established periods for determination of the class and dates for a final settlement hearing approving disbursement of settlement funds to any class members. Under the settlement, the Company has paid into a settlement fund the amount of $37,500 to include all costs of administration, and has also contributed 150,000 shares of stock of Miller Petroleum, Inc. that is currently owned by the Company that had been accepted in payment of an obligation owed to the Company by Miller Petroleum. The Company also contributed to the settlement fund the Company’s agreement to issue 300,000 warrants to purchase ~~20,000 shares~~a share of the Company’s common stock for a period of three years from date of issue at ~~52 cents~~$1 per ~~share,~~share. The number or price of the ~~closing price~~warrants is to be adjusted to account for the additional shares sold pursuant to the rights offering made by the Company or other stated events. All expenses including attorney’s fees as are awarded by the court on final hearing are to be paid out of the settlement ~~date. Plaintiffs have executed~~funds. The parties stipulated the existence of a ~~right~~class for settlement purposes only. On April 29, 2004, a final hearing for approval of ~~way agreement, all~~the settlement ~~payments including~~was held in federal court in Knoxville, Tennessee. On May 10, 2004 the ~~issuance~~Court entered its final order approving the fairness of ~~stock~~the settlement to the class, dismissing the action pursuant to the Settlement Stipulation, and ~~warrants have been made,~~fully releasing the claims of the class members. Pursuant to the Settlement Stipulation and the ~~litigation was dismissed by agreed~~Court’s final order, ~~dated~~class members may file their claims against the settlement fund through July ~~17, 2003.~~

15, 2004. The fund will be disbursed in accordance with the claims filed. No further court approval is required or contemplated, although the Court retains jurisdiction to enforce the settlement stipulation and the Court’s final order.

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter, certain Directors and Officers of the Company exercised options granted to them pursuant to the Tengasco, Inc. Stock Incentive Plan and purchased the following number of shares of the Company’s common stock at the exercise price of $0.50 per share, which was the market price of the stock on the date the options were granted: Richard T. Williams- 50,000 shares; Peter Salas- 24, 000 shares; Sheila Sloan- 8,000 shares; Steve Akos- 24,000 shares; and Robert Devereux- 24,000 shares.

On October 17, 2003, the Company filed a Registration Statement on Form S-1 with the SEC for a rights offering of the Company’s common stock (the "Rights Offering"). On December 29, 2003; February 11, 2004; and February 13, 2004, the Company filed amendments to the Registration Statement. On February 13, 2004, the SEC deemed effective the Registration Statement on Form S-1 as amended.

The Rights Offering was a distribution to the holders of the Company’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’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.

The record date for the Rights Offering was set as of February 27, 2004. The offering expired at 5:00 p.m., New York City time, on March 18, 2004.

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. In no event could any subscriber purchase shares of the Company’s common stock in the offering that, when aggregated with all of the shares of the Company’s common stock otherwise owned by the of the shares of the Company’s 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’s issued and outstanding shares.

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 for 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 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’s subscription agent who also returned payments for those oversubscribed shares that were not available.

Pursuant to 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. A total of 15,211,188 shares were purchased pursuant to the oversubscription privilege, resulting in additional gross proceeds to the Company of $3,802,797.

The net proceeds of the Rights Offering have been used to pay non-bank indebtedness in the aggregate amount of approximately $6 million (including up to $3,850,000 in principal amount plus accrued interest owed by the Company to Dolphin Offshore Partners, L.P., the general partner of which is Peter E. Salas a director of the Company) and to pay $1,157,000 of the Company’s settlement with Bank One. The balance of the net proceeds will be used for working capital purposes, including the drilling of additional wells. At December 31, 2003, the Company incurred costs in connection with the Rights Offering of $223,003, which are reflected in the consolidated balance sheet as an asset. This asset will be offset against gross proceeds to pay Bank One, when received by the Company.

ITEM 5 OTHER INFORMATION

On ~~August 6, 2003~~February 2, 2004, Dolphin ~~Offshore Partners, LP (“Dolphin”) which owns more than 10% of the Company’s outstanding common stock and whose general partner is Peter E. Salas, a Director of the Company,~~ loaned the Company the sum of ~~$150,000 for~~$225,000 which ~~the Company~~was used for ~~working capital.~~making payment of principal and interest to Bank One for February, 2004. This loan iswas evidenced by a separate promissory note bearing interest at the rate of 12% per annum, with payments of interest only payable quarterly and the principal balance payable on ~~January~~April 4, ~~2004, which are~~2004. The obligations under the loan were secured by an undivided ~~6 %~~ interest in the Company’s Tennessee ~~pipelines.~~and Kansas pipelines and the security agreement referred to above. All notes payable to Dolphin and secured by an interest in the pipelines were repaid on March 30, 2004 from the proceed received by the Company from its Rights Offering.

~~During~~The following persons that are the ~~quarter ending September 30, 2003, a Director, Charles M. Stivers and an employee~~Company’s Directors, Officers or owners of ~~the Company, Robert M. Carter, exercised options granted to them pursuant to the Tengasco, Inc. Stock Incentive Plan and purchased 24,000 and 12,000 the number of shares~~more than ten percent of the Company’s outstanding common stock ~~respectively at~~purchased the ~~exercise price~~numbers of ~~$0.50 per share, which was~~shares in the ~~market price of the stock on the date the options were granted~~Rights Offering indicated as follows: Stephen W. Akos (Director) 48,868 shares; Jeffrey R. Bailey (Director, President) 66,287 shares; Robert L. Devereux (Director) 412,457 shares; Richard T. Williams (Director, Chief Executive Officer) 190,000 shares; Dolphin Offshore Partners, L.P. 14,248,732 shares.

On ~~October 17, 2003,~~May 18, 2004, Dolphin loaned the Company ~~filed~~$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 ~~registration statement with~~first lien on the ~~Securities~~company’s Tennessee and ~~Exchange Commission on Form S-1 with respect to a proposed rights offering to existing shareholders as~~Kansas producing properties and the Tennessee pipeline. The proceeds of the ~~record date, which has not been determined. The rights offering will provide that~~loan were used to fund in part the ~~holders~~settlement of the Company’s approximately 12 million outstanding shares of common stock may purchase two shares of common stock for each share held. The offer includes an over-subscription privilege whereby participating shareholders may purchase shares that were offered but not purchased by other shareholders.Bank One litigation. See, Part II, Item 1, Legal Proceedings.

~~The right offering~~On May 5, 2004, the Company completed the drilling to the Knox formation of the Hazel Sutton #3 well in the Swan Creek field in Hancock County, Tennessee. Well logs and pressure tests indicate that this portion of the Knox gas reservoir is already being ~~made in order~~drained by other wells, and completing the Hazel Sutton #3 as a Knox gas well would not add significantly to ~~reduce debt and increase shareholder equity. The proceeds~~the total volume of gas that will ultimately be produced from the ~~offering~~Knox reservoir. Instead, the well will be ~~used~~completed as a Trenton gas well. On May 18, 2004, the Stephen Lawson #8 was drilled to ~~reduce~~ the ~~Company’s non-bank indebtedness, to reduce~~Knox formation in the ~~Company’s indebtedness to its bank lender, and/or for working capital purposes. The subscription price, record date, offering period, issuance date and other details~~Swan Creek field in Hancock County, Tennessee. It is anticipated that this well will produce commercial quantities of ~~the proposed offering have not yet been determined, although the Company anticipates that the offering will commence within 60-90 days~~gas from the date of filing of the registration statement. When the Securities and Exchange Commission declares the registration statement effective, the prospectus and related documents will be mailed to shareholders of record and will also be made available, as applicable, for distribution to beneficial owners of the Company’s common stock. None of the Company, its board of directors or any committee of its board of directors is making any recommendation to shareholders as to whether to exercise their subscription rights.Knox reservoir.

ITEM ~~3 DEFAULTS UPON SENIOR SECURITIES~~

~~NONE~~6 EXHIBITS AND REPORTS ON FORM 8-K

~~ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

~~NONE~~(a) The following exhibits are filed with this report.

~~Exhibits~~10.47 Promissory Note dated May 18, 2004 from Tengasco, Inc. and Tengasco Pipeline Corporation as Maker to Dolphin Offshore Partners, LP as Holder in the principal amount of $2,500,000 bearing interest at 12% per annum, payable interest only monthly beginning June 18, 2004 with principal due May 20, 2005, prepayable without penalty, and secured by the Company’s Tennessee and Kansas producing properties and the Tennessee pipeline.

~~Exhibit 31: Certifications~~31.1 Certification of ~~Richard T. Williams,~~ Chief Executive Officer, ~~and Mark A. Ruth,~~pursuant to Exchange Act Rule, Rule 13a-14a/15d-14a.

31.2 Certification of Chief Financial Officer, pursuant Exchange Act Rule, Rule 13a-14a/15d-14a

31.1 Certifications of Chief Executive Officer pursuant to ~~Section 302~~18 U.S.C section 1350 as adopted pursuant to section 906 of the ~~Sarbanes-~~Sarbanes - Oxley Act of 2002.

~~Exhibit 32:~~32.2 Certifications of ~~Richard T. Williams, Chief Executive Officer, and Mark A. Ruth,~~ Chief Financial Officer pursuant to ~~Section~~18 U.S.C section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

~~SIGNATURES~~

~~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) The Company did not file or furnish any current reports on Form 8-K during the quarter covered by this report.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant duly caused thisreport to be signed on its behalf by the undersigned hereto duly authorized.

Dated: ~~November 13, 2003~~May 20, 2004

TENGASCO, INC.

		By :s/ Richard T. Williams Richard T. Williams Chief Executive Officer

~~By :~~By: s/ Mark A. Ruth
Mark A. Ruth
~~Chief~~Cheif Financial Officer

Exhibit 31
31.1

CERTIFICATION

I, Richard T. Williams, certify ~~pursuant~~that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tengasco, Inc. for the quarter ended March 31, 2004.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to ~~Section 302~~state a material fact necessary to make the statements made, in light of the ~~Sarbanes-Oxley~~circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. 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;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act ~~of 2002 that:~~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: ;

1.	~~I have reviewed this quarterly report on Form 10-Q of Tengasco, Inc. and Subsidiaries.~~

2.(a)

Based on my knowledge, this quarterly 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 quarterly report;

3.	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, m and for, the periods presented in this quarterly report;

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules (13a-15e and 15d-15e) for the Registrant t and we have:

~~(a) designed under our supervision to ensure that material information relation to the Registrant, including its designed~~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 ~~with~~within those entities, particularly during the period in which this ~~quarterly~~ report is being prepared:

(b) ~~evaluated~~

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;

(c)

Evaluated the effectiveness of the ~~Registrant’s~~registrant’s disclosure controls and procedures and presented in this ~~quarterly~~ 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~~

evaluation, and;

~~(c) disclosed~~(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that the occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);

5.	The Registrant’s other certifying officers and I have disclosed based on our most recent evaluation of internal control over financial reporting to the Registrant’s auditors and the audit committee of the Registrant’s board of directors) or persons performing the equivalent functions);

(a)	~~(a) all~~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’s ability to record, process, summarize and report financial information; and

(b) ~~any~~

Any fraud, whether or not material, that involves ~~the~~ management or other ~~employe4s~~employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: ~~November 13, 2003~~May 20, 2004

		~~By :~~By:s/ Richard T. Williams Richard T. Williams Chief Executive Officer

Exhibit 31
31.2

CERTIFICATION

I, Mark A. Ruth, certify ~~pursuant~~that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tengasco, Inc. for the quarter ended March 31, 2004.

3. 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;

1.	~~I have reviewed this quarterly report on Form 10-Q of Tengasco, Inc. and Subsidiaries.~~

2.(a)

3.	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, m and for, the periods presented in this quarterly report;

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules (13a-15e and 15d-15e) for the Registrant t and we have:

(b) ~~evaluated~~

(c)

evaluation, and;

~~(c) disclosed~~(d)

5.	The Registrant’s other certifying officers and I have disclosed based on our most recent evaluation of internal control over financial reporting to the Registrant’s auditors and the audit committee of the Registrant’s board of directors) or persons performing the equivalent functions);

(a)	~~(a) all~~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’s ability to record, process, summarize and report financial information; and

(b) ~~any~~

Any fraud, whether or not material, that involves ~~the~~ management or other ~~employe4s~~employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated May 20, 2004

~~Dated: November 13, 2003~~

		~~By :~~By:s/Mark A. Ruth Mark A. Ruth Chief Financial Officer

Exhibit 32
32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:

~~(J)~~ I have reviewed the Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

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.

~~(B)~~

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 (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.

Dated: ~~November 13, 2003~~May 20, 2004

		~~By :~~By:s/ Richard T. Williams Richard T. Williams Chief Executive Officer

Exhibit 32
32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:

~~(C)~~

~~I have reviewed the Quarterly Report on Form 10-Q (i);~~

~~(B)~~

I have reviewed the Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

Dated: ~~November 13, 2003~~May 20, 2004

		~~By :~~By:s/ Mark A. Ruth Mark A. Ruth Chief Financial Officer

		Amount		Additional Paid in Capital		Accumulated Other Comprehensive Loss
Balance December 31, 2002	11,459,279	$	11,460	$	42,237,276	$	(115,500	)
Net Loss	0		0		0
Common Stock Issued in Private
Placements Net of Related Expenses
	227,275		227		249,773
Common Stock Issued for exercised
options	94,000		94		46,906
Common Stock Issued in Conversion of
Debt	60,528		61		69,538
Common Stock Issued for Preferred
Dividend in Arrears	154,824		154		170,155
Common Stock Issued for Charity	3,571		4		5,710
Retained Earnings-Accretion of Issue
Cost on Preferred Stock
Common Stock Issued for Services	55,000		55		69,945
Common Stock Issued for Litigation
Settlement	10,000		10		6,390
Dividends on Convertible Redeemable
Preferred Stock	0		0		0
Cumulative effect of a change in
accounting principle	0		0		0
Balance September 30, 2003	12,064,477	$	12,065	$	42,855,693	$	(115,500	)

	Accumulated Deficit					Amount			Total
Balance December 31, 2002	$	(27,776,726	)	(14,500	)	$	(145,887	)	$	14,210,623
Net Loss		(1,494,985	)	0			0			(1,494,985	)
Common Stock Issued in Private
Placements Net of Related Expenses
		0		0			0			250,000
Common Stock Issued for exercised
options		0		0			0			47,000
Common Stock Issued in Conversion o
Debt		0		0			0			69,599
Common Stock Issued for Preferred
Dividend in Arrears										170,309
Common Stock Issued for Charity										5,714
Retained Earnings-Accretion of Issu
Cost on Preferred Stock		(122,040	)							(122,040)
Common Stock Issued for Services		0		0						70,000
Common Stock Issued for Litigation
Settlement										6,400
Dividends on Convertible Redeemable
Preferred Stock		(402,583	)	0			0			(402,583	)
Cumulative effect of a change in
accounting principle		(351,204	)	0			0			(351,204	)

Balance September 30, 2003	$	(30,147,538	)	(14,500	)	$	(145,887	)	$	12,458,833


Balance, January 1, 2003:	$	611,395
Accretion expense through September 30, 2003		55,026

Balance, September 30, 2003	$	666,421

U.S. Securities and Exchange CommissionWashington,D.C. 20549

Form 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OFTHEOFTHE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2003March 31, 2004

Commission File No. 0-20975

Tengasco, Inc. and Subsidiaries(ExactnameExact name of small business issuer as specified in its charter)

TennesseeState or other jurisdiction ofIncorporation or organization87-0267438(IRS Employer Identification No.)603 Main Avenue, Suite 500, Knoxville, TN 37902(Address of principal executive offices)

(865-523-1124)(Issuer’s telephone number, including area code)

TENGASCO, INC. AND SUBSIDIARIES

TENGASCO, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

TENGASCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

TENGASCO, INC. AND SIBSIDIARIESCONSOLIDATEDSIBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSS

TENGASCO, INC. AND SUBSIDIARIES

CONSILIDATEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

TENGASCO, INC. AND SUBSIDIARIESCONSOLIDATEDSUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Tengasco, Inc. And SubsidiariesCondensedSubsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Tennessee

Comparison of the Nine MonthsQuarters Ending September 30March 31, 2004 and 2003 and 2002

Comparison of the Quarters Ending September 30 2003 and 2002

Liquidity and Capital Resources

Critical Accounting Policies

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Risk

Interest Rate Risk

Forward-Looking Statements and Risk

Evaluation of Disclosure Controls and Procedures

Changes in Internal Controls

SIGNATURES

Exhibit 3131.1

CERTIFICATION

Exhibit 3131.2

CERTIFICATION

Exhibit 3232.1

CERTIFICATION

Exhibit 3232.2

CERTIFICATION

U.S. Securities and Exchange Commission
Washington,D.C. 20549

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OFTHEOF
THE SECURITIES EXCHANGE ACT OF 1934

Tengasco, Inc. and Subsidiaries

(ExactnameExact name of small business issuer as specified in its charter)

Tennessee
State or other jurisdiction of
Incorporation or organization

87-0267438
(IRS Employer Identification No.)
603 Main Avenue, Suite 500, Knoxville, TN 37902

(Address of principal executive offices)

(865-523-1124)
(Issuer’s telephone number, including area code)

TENGASCO, INC. AND SIBSIDIARIESCONSOLIDATED
SIBSIDIARIES

TENGASCO, INC. AND SUBSIDIARIESCONSOLIDATED
SUBSIDIARIES

Tengasco, Inc. And SubsidiariesCondensed
Subsidiaries

Exhibit 31
31.1

Exhibit 31
31.2

Exhibit 32
32.1

Exhibit 32
32.2