UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 (Mark
One)
 Form
10-Q
 
 [√]
              QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
 For
      the quarterly period ended September 30,
2009
 
 or
 
 [
      ]
              TRANSITION REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
 For
      the transition period from __________________ to
      __________________________Commission
      file number: 0-27828
 
 TN-K
      ENERGY GROUP INC.(Name of registrant as specified
      in its charter)
 
 Delaware
              13-3779546(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
 
 649
      Sparta Highway, Suite 102, Crossville, TN
              38555(Address
      of principal executive offices)
              (Zip
      Code)
 
 (931)
      707-9601(Registrant's
      telephone number, including area
code)
 
 
 not
      applicable(Former name,
      former address and former fiscal year, if changed since last
      report)
 
 Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.
 
 Yes [√]
No [ ]
 
 Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting company" in Rule
12b-2 of the Exchange Act.
 
 Large
      accelerated filer
              [
      ]
              Accelerated
      filer
              [
      ]Non-accelerated
      filer
              [
      ]
              Smaller
      reporting company
              [√]
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act)
 
 Yes [ ]
No [√]
  Indicated the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.  36,420,129 shares of common stock are issued and
outstanding as of November 13, 2009.
 
 
 TABLE
OF CONTENTS
 
 Page
      No.PART
      I. - FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements.
              3Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
              19Item
      3.
              Quantative
      and Qualitative Disclosures About Market Risk.
              25Item
      4T
              Controls
      and Procedures.
              25PART
      II - OTHER INFORMATIONItem
      1.
              Legal
      Proceedings.
              26Item
      1A.
              Risk
      Factors.
              26Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds.
              26Item
      3.
              Defaults
      Upon Senior Securities.
              26Item
      4.
              Submission
      of Matters to a Vote of Security Holders.
              26Item
      5.
              Other
      Information.
              26Item
      6.
              Exhibits.
              26
 
 CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
 
 This report contains forward-looking
statements. These forward-looking statements are subject to known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  These forward-looking statements were based on various
factors and were derived utilizing numerous assumptions and other factors that
could cause our actual results to differ materially from those in the
forward-looking statements.  These factors include, but are not
limited to, our ability to satisfy our obligations, our ability to generate
revenues and pay our operating expenses, our ability to raise capital as
necessary, economic, political and market conditions and fluctuations,
government and industry regulation, interest rate risk, U.S. and global
competition, and other factors.  Most of these factors are difficult
to predict accurately and are generally beyond our control.  You
should consider the areas of risk described in connection with any
forward-looking statements that may be made herein.  Readers are
cautioned not to place undue reliance on these forward-looking statements and
readers should carefully review this report in its entirety, including the risks
described in "Item 1A. - Risk Factors".  Except for our ongoing
obligations to disclose material information under the Federal securities laws,
we undertake no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the occurrence of
unanticipated events.  These forward-looking statements speak only as
of the date of this report, and you should not rely on these statements without
also considering the risks and uncertainties associated with these statements
and our business.
 
 OTHER
PERTINENT INFORMATION
 
 Unless
specifically set forth to the contrary, when used in this prospectus the terms
“TN-K", "we"", "our", the "Company" and similar terms refer to TN-K Energy Group
Inc., a Delaware corporation formerly known as Digital Lifestyles Group, Inc.,
and our subsidiaries.  In addition, when used herein and unless
specifically set forth to the contrary, “2009” refers to the year ending
December 31, 2009 and “2008” refers to the year ended December 31,
2008.
 
 2
 
 PART
1 - FINANCIAL INFORMATION
 
 Item
1.        Financial
Statements.
  TN-K
      ENERGY GROUP INC.CONSOLIDATED
      BALANCE SHEETS(In
      thousands)  ASSETSSeptember
      30, 2009
                  
                  
                  December
      31, 2008(unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  9
                  
                  
                  $
                  22TOTAL
      CURRENT ASSETS
                  
                  
                  9
                  
                  
                  
                  22Total
      Assets
                  
                  $
                  9
                  
                  
                  $
                  22LIABILITIES
      AND STOCKHOLDERS' (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
                  
                  $
                  6,378
                  
                  
                  $
                  6,378Liquidated
      damages payable
                  
                  
                  2,662
                  
                  
                  
                  2,436Accrued
      expenses
                  
                  
                  999
                  
                  
                  
                  950Convertible
      notes payable, net of debt discount
                  
                  
                  1,539
                  
                  
                  
                  1,490TOTAL
      CURRENT LIABILITIES
                  
                  
                  11,578
                  
                  
                  
                  11,254Derivitave
      and warrant liabilities
                  
                  
                  3,275
                  
                  
                  
                  100Total
      Liabilities
                  
                  
                  14,853
                  
                  
                  
                  11,354STOCKHOLDERS'
      (DEFICIT)Common
      stock, $.03 par value: 100,000 shares authorized,33,224
      and 33,224 shares issued and outstanding
                  
                  
                  996
                  
                  
                  
                  996Additional
      paid-in capital
                  
                  
                  16,561
                  
                  
                  
                  16,348Unearned
      compensation
                  
                  
                  (26
                  )Accumulated
      (deficit)
                  
                  
                  (26,168
                  )
                  
                  
                  (22,469
                  )(8,637
                  )
                  
                  
                  (5,125
                  )Less:
      Unearned ESOP shares
                  
                  
                  (6,207
                  )
                  
                  
                  (6,207
                  )Total
      stockholders' (deficit)
                  
                  
                  (14,844
                  )
                  
                  
                  (11,332
                  )Total
      liabilities and stockholders' (deficit)
                  
                  $
                  9
                  
                  
                  $
                  22
 See
accompanying notes to consolidated financial statements
 3
 TN-K
      ENERGY GROUP INC.CONSOLIDATED
      STATEMENTS OF OPERATIONS(unaudited)(In
      thousands, except per share data)   For
      the Three Months Ended
                  
                  
                  For
      the Nine Months EndedSeptember
      30, 2009
                  
                  
                  September
      30, 2008
                  
                  
                  September
      30, 2009
                  
                  
                  September
      30, 2008Net
      sales
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Cost
      of sales
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -GROSS
      PROFIT
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -OPERATING
      EXPENSES
                  
                  
                  113
                  
                  
                  
                  132
                  
                  
                  
                  175
                  
                  
                  
                  347Operating
      loss
                  
                  
                  (113
                  )
                  
                  
                  (132
                  )
                  
                  
                  (175
                  )
                  
                  
                  (347
                  )OTHER
      INCOME (EXPENSE)Interest
      expense
                  
                  
                  (44
                  )
                  
                  
                  (48
                  )
                  
                  
                  (129
                  )
                  
                  
                  (145
                  )Gain
      on debt relief
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  10Liquidated
      damages
                  
                  
                  (226
                  )
                  
                  
                  
                  
                  
                  
                  (226
                  )Change
      in fair value of derivativeand
      warrant liabilities
                  
                  
                  (3,075
                  )
                  
                  
                  152
                  
                  
                  
                  (3,175
                  )
                  
                  
                  246Other,
      net
                  
                  
                  -
                  
                  
                  
                  17
                  
                  
                  
                  6
                  
                  
                  
                  63TOTAL
      OTHERINCOME
      (EXPENSE)
                  
                  
                  (3,345
                  )
                  
                  
                  121
                  
                  
                  
                  (3,524
                  )
                  
                  
                  174(LOSS)
      BEFORE INCOME TAXES
                  
                  
                  (3,458
                  )
                  
                  
                  (11
                  )
                  
                  
                  (3,699
                  )
                  
                  
                  (173
                  )INCOME
      TAX EXPENSEProvision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -NET
      (LOSS)
                  
                  $
                  (3,458
                  )
                  
                  $
                  (11
                  )
                  
                  $
                  (3,699
                  )
                  
                  $
                  (178
                  )Basic
      and diluted (loss) per share
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.01
                  )Weighted
      average shares of common stock outstanding:Basic
      and diluted
                  
                  
                  33,224
                  
                  
                  
                  33,224
                  
                  
                  
                  33,224
                  
                  
                  
                  33,224
 See
accompanying notes to consolidated financial statements
  4
 TN-K
      ENERGY GROUP INC.CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' (DEFICIT)(unaudited)(In
      thousands)  Additional
                  
                  
                  UnearnedCommon
      Stock
                  
                  
                  Paid-In
                  
                  
                  ESOP
                  
                  
                  Unearned
                  
                  
                  AccumulatedShares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Shares
                  
                  
                  Compensation
                  
                  
                  Deficit
                  
                  
                  TotalBalance,
      January 1, 2009
                  
                  
                  33,224
                  
                  
                  $
                  996
                  
                  
                  $
                  16,348
                  
                  
                  $
                  (6,207
                  )
                  
                  $
                  -
                  
                  
                  $
                  (22,469
                  )
                  
                  $
                  (11,332
                  )Issuance
      of options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  165
                  
                  
                  
                  -
                  
                  
                  
                  (26
                  )
                  
                  
                  -
                  
                  
                  
                  139Contribution
      of capital
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48Net
      (Loss)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,699
                  )
                  
                  
                  (3,699
                  )Balance,
      September 30, 2009
                  
                  
                  33,224
                  
                  
                  $
                  996
                  
                  
                  $
                  16,561
                  
                  
                  
                  (6,207
                  )
                  
                  
                  (26
                  )
                  
                  $
                  (26,168
                  )
                  
                  $
                  (14,844
                  )
 See
accompanying notes to consolidated financial statements
  5
 TN-K
      ENERGY GROUP INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS(unaudited)(In
      thousands)  For
      the Nine Months EndedSeptember
      30, 2009
                    
                    
                    September
      30, 2008Cash
      flows from operating activities:Net
      (Loss)
                    
                    $
                    (3,699
                    )
                    
                    $
                    (182
                    )Adjustments
      to reconcile net (loss) to net cashused
      by operating activitiesChange
      in fair value of derivative and warrant liabilities
                    
                    
                    3,175
                    
                    
                    
                    (246
                    )Gain
      on debt relief
                    
                    
                    -
                    
                    
                    
                    (10
                    )Stock
      and stock rights issued for services
                    
                    
                    213
                    
                    
                    
                    249Liquidated
      damages accrued
                    
                    
                    226
                    
                    
                    
                    -Accounts
      payable
                    
                    
                    -
                    
                    
                    
                    (2
                    )Accrued
      expenses
                    
                    
                    49
                    
                    
                    
                    162Net
      cash used in operating activities
                    
                    
                    (36
                    )
                    
                    
                    (29
                    )Cash
      flows from financing activities:Increase
      in unearned compensation
                    
                    
                    (26
                    )
                    
                    
                    -Proceeds
      from convertible note payable, net of issuance costs
                    
                    
                    49
                    
                    
                    
                    38Net
      cash provided (used) by financing activities
                    
                    
                    23
                    
                    
                    
                    38Net
      Change in cash and cash equivalents
                    
                    
                    (13
                    )
                    
                    
                    9Cash
      and cash equivalents, beginning of year
                    
                    
                    22
                    
                    
                    
                    -Cash
      and cash equivalents, end of year
                    
                    $
                    9
                    
                    
                    $
                    9
 See
accompanying notes to consolidated financial statements
  6
  TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Three and Nine Months Ended September 30, 2009
 
 NOTE
1 - ORGANIZATION AND BASIS OF PRESENTATION
 
 INTERIM
INFORMATION
 
 The
accompanying interim consolidated financial statements include the accounts of
TN-K Energy Group Inc. and its wholly owned subsidiaries and have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). We have eliminated all significant intercompany
transactions. We have condensed or omitted certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
pursuant to such regulations. These financial statements should be read in
conjunction with the audited financial statements and the notes thereto included
in our Annual Report on Form 10-K for the year ended December 31,
2008.
 
 In the
opinion of our management, the accompanying financial statements contain all
adjustments necessary to present fairly our financial position at September 30,
2009, and the results of operations and cash flows for the three and nine months
ended September 30, 2009 and 2008. Certain reclassifications have been made to
prior year amounts in order to conform to the current year presentation. The
results of operations for the interim periods are not necessarily indicative of
the results of operations for the full year.
 
 The
accompanying consolidated financial statements include the accounts of TN-K
Energy Group Inc. ("TN-K" "we," "our," "us," or the "Company") (formerly Digital
Lifestyles Group, Inc.) and TN-K's wholly owned subsidiaries. All significant
intercompany transactions have been eliminated.
 
 As of
September 30, 2009, we had no business operations. As discussed in Note 8, we
entered into the energy industry in October 2009 through the leasing of acreage
in Tennessee and Kentucky. It is our intent to expand our operations to include
the sale of oil and natural gases. As of September 30, 2009, we had
approximately $15 million in unsecured debt, virtually all of which is past due,
and we have insignificant assets. During the fiscal year ended December 31,
2008, we incurred cash costs of approximately $35,000 primarily related to
operating costs, such as rent for office space, utilities, employee
compensation, costs of maintaining the business as a public entity, professional
expenses (including legal and accounting fees) related to attempting to
negotiate a business combination and bringing the Company current in its SEC
filings.
 
 We
currently have capital resources sufficient to meet our current operating and
capital needs.  Additionally, we have announced the acquisition of oil
and gas properties in our Form 8-K filing on November 11, 2009. As a result of
this acquisition, we expect to cash flow in a sufficiency to meet our immediate
working capital needs for the foreseeable future. We may depend upon our ability
to arrange for additional debt or equity financing to meet our liquidity
requirements. We currently have a severe shortage of capital, significant debt,
and are under default under existing credit and loan agreements,
and
 
 7
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 we may
not be able to arrange for debt or equity financing from third parties on
favorable terms, or at all. As disclosed in Note 8, we have exited the shell
status and started our operations in the energy sector, changed our name and
raised $51,000 in capital. We believe these actions will further facilitate our
efforts to develop our business and generate sufficient revenues to fund
operations.
 
 CASH AND CASH
EQUIVALENTS
 
 Cash and
cash equivalents consist of cash on hand, cash on deposit and all highly liquid
investments with original maturities at the date of purchase of less than three
months. Cash equivalents consist primarily of cash deposited in money market
accounts. Our cash and cash equivalents are on deposit with financial
institutions, which deposits at times may exceed federally insured
limits.
 
 USE OF
ESTIMATES
 
 The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the recorded amount of
revenues and expenses during the reporting periods. On an on-going basis, we
evaluate our estimates including but not limited to, those related to (i)
valuation of derivative instruments, (ii) fair value of stock transactions,
and  (iii) deferred tax asset valuation allowances. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis of making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions, and such differences
may be material to the consolidated financial statements.
 
 FAIR VALUE OF FINANCIAL
INSTRUMENTS
 
 Our
derivative and warrant liabilities are presented on our balance sheets at fair
value. For other liabilities it is not practical to estimate the fair value
because there is no established market for these instruments as we do not
currently have the resources to settle them and it is inappropriate to estimate
future cash flows, which are largely dependent on the need for additional
capital.
 
 CONCENTRATIONS
 
 There are
no financial instruments that potentially subject us to a concentration of
credit risk.  Pending the determination of the actual cash flows from
our November 7, 2009 acquisition, we have insignificant amount of cash and
no accounts receivable as of September 30, 2009 and December 31,
2008.
 
 8
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
 
 DERIVATIVE FINANCIAL
INSTRUMENTS
 
 The
Company has historically used derivative instruments to facilitate its financing
transactions. Under the provisions  ASC 815 the Company is required to
classify certain non-employee stock options and warrants (free-standing
derivatives) as liabilities. Our derivative financial instruments also consist
of embedded and free-standing derivatives related to the Alloy note (see Note
3). The accounting treatment of derivative financial instruments requires that
the Company record the derivatives at their fair values as of the inception date
of the agreement and at fair value as of each subsequent balance sheet date. The
fair value of all derivatives at September 30, 2009 and December 31, 2008
totaled approximately $3,275,000 and $100,000, respectively, and are classified
as long-term liabilities. Any change in fair value of these instruments will be
recorded as non-operating, non-cash income or expense at each reporting date. If
the fair value of the derivatives is higher at the subsequent balance sheet
date, the Company will record a non-operating, non-cash charge. If the fair
value of the derivatives is lower at the subsequent balance sheet date, the
Company will record non-operating, non-cash income. At September 30, 2009 and
December 31, 2008 derivatives were valued primarily using the Black-Scholes
Option Pricing Model with the following assumptions: dividend yield of 0%,
annual volatility of 179%, risk free interest rate of 2.11% - 4.83%, and
expected life of 1-7 years.
 
 For the
nine months ended September 30, 2009 the net increase in the derivative and
warrant liabilities was approximately $3,175,000. For the nine months ended
September 30, 2008 the net decrease in the derivative and warrant liabilities
was approximately $246,000, both of which are recorded as components of other
income (expense) in the accompanying consolidated statements of
operations.
 
 REVENUE
RECOGNITION
 
 We ceased
all previous operations in April 2005 and had no significant  revenues
through September 30, 2009. As disclosed in Note 8, in October 2009 we started
operations in the energy industry and we anticipate that we will retain a 25%
working interest in each well drilled. It is our intention to sell the remaining
60% interest, after paying a royalty, to one or more third parties.
 
 STOCK-BASED
COMPENSATION
 
 Stock-based
compensation expense is recognized in the statement of operations for the nine
months ended September 30, 2009 and 2008 is based on awards ultimately expected
to vest. Compensation expense has been reduced for estimated pre-vesting
forfeitures.  ASC 718  requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. We estimated forfeitures to be 0% of
the options issued.
 
 NET (LOSS) PER
SHARE
 
 Basic net
(loss) per share excludes dilution and is computed by dividing net (loss) income
by the weighted average number of common shares outstanding during the reported
periods. Diluted net (loss)
  9
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
 
 income
per share reflects the potential dilution that could occur if other commitments
to issue common stock were exercised.
 
 The
assumed effects of the exercise of all potentially dilutive securities at
September 30, 2009 and 2008, respectively, and the application of the treasury
stock method would have been anti-dilutive. Therefore, there are no differences
between basic and diluted per share amounts in the 2009 and 2008 quarterly
statements of operations.
 
 RECENT ACCOUNTING
PRONOUNCEMENTS
  Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”), which was formerly known as SFAS
168.  ASC 105-10 establishes the FASB Accounting Standards
Codification (the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S.
GAAP.  Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative U.S. GAAP for SEC
registrants.  All guidance contained in the Codification carries an equal
level of authority.  The Codification superseded all existing non-SEC
accounting and reporting standards and all other non-grandfathered, non-SEC
accounting literature not included in the Positions or Emerging Issues Task
Force Abstracts.  Instead, it will issue Accounting Standards Updates
(“ASUs”).  The FASB will not consider ASUs as authoritative in their own
right. ASUs will serve only to update the Codification, provide background
information about the guidance and provide the bases of conclusions on the
change(s) in the Codification.  References made to FASB guidance throughout
this document have been updated for the Codification.
 
 In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS
157”), which was primarily codified into ASC Topic 820. This standard defines
fair value, establishes the framework for measuring fair value in accounting
principles generally accepted in the United States and expands disclosure about
fair value measurements. This pronouncement applies under other accounting
standards that require or permit fair value measurements. Accordingly, this
statement does not require any new fair value measurement. This statement is
effective for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The adoption of ASC 820 did not have a material
impact on our financial statements.
 
 In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities - including an amendment of FAS 115 (“SFAS
159”), which was primarily codified into Topic 825. SFAS 159 allows companies to
choose, at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be measured at fair
value. Unrealized gains and losses shall be reported on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
SFAS 159 also establishes presentation and disclosure requirements. We are
continuing to evaluate the desirability of adopting SFAS 159. SFAS 159
was
 
 10
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
 
 effective
for fiscal years beginning after November 15, 2007 and will be applied
prospectively. The Company has elected not to adopt SFAS 159.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (“SFAS 141R”), which was primarily codified into Topic 805
“Business Combinations” in the ASC, and SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment of Accounting Research
Bulletin No. 51(“SFAS 160”), which was primarily codified into Topic 810
“Consolidations” in the ASC. SFAS No. 141R requires an acquirer to measure the
identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree at their fair values on the acquisition date, with
goodwill being the excess value over the net identifiable We expect ASC 810 will
have an impact on our accounting for future business combinations once adopted,
but the effect will depend on the terms of such future transactions. SFAS No.
160 clarifies that a noncontrolling interest in a subsidiary should be reported
as equity in the consolidated financial statements. The calculation of earnings
per share will continue to be based on income amounts attributable to the
parent. SFAS No. 141R and SFAS No. 160 are effective for financial statements
issued for fiscal years beginning after December 15, 2008.  Early adoption
is prohibited.  SFAS No. 141R will impact the valuation of business
acquisitions made in 2009 and forward.  The Company adopted SFAS No. 160 on
July 1, 2009. As a result, implementation of SFAS No. 160 had no impact on the
Company’s condensed consolidated financial statements.  The adoption of
this pronouncement did not have a material impact on the Company's financial
position or results of operations.
  In June
2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,
Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (“EITF07-5”), now codified under ASC Topic No. 815.
This literature provides guidance on how to determine if certain instruments (or
embedded features) are considered indexed to our own stock, including
instruments similar to our convertible senior notes. This new guidance requires
companies to use a two-step approach to evaluate an instrument’s contingent
exercise provisions and settlement provisions in determining whether the
instrument is considered to be indexed to its own stock and exempt from previous
accounting literature for derivative instruments and hedging activities as
codified primarily under ASC Topic No. 815. Although this new guidance is
effective for fiscal years beginning after December 15, 2008, any
outstanding instrument at the date of adoption will require a retrospective
application of the accounting through a cumulative effect adjustment to retained
earnings upon adoption. The adoption of this guidance did not have a material
impact on our consolidated financial position, results of operations or cash
flows.
 
 FASB
Staff Position (FSP) “SFAS
142-3, Determination of the Useful Life of Intangible Assets,”which was
primarily codified into Topic 350, amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset. The FSP provides that in addition to
considering the entity specific factors in paragraph 11 of Statement
No.
 
 
 11
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
 
 142, an
entity shall consider its own historical experience in renewing or extending
similar arrangements. Alternatively, if an entity lacks historical experience,
it shall consider the assumptions a market participant would use consistent with
the highest and best use of the asset, adjusted for the entity specific factors
in paragraph 11 of Statement No. 142. The FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years.Adoption of this FSP had no
material impact on our results of operations or financial position.
 
 FSP EITF
03-6-1, which was primarily codified into Topic 260, is effective for fiscal
years beginning after December 15, 2008 and is to be applied retrospectively.
This FSP requires share based compensation awards that qualify as participating
securities to be included in basic EPS using the two-class method. A share based
compensation award is considered a participating security if it receives
non-forfeitable dividends. A non-forfeitable dividend would be a dividend that
the participant receives before the award is vested and if the participant
forfeits the actual shares awarded the dividends he/she has received do not have
to be paid back to the company. This guidance was adopted in the first quarter
and has been applied to all periods shown. See Note 7 for further
discussion.
 
 
 12
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
  In May
2009, the FASB issued Statement No. 165, "Subsequent Events," which was
primarily codified into ASC Topic 825, establishes general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. In
particular, this Statement sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements, and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. In accordance with this
Statement, an entity should apply the requirements to interim or annual
financial periods ending after June 15, 2009. The Company evaluated subsequent
events for recognition or disclosure through November 16, 2009, which is the
date the financial statements were issued.
 
 In June
2009, the FASB issued Statement No. 166, "Accounting for Transfers of Financial
Assets-an amendment of FASB Statement No. 140." This statement removes the
concept of a qualifying special-purpose entity from Statement 140 and removes
the exception from applying FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, to qualifying special-purpose
entities. The objective in issuing this Statement is to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. This Statement must be applied as of the
beginning of each reporting entity's first annual reporting period that begins
after November 16, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. Management is
currently evaluating this standard but does not expect the impact of adoption to
be material to the results of operations or financial position of the
Company.
 
 NOTE
3 - CONVERTIBLE NOTES PAYABLE
 
 The
Company’s obligations under convertible notes payable, substantially all of
which are in default, are summarized as follows at September 30, 2009 and
December 31, 2008:
 
 
 13
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
3 - CONVERTIBLE NOTES PAYABLE – (continued)
  September
      30,
                      
                      
                      December
      31,2009
                      
                      
                      2008Convertible
      note payable to a third party with an interest rateof
      7% per annum, due September 19, 2006, net of unamortizeddebt
      discount of $0
                      
                      $
                      500,000
                      
                      
                      $
                      500,000Convertible
      note payable to a third party with an interest rateof
      7% per annum, due October 27, 2006, net of unamortizeddebt
      discount of $0
                      
                      
                      50,000
                      
                      
                      $
                      50,000Convertible
      line of credit note payable to a third party with an interest
      rateof
      7.5% per annum, amended due date December 2009
                      
                      
                      388,750
                      
                      
                      
                      339,850Convertible
      note payable to Alloy, payable upon demand
                      
                      
                      600,000
                      
                      
                      
                      600,000$
                      1,538,750
                      
                      
                      $
                      1,489,850
  The
Company's convertible notes payable obligate the Company to file and maintain a
registration statement for the shares underlying the conversion options. The
Company has failed in the performance of this obligation. Terms of certain of
the notes require the payment of liquidated damages during the period that the
Company fails to maintain the effectiveness of its registration statement.
Accordingly, in 2006 the Company, under provisions of  ASC 815 accrued
liquidated damages of about $2,436,000 through June 30 2009 for this failure. We
have provided for an additional accrual of $226,000 for the continuing effects
through November 2009 for our failure to file and maintain an effective
registration statement.
 
 NOTE
4 – STOCK WARRANTS AND OPTIONS
 
 Stock
Option Plan
 
 In
September 2009, our board of directors approved the 2009 Equity Compensation
Plan. Terms and conditions of our equity plans, including exercise price and the
period in which options are exercisable, generally are at the discretion of our
board of directors; however, no options are exercisable for more than 10 years
after the date of grant. The total number of shares of common stock reserved and
available for issuance under the plan is 4,800,000 shares.
 
 A summary
of our stock option and warrant activity, and related information for the nine
months ended September 30, 2009 follows:
 
 
 
 14
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
4 – STOCK WARRANTS AND OPTIONS – (continued)
   WeightedAverageShares
                      
                      
                      Exercise
      PriceOutstanding,
      beginning of year
                      
                      
                      20,784,544
                      
                      
                      $
                      0.43Granted
                      
                      
                      771,333
                      
                      
                      
                      0.21Exercised
                      
                      
                      -
                      
                      
                      
                      -Expired/cancelled
                      
                      
                      (1,193,333
                      )
                      
                      
                      0.54Outstanding
      and exercisable,at
      September 30, 2009
                      
                      
                      20,362,544
                      
                      
                      $
                      0.41Exercisable
      at September 30, 2009
                      
                      
                      20,252,544
                      
                      
                      $
                      0.41
  The
following table summarizes our stock options outstanding at September 30,
2009:
  Weighted-average
                      
                      
                      Weighted-remaining
                      
                      
                      averageExercise
      Price Range
                      
                      Shares
                      
                      
                      contractual
      life
                      
                      Exercise
      price$0.12-$.20
                      
                      
                      3,321,277
                      
                      
                      
                      1.29
                      
                      
                      $
                      0.19$.25-$.35
                      
                      
                      1,727,008
                      
                      
                      
                      0.31
                      
                      
                      $
                      4.26$.40-$.48
                      
                      
                      13,467,593
                      
                      
                      
                      0.47
                      
                      
                      
                      2.04$.50-$.56
                      
                      
                      1,846,666
                      
                      
                      
                      0.50
                      
                      
                      $
                      1.62Total
                      
                      
                      20,362,544
   During
the nine months ended September 30, 2009, we expensed $2,400 representing the
value of options vested to our Chief Executive Officer. In addition, we
converted accrued unpaid wages to our Chief Executive Officer totaling $141,000
for options to purchase 388,000 shares of common stock with an exercise price of
$.25 per share over a five year period. We also granted our director options to
purchase 180,000 shares of our common stock with an exercise price of $.12 per
share and recorded compensation expense of $43,189 for his
services.
 
 15
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
5 – SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  September
      30
                      
                      
                      September
      30(in
      thousands)
                      
                      2009
                      
                      
                      2008Cash
      paid during year ended:Interest
                      
                      $
                      -
                      
                      
                      $
                      -Income
      taxes
                      
                      $
                      -
                      
                      
                      $
                      -Non-cash
      investing and financing activities:Issuance
      of options as compensation
                      
                      $
                      186
                      
                      
                      $
                      246
 NOTE
6 - COMMITMENTS AND CONTINGENCIES
 
 In
connection with certain of our debts, management agreements and stock purchase
agreements, have indemnified lenders, buyers and others for certain claims
arising from our breach of representations and warranties contained in the
corresponding agreements. The duration of the guarantees and indemnities varies,
and in many cases is indefinite. These guarantees and indemnities do not provide
for any limitation of the maximum potential future payments we could be
obligated to make. Historically, we have not been obligated to make any payments
for these obligations and no
liabilities have been recorded for these indemnities and guarantees in the
accompanying consolidated balance sheets.
 
 We may
become involved in various litigation and claims, government investigations and
other legal proceedings that arise from time to time in the ordinary course of
business. We could in the future incur judgments
or enter into settlements of claims that could have a material adverse effect on
our financial condition, liquidity and results of operations.
 
 NOTE
7 – FAIR VALUE
 
 On June
28, 2008, the Company adopted the provisions of  ACS 820 for all
financial assets and financial liabilities.  ACS 820, defines fair
value, establishes a framework for measuring fair value, and enhances
disclosures about fair value measurements.  ACS 820 does not require
any new fair value measurements, but applies to other accounting pronouncements
that require or permit fair value measurements.
 
 Measurement of Fair
Value
 
 ACS
820 defines fair value as the price that would be received from selling an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value,
the Company considers the principal or most advantageous market in which it
would transact and it considers assumptions that market participants would use
when pricing the asset or liability.
 
 16
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 NOTE
7 – FAIR VALUE – (continued)
 
 Fair Value
Hierarchy
 
 ASC 820
establishes a fair value hierarchy based on whether the market participant
assumptions used in determining fair value are obtained from independent sources
(observable inputs) or reflect the Company's own assumptions of market
participant valuation (unobservable inputs). A financial instrument's
categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820 establishes
three levels of inputs that may be used to measure fair value:
 
 Level
1—Quoted prices in active markets that are unadjusted and accessible at the
measurement date for identical, unrestricted assets or liabilities;
 
 Level
2—Quoted prices for identical assets and liabilities in markets that are
inactive; quoted prices for similar assets and liabilities in active markets or
financial instruments for which significant inputs are observable, either
directly or indirectly; or
 
 Level
3—Prices or valuations that require inputs that are both unobservable and
significant to the fair value measurement.
 
 The
Company considers an active market to be one in which transactions for the asset
or liability occur with sufficient frequency and volume to provide pricing
information on an ongoing basis, and views an inactive
market as one in which there are few transactions for the asset or liability,
the prices are not current, or price quotations vary substantially either over
time or among market makers. Where appropriate the Company's or the
counterparty's non-performance risk is considered in determining the fair values
of liabilities and assets, respectively.
 
 The fair
value of our financial instruments at September 30, 2009 follows:
  (in
      thousands)
                        
                        Fair Value Measurements at Reporting Date
      UsingQuoted
      Prices inActive
      Markets for
                        
                        
                        Significant
      Other
                        
                        
                        SignificantIdentical
      Assets
                        
                        
                        Observable
      Inputs
                        
                        
                        Unobservable
      InputsDescription
                        
                        Total
                        
                        
                        (Level
      1)
                        
                        
                        (Level
      2)
                        
                        
                        (Level
      2)Derivative
      securities
                        
                        $
                        3,275
                        
                        
                        $
                        -
                        
                        
                        $
                        3,275
                        
                        
                        $
                        -
   Derivative
warrant and conversion liabilities have generally been valued using the
Black-Scholes method using as inputs: a) expected life of one-half to eight
years, b) 0% expected dividend yield, c) 4.83% bond equivalent yield, and d)
expected future volatility of 179%.
 
 17
 
 TN-K
ENERGY GROUP INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
 
 
 NOTE
8 – SUBSEQUENT EVENTS
 
 In
October 2009, the Company began operations in the energy industry by entering
into two lease agreements covering a total of 43 acres in Kentucky and
Tennessee. Under the terms of the lease for the Tennessee Property, we are
required to commence drilling operations on the leased property within one year
of the lease date.  Assuming that we comply with that requirement, the
term of the lease renews on an annual basis so long as we are producing oil
and/or gas from the site or we are continuing our drilling efforts. We are
required to pay the lessor a royalty equal to one-eighth of all oil produced and
saved from the wells drilled on the leased premises based upon the market value
of the oil.  We are also required to pay the lessor a royalty equal to
one-eighth of the market value of gas produced for any new wells drilled by us
and the lessor is entitled to gas free of charge from any gas well for use on
the leased property.  In connection therewith, we are required to lay
a 1” gas line to the residence on the leased premises.
 
 Between
October 13, 2009 and October 15, 2009 the Company sold an aggregate of 196,154
shares of its common stock and issued the purchasers three year Series A Common
Stock Purchase Warrants to purchase an aggregate of 39,231 shares of its common
stock with an exercise price of $0.31 per share in private transactions
resulting in gross proceeds to us of $51,000. We did not pay any commissions or
finder’s fees in connection with these sales and we intend to use the proceeds
for general working capital. The purchasers were accredited investors and the
transactions were exempt from registration under the Securities Act of 1933 in
reliance on exemptions provided by Section 4(2) and Regulation D of that act.
The purchasers had such knowledge and experience in business matters that each
was capable of evaluating the merits and risks of the prospective investment in
our securities. The purchasers had access to business and financial information
concerning our company.
 On
November 6, 2009 the Company entered into an Assignment of Oil and Gas Lease
with two unrelated third parties which has resulted in the company acquiring a
27.5% revenue interest in 18 oil wells, together with a 27.5% interest of all
equipment located on the wells, including tanks, well head and pumps, flow lines
and all other equipment used to operate the wells. The wells, which were drilled
between February 2008 and May 2009, are located in the J.R. Clark Lease in the
Exie Quadrangle in Green County, Kentucky.  Current production on
these wells is estimated at approximately 100 barrels per day.  There
is no current reserve report on these wells but the Company intends to obtain
one in conjunction with the filing of financial statements pursuant to Item 9.01
of the 8-K as filed on November 12, 2009.
 
 Under the
terms of the agreement, one of the owners will continue to be the operator of
the wells unless, for any reason, he is unable to continue at which time we have
the right to operate any of the wells to produce oil and/or gas.  We
are responsible for 32% of all costs for the operation of these
wells.
 
 As full
and complete consideration for the net working interest, we issued the assignors
an aggregate of 4,000,000 shares of our common stock valued at $1
million.  The shares, which are “restricted securities” as that term
is defined in Regulation D promulgated under the Securities Act of
1933,  were issued in a private transaction exempt from registration
under the Securities Act of 1933 in reliance on an exemption provided by Section
4(2) of that act.  The recipients were accredited
investors.
 18
 Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
 
 The following discussion of our
financial condition and results of operationfor the three months
and nine months ended September 30, 2009 and 2008 should be read in conjunction
with the financial statements and the notes to those statements that are
included elsewhere in this report. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding
Forward-Looking Statements and Business sections appearing in our Form 10-K for
the year ended December 31, 2008 as filed with the Securities and Exchange
Commission.  We use words such as “anticipate,” “estimate,” “plan,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking
statements.
 
 Plan
of Operations
 
 We are an independent energy company that has recently
begun operations in the energy sector initially through the leasing of acreage
in Tennessee and Kentucky.  Prior to our entry into the energy
industry in October 2009, we were a “shell company” as such term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934. As a result of entering
into these leases and undertaking efforts to begin drilling operations on the
sites we ceased to be a shell company.  Since entering into these
initial leases, in November 2009 we began drilling operations on one of the
sites and, in a separate transaction, acquired a 27.5% revenue interest in 18
oil wells, together with a 27.5% interest of all equipment located on the wells,
including tanks, well head and pumps, flow lines and all other equipment used to
operate the wells.  These wells produce approximately 100 barrels of
oil daily and proceeds from the sale of oil from these wells will provide an
immediate source of revenue to our company.
 
 It is our intent to continue to expand
our operations to include the sale of oil and natural gas and the leasing of
additional properties for oil, natural gas and coal
production.  Presently, our leased properties include the leases for
approximately 43 acres in Kentucky and Tennessee.  The Tennessee lease
is approximately 10.5 acres and is considered a direct offset to a well located
on an adjacent property that was a 500 barrel per day flowing well when
drilled.  The Kentucky lease is approximately 32 acres and the company
believes this site is of particular promise due to several producing formations
in the immediate area, including the Granville, Sunnybrook, Stones River,
Murfreesboro, Wells Creek and Knox formations.
 
 We entered into the leases for the
acreage in Tennessee and Kentucky in two separate transactions, both of which
occurred in October 2009.  Under the terms of the lease for the
Tennessee property we agreed to pay the lessor a royalty equal to one-eighth of
all oil produced and saved from the wells drilled on the leased premises based
upon the market value of the oil as well as a royalty equal to one-eighth of the
market value of gas produced for any new wells drilled by us.  Under
the terms of the lease for the Kentucky Property, we agreed to pay the lessor a
one-eighth royalty of the market price of the oil we extract from the
site.  In addition, we are required to pay the lessor 15% of the
market price of gas produced from the site.
 
 We will be the operator of the wells
drilled on these properties.  In November 2009 we completed the
process to obtain all of the permits necessary to commence drilling the David
Irwin Well #1 on the lease in Clinton County, Kentucky and immediately
thereafter we began our drilling operations.  There are producing
wells in six known formations within approximately 5,000 feet of this lease. The
known producing formations are the Granvelle, Sunnybrook, Stones River,
Murfreesbro, Wells Creek and the Knox formations.  This is the first
well of as many as five wells that can potentially be drilled on this
lease.
 
 We anticipate that we will generally
retain a 25% working interest in each well drilled, with the property owner
retaining a 12.5% to 15% royalty interest.  In is our intention to
then sell the remaining approximate 60% interest of each well to one or more
third parties.  Based upon our current estimates, we believe we should
be able to sell interests in the wells in the range of $800 to $1,200 for each
percent of interest, which will provide sufficient funds to pay all costs
associated with drilling the wells which are estimated to range from $8 to $12 a
foot average in area, as well as all site preparation and related title and
property fees.  We have sold the 50% interest in the David Irwin Well
#1 to an unrelated third party which provided us with sufficient funds to cover
the anticipated drilling costs while retaining a 35% interest in the production
from this well.
 
 
 19
 We have also acquired the 27.5% revenue
interest in 18 wells located in the J.R. and Pansy Clark Leases in the Exie
Quadrangle in Green County, Kentucky together with the equipment used to operate
those wells in exchange for 4 million shares of our common stock valued at $1
million.  The 18 wells were drilled between February 2008 and May 2009
and current production on these wells is estimated at approximately 100 barrels
per day.  Under the terms of the agreement, one of the owners will
continue to be the operator of the wells unless, for any reason, he is unable to
continue at which time we have the right to operate any of the wells to produce
oil and/or gas.  We are responsible for 32% of all costs for the
operation of these 18 wells which presently total approximately $1,800 per month
in the aggregate; as a result, we anticipate our total share of the operating
costs will be approximately $576 monthly at the current level of
operations.  There is no current reserve report on these wells but we
intend to obtain one in conjunction with the filing of financial statements with
the Securities and Exchange Commission relative to this
transaction.  We will begin reporting revenues from these wells in the
fourth quarter of 2009.
 
 While we have been able to begin
operations using a minimum of cash, and we raised $51,000 of working capital
subsequent to the end of the quarter, we may need to raise additional capital to
fully develop our operations.  As described above, we intend to
continue to sell interests in each of the wells we drill on the Tennessee and
Kentucky properties which will provide sufficient funds to pay the costs
associated with the development and drilling of those wells.  Our
yearly general and administrative cash overhead costs are approximately
$100,000, which includes rent, utilities, employee compensation, costs to
maintain the company as a public entity including legal, accounting and EDGAR
filing fees.  As a result of the restructure of Mr. Page’s employment
agreement as described later in this section, we have been able to reduce our
general and administrative expenses.  We will anticipate, however,
that these costs will increase as we hire additional employees and expand our
operations.  We are not able, however, at this time to quantify the
amount of additional expenses we may incur in future periods.  We do
not have any internal or external sources of capital, other than a $400,000
credit line which matures in December 2009.
 
 As described later in this report, we
our balance sheet at September 30, 2009 reflects a significant amount of debt
including past due secured and unsecured notes, accounts payable, liquidated
damages and accrued expenses.  These vast majority of these
obligations were incurred by prior management at a time when we were a
technology company prior to discontinuing those operations in April
2005.  While we anticipate that revenues from our existing operations
will be sufficient revenues to pay our operating expenses, we cannot predict if
these revenues will be sufficient to enable us to satisfy these past due
obligations.  Accordingly, it is possible that we will seek to raise
additional working capital through the sale of our securities.  There
are no assurances, however, we will be successful in our efforts to grow our
business or, if necessary, to raise additional capital.  In that
event, and if our revenues are not sufficient to pay our expenses and satisfy
our obligations, it is possible that we will be unable to continue as a going
concern in which event investors could lose their entire investment in our
company.
 
 Other
recent events
 
 In addition to exiting shell status and
starting our operations in the energy sector during the third quarter of 2009,
we completed a number of other actions which we believe will further facilitate
our efforts to develop our business and generate sufficient revenues to fund our
operations, including:
 
 •           Name
Change.  Effective at the close of business on October 19, 2009
we changed our name from Digital Lifestyles Group, Inc. to TN-K Energy Group
Inc. to more accurately reflect our operations and our geographic focus
within Tennessee and Kentucky.  At market open on October 29, 2009 the
ticker symbol for our common stock, which is quoted in the over the counter
market on the Pink Sheets, was changed to TNKY;
 
 •           Capital
Raise.  Between October 13, 2009 and October 15, 2009 we sold
an aggregate of 196,154 shares of our common stock and issued the purchasers
three year Series A Common Stock Purchase Warrants to purchase an aggregate of
39,231 shares of our common stock with an exercise price of $0.31 per share in
private transactions resulting in gross proceeds to us of $51,000.  We
are using these funds for working capital;
 
 •           Adoption of our 2009 Equity
Compensation Plan.  On September 29, 2009 our Board of
Directors adopted our 2009 Equity Compensation Plan. The purpose of the 2009
Equity Compensation Plan is to enable our company to offer to our employees,
officers, directors and consultants whose past, present and/or potential
contributions to our company have been or will be important to our success, an
opportunity to acquire a proprietary interest in our company.  We have
reserved 4,800,000 shares of our common stock for issuance upon grants made
under the plan. Following the adoption of the plan, we granted compensatory
options to both Mr. Ken Page, our President and CEO, and Mr. Brad McNeil, a
member of our Board of Directors.  These options are in place of cash
compensation and will permit us to conserve our cash resources as we grow our
company; and
 
 20
 •           Compensation Arrangements with Mr.
Page.  On September 29, 2009 we also entered into an agreement
with Mr. Page pursuant to which certain terms of his employment agreement were
amended at his request in an effort to assist our company during our development
of our new business.  Under Amendment No. 1 to Mr. Page’s employment
agreement, his base salary was reduced from $72,000 per year to $50,000 per
year.  In addition, we granted him options to purchase an aggregate of
120,000 shares of our common stock pursuant to our 2009 Equity Compensation Plan
which have an exercise price of $0.25 per share.  The options vest in
12 equal monthly installments at the end of each month beginning in September
2009.   In addition, at September 29, 2009 we owed Mr. Page
$141,000 in accrued but unpaid compensation.  On September 29, 2009 we
entered into an agreement with him whereby he (i) forgave an aggregate of
$44,000 of accrued but unpaid compensation due him, which shall be treated as a
capital contribution, and (ii) accepted five year non-qualified options to
purchase an aggregate of 388,000 shares of our common stock granted under our
2009 Equity Compensation Plan as full and complete payment for the balance of
$97,000 in accrued but unpaid compensation due him.  As with his
voluntary reduction in salary, Mr. Page elected to forgo receipt of the cash
compensation due him given our limited cash resources in an effort to assist our
company with its capital needs as we develop our new business.
 
 Going
Concern
 
 We have incurred net losses of
approximately $26 million since inception through September 30,
2009.  At September 30, 2009 we had minimal cash, no other assets and
our total liabilities were approximately $14.8 million, the majority of which
are past due.  The report of our independent registered public
accounting firm on our financial statements for the year ended December 31, 2008
contains an explanatory paragraph regarding our ability to continue as a going
concern based upon  recurring operating losses and our need to obtain
additional financing to sustain operations.  While subsequent to
September 30, 2009 we have exited shell status and begun operations in the
energy sector which we believe will provide sufficient revenues to fund our
ongoing operations, there are no assurances that our revenues from these
operations will generate sufficient revenues in future periods to continue to
expand our business and satisfy our existing obligations.  Our ability
to continue as a going concern is dependent upon a number of factors over which
our control is limited, including our ability to generate sufficient revenues to
fund our operations, obtain the necessary financing to meet our obligations and
repay our liabilities.  There are no assurances that we will continue
as a going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
 
 Results
of Operations
 
 Three
months and nine months ended September 30, 2009 compared to three months and
nine months ended September 30, 2008
 
 Revenues
 
 As we did not exit shell status and
commence our operations in the energy sector until October 2009, we did not
report any revenues during either the 2009 or 2008 periods.  We
anticipate, however, that we will begin generate revenues from operations during
the fourth quarter of 2009 although at this time we are not able to quantify the
anticipated amounts of such revenue.
 
 Operating
expenses
 
 Our operating expenses include rent,
insurance, payroll and professional fees.  Operating expenses
decreased approximately 14% and approximately 50% for three and nine months
ended September 30 2009, respectively, as compared to comparable periods in
2008.  During the 2009 period option compensation expense decreased
approximately $52,000 and approximately $175,000, respectively, for the three
and nine months ended September 30, 2009 while professional fees increased
approximately $43,000 and approximately $54,000 during the same comparable
periods.  As described elsewhere herein, during the third quarter of
2009 at his request we restructured Mr. Page’s compensation, lowering it by
$22,000 per year which will reduce our compensation expense related to his
employment agreement in future periods.  In addition, during the third
quarter of 2009 we filed our delinquent annual reports for 2006, 2007 and 2008,
together with our quarterly reports for the first two quarters of 2009, with the
Securities and Exchange Commission and are now current in our reporting
obligations.  In connection therewith, we incurred approximately
$52,000 of additional expenses representing, legal, accounting and EDGAR filing
fees in the quarter.
 
 21
 Total
other income (expense)
 
 During the three months and nine months
ended September 30, 2009 our interest expense decreased approximately 8% and
approximately 11%, respectively, from the comparable periods in 2008 which
reflects the reclassification of certain debt to equity.  During the
nine months ended September 30, 2008 we recognized a one-time $10,000 gain on
relief of debt for which there were no comparable events in the 2009
periods.
 
 Change in fair value of derivative and
warrant liabilities expense consist of income or expense associated with the
change in the fair value of derivative liabilities associated with the various
outstanding warrants primarily as a result of the application of ASC 815 to our
financial statements.  The difference in fair value of the derivative
liabilities between the date of their issuance and their measurement date
amounted to an increase of approximately $3.2 million for each of the three and
nine months ended September 30, 2009, respectively, from the comparable periods
in 2008. The increase is driven primarily by the increase in the stock price in
addition to a decrease in the remaining terms for the options .  While
these are non-cash items, the application of ASC 815 has a significant impact on
our financial statements.
 
 Other income totaling approximately
$6,000, net, in the 2009 periods, is primarily attributable to royalties
received for the use of our name under a marketing and license agreement which
expired in January 2009.  During the nine months ended September 30,
2008, we had received approximately $36,000 from a marketing and licensing
agreement for which there was no comparable income in the 2009
periods.
 
 Liquidity
and Capital Resources
 
 As of September 30, 2009, we had $9,000
in cash and a working capital deficit of approximately $11.6
million.  At September 30, 2009 we had no assets other than cash and
approximately $14.8 million of liabilities, of which all but approximately
$388,750 are past due, and we do not have the funds necessary to settle these
obligations.  Included in our liabilities at September 30, 2009 are
the following:
 
 •           approximately
$6.4 million of accounts payable which represents obligations to various vendors
including approximately $1 million due Advanced Micro Devices, approximately
$1.2 million due American Express and approximately $1.3 due Microsoft
Licensing, Inc.,
 
 •           approximately
$2.662 million of liquidated damages due Laurus Master Fund, Ltd. and Alloy
Marketing and Promotions related to transactions which occurred in November 2004
and April 2005, respectively,
 
 •           approximately
$999,000 of accrued expenses which represents approximately $640,000 of interest
on the convertible notes, approximately $318,000 of accrued payables,
approximately $31,000 of accrued royalties, and unpaid payroll taxes of
approximately $10,000,
 
 •           approximately
$442,000 of principal and accrued interest due Mr. Dan Page, a principal
shareholder and the father of our CEO, under the terms of 7.5% convertible
promissory notes which are due on December 31, 2009,
 
 •           approximately
$1.1 million principal amount of convertible notes payable are described below
under “Past Due Notes”, and
 
 •           approximately
$3.3 million of non-cash derivative and warrant liabilities.
 
 As described earlier in this section,
subsequent to September 30, 2009 we raised $51,000 in working capital through
the sale of our securities and believe that our current operations will be
sufficient to fund our ongoing operating expenses.  We have, however,
convertible notes in the aggregate principal amount of $388,750 due to Mr. Dan
Page, the father of our CEO, which mature on December 31, 2009.  We do
not presently have the funds necessary to satisfy this obligation and, while we
have had preliminary discussions with Mr. Page regarding the extension of all or
a portion of this obligation, there are no assurances Mr. Page will either
convert the note at maturity or extend the due date.  As of September
30, 2009 we owe Mr. Page approximately $442,000 in principal and interest under
these notes.
 
 22
 Cash
Flow from Operating Activities
 
 For the nine months ended September 30,
2009, net cash used by operating activities was approximately $36,000 as
compared to approximately $29,000 in the nine months ended June 30,
2008.  In the period 2009, we offset our loss from operations with
increases in accrued expenses and derivative liabilities, stock issued for
services and accrued expenses.  In the period 2008, we offset our loss
with an increase in accrued expenses and stock compensation
expense.  These increases were offset by a decrease in our derivative
liabilities, a one-time gain on debt relieve and a decrease in our accounts
payable..
 
 Cash
Flow from Financing Activities
 
 In the nine months ended September 30,
2009 we received approximately $49,000 from the proceeds on notes payable as
compared to approximately $38,000 during the 2008 period.
 
 Past
Due Notes at September 30, 2009
 
 •           $600,000
principal amount due Alloy Marketing and Promotions, LLC under the terms of an
unsecured convertible promissory note issued to it in April 2005 in payment to
Alloy for marketing and promotional services rendered to us.  Under
the terms of this demand note which originally bore interest at the rate of 10%
per annum, the principal and interest could be converted into shares of our
common stock at any time after April 1, 2005 at a conversion price equal to 75%
of the fair market value of our common stock providing that the underlying
shares were covered by an effective registration statement.  In
connection with the issuance of the note we entered into a registration rights
agreement with Alloy whereby we agreed to file a registration statement with the
SEC to cover the resale of the shares of common stock into which the note could
be converted.  We agreed to pay Alloy liquidated damages if we did not
file the registration statement within a specified period, if we failed to
maintain an effective registration statement or if our common stock was
suspended from trading on any market.  We have not filed the
registration statement and at September 30, 2009 we have accrued liquidated
damages in the amount of $310,500 which were due Alloy.  This note
remains outstanding and interest is now being accrued at the default rate of 12%
per annum, with a late payment fee of 6% per month.  At September 30,
2009 we owed Alloy an aggregate of approximately $1,352,790 under this note,
which includes principal, accrued but unpaid interest, late fees, and
liquidation damages;
 
 •           $500,000
principal amount due Mr. L.E. Smith under the terms of a convertible promissory
note issued in September 2005.  This note, which bears interest at 7%
per annum and is convertible into shares of our common stock at a conversion
price of $0.25 per share, was due in September 2006.  This note is in
default.  At September 30, 2009 we owed Mr. Smith an aggregate of
approximately $635,750 under this note, which includes principal and accrued but
unpaid interest; and
 
 •           $50,000
principal amount due Mr. Robert Wood under the terms of a convertible promissory
note issued in October 2005.  This note, which bears interest at 7%
per annum and is convertible into shares of our common stock at a conversion
price of $0.25 per share, was due in October 2006.  The purchaser was
also issued corresponding five warrants to purchase 40,000 shares of our common
stock common stock at an exercise price of $0.25 per share.  In
connection with both the convertible note and the warrants, we entered into a
registration rights agreement with the purchaser whereby we agreed to register
for resale the shares underlying the convertible note and
warrants.  This note is in default and we did not register the shares
underlying either the note or the warrant.  At September 30, 2009 we
owed Mr. Wood an aggregate of approximately $68,875 under this note, which
includes principal and accrued but unpaid interest.
 
 Recent
Accounting Pronouncements
 
 Effective July 1, 2009, we adopted the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC
105-10”), which was formerly known as SFAS 168.  ASC 105-10
establishes the FASB Accounting Standards Codification (the “Codification”) as
the source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with U.S. GAAP.  Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants.  All guidance contained in the
Codification carries an equal level of authority.  The Codification
superseded all existing non-SEC accounting and reporting standards and all other
non-grandfathered, non-SEC accounting literature not included in the Positions
or Emerging Issues Task Force Abstracts.  Instead, it will issue
Accounting Standards Updates (“ASUs”).  The FASB will not consider
ASUs as authoritative in their own right. ASUs will serve only to update the
Codification, provide background information about the guidance and provide the
bases of conclusions on the change(s) in the Codification.  References
made to FASB guidance throughout this document have been updated for the
Codification.
 
 23
 In September 2006, the FASB issued SFAS
157, “Fair Value Measurements” (“SFAS 157”), which was primarily codified into
Topic 820. This standard defines fair value, establishes the framework for
measuring fair value in accounting principles generally accepted in the United
States and expands disclosure about fair value measurements. This pronouncement
applies under other accounting standards that require or permit fair value
measurements. Accordingly, this statement does not require any new fair value
measurement. This statement is effective for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. The adoption of
SFAS 157 did not have a material impact on our financial
statements.
 
 In February 2007, the FASB issued SFAS
159, The Fair Value Option for Financial Assets and Financial Liabilities -
including an amendment of FAS 115 (“SFAS 159”), which was primarily codified
into Topic 825. SFAS 159 allows companies to choose, at specified election
dates, to measure eligible financial assets and liabilities at fair value that
are not otherwise required to be measured at fair value. Unrealized gains and
losses shall be reported on items for which the fair value option has been
elected in earnings at each subsequent reporting date. SFAS 159 also establishes
presentation and disclosure requirements. SFAS 159 was effective for fiscal
years beginning after November 15, 2007 and will be applied
prospectively.  We have elected not to adopt SFAS 159.
 
 In December 2007, the FASB issued SFAS
No. 141 (revised 2007), Business Combinations (“SFAS 141R”), which was primarily
codified into Topic 805 “Business Combinations” in the ASC, and SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of
Accounting Research Bulletin No. 51(“SFAS 160”), which was primarily codified
into Topic 810 “Consolidations” in the ASC. SFAS No. 141R requires an acquirer
to measure the identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree at their fair values on the acquisition
date, with goodwill being the excess value over the net
identifiable.  We expect ASC 810 will have an impact on our accounting
for future business combinations once adopted, but the effect will depend on the
terms of such future transactions. SFAS No. 160 clarifies that a noncontrolling
interest in a subsidiary should be reported as equity in the consolidated
financial statements. The calculation of earnings per share will continue to be
based on income amounts attributable to the parent. SFAS No. 141R and SFAS No.
160 are effective for financial statements issued for fiscal years beginning
after December 15, 2008.  Early adoption is
prohibited.  SFAS No. 141R will impact the valuation of business
acquisitions made in 2009 and forward.  We adopted SFAS No. 160 on
July 1, 2009. As a result, implementation of SFAS No. 160 had no impact on our
consolidated financial statements.  The adoption of this pronouncement
did not have a material impact on our financial position or results of
operations.
 
 In June 2008, the FASB ratified
Emerging Issues Task Force (“EITF”) Issue No. 07-5, Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (“EITF
07-5”), now codified under ASC Topic No. 815. This literature provides guidance
on how to determine if certain instruments (or embedded features) are considered
indexed to our own stock, including instruments similar to our convertible
senior notes. This new guidance requires companies to use a two-step approach to
evaluate an instrument’s contingent exercise provisions and settlement
provisions in determining whether the instrument is considered to be indexed to
its own stock and exempt from previous accounting literature for derivative
instruments and hedging activities as codified primarily under ASC Topic No.
815. Although this new guidance is effective for fiscal years beginning after
December 15, 2008, any outstanding instrument at the date of adoption will
require a retrospective application of the accounting through a cumulative
effect adjustment to retained earnings upon adoption. The adoption of this
guidance did not have a material impact on our consolidated financial position,
results of operations or cash flows.
 
 FASB Staff Position (FSP) “SFAS 142-3,
Determination of the Useful Life of Intangible Assets,” which was primarily
codified into Topic 350, amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset. The FSP provides that in addition to considering
the entity specific factors in paragraph 11 of Statement No. 142, an entity
shall consider its own historical experience in renewing or extending similar
arrangements. Alternatively, if an entity lacks historical experience, it shall
consider the assumptions a market participant would use consistent with the
highest and best use of the asset, adjusted for the entity specific factors in
paragraph 11 of Statement No. 142. The FSP is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Adoption of this FSP had no material impact on our
results of operations or financial position.
 
 24
 FSP EITF 03-6-1, which was primarily
codified into Topic 260,  is effective for fiscal years beginning
after December 15, 2008 and is to be applied retrospectively. This FSP requires
share based compensation awards that qualify as participating securities to be
included in basic EPS using the two-class method. A share based compensation
award is considered a participating security if it receives non-forfeitable
dividends. A non-forfeitable dividend would be a dividend that the participant
receives before the award is vested and if the participant forfeits the actual
shares awarded the dividends he/she has received do not have to be paid back to
the company. This guidance was adopted in the first quarter of 2009 and has been
applied to all periods shown. See Note 7 to the Notes to Consolidated Financial
Statements appearing elsewhere in this report for further
discussion.
 
 In May 2009, the FASB issued Statement
No. 165, "Subsequent Events," which was primarily codified into Topic 825,
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. In particular, this Statement sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009. We evaluated
subsequent events for recognition or disclosure through November 16, 2009, which
is the date the financial statements were issued.
 
 In June 2009, the FASB issued Statement
No. 166, "Accounting for Transfers of Financial Assets-an amendment of FASB
Statement No. 140." This statement removes the concept of a qualifying
special-purpose entity from Statement 140 and removes the exception from
applying FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, to qualifying special-purpose entities. The
objective in issuing this Statement is to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. This Statement must be applied as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods
thereafter.  Management is currently evaluating this standard but does
not expect the impact of adoption to be material to our results of operations or
financial position.
 
 Other accounting standards that have
been issued or proposed by the FASB or other standards-setting bodies that do
not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
 
 Item
3.            Quantitative
and Qualitative Disclosures About Market Risk.
 
 Not applicable for a smaller reporting
company.
 
 Item
4T.          Controls and
Procedures.
 
 Evaluation of Disclosure Controls
and Procedures.  We maintain “disclosure controls and
procedures” as such term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934.  In designing and evaluating our disclosure
controls and procedures, our management recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of disclosure controls
and procedures are met.  Additionally, in designing disclosure
controls and procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible disclosure
controls and procedures.  The design of any disclosure controls and
procedures also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future
conditions.  Based on his evaluation as of the end of the period
covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer who
also serves as our principal financial and accounting officer, has concluded
that our disclosure controls and procedures were not effective such that the
information relating to our company, required to be disclosed in our Securities
and Exchange Commission reports (i) is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms and (ii) is
accumulated and communicated to our management, including our Chief Executive
Officer, to allow timely decisions regarding required disclosure.
 
 25
 Our management concluded that our
disclosure controls and procedures were not effective as a result of a material
weakness in our disclosure controls and procedures, including
inadequate segregation of duties consistent with control objectives;
insufficient written policies and procedures for accounting and financial
reporting with respect to the requirements and application of US GAAP and SEC
disclosure requirements and ineffective controls over period end financial
disclosure and reporting processes.  We have only recently exited
shell status and all accounting and financial reporting operations have been and
are currently performed by our sole officer and one individual on an as needed
consulting basis.  The consultant is the only individual with any
significant knowledge of generally accepted accounting
principles.  The consultant is also in charge of the general ledger
(including the preparation of routine and non-routine journal entries and
journal entries involving accounting estimates), the preparation of accounting
reconciliations, the selection of accounting principles, and the preparation of
interim and annual financial statements (including report combinations,
consolidation entries and footnote disclosures) in accordance with generally
accepted accounting principles.  Management believes, however, that
these material weaknesses did not have an adverse affect on the Company's
financial results.  As we continue to develop our operations we intend
to expand our staff to permit for the segregation of duties.  We do
not expect our disclosure controls and procedures to be effective until such
time as we hire one or more additional employees and even then there are no
assurances that our disclosure controls and procedures will be adequate in
future periods.
 
 Changes in Internal Control over
Financial Reporting.There have been no changes in our
internal control over financial reporting during our last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
 
 PART
II - OTHER INFORMATION
 
 Item
1.             Legal
Proceedings.
 
 None.
 
 Item
1A.          Risk
Factors.
 
 Not applicable for a smaller reporting
company.
 
 Item
2.             Unregistered
Sales of Equity Securities and Use of Proceeds.
 
 None.
  Item
3.             Defaults
Upon Senior Securities.
 
 None.
 
 Item
4.             Submission
of Matters to a Vote of Security Holders.
 
 None.
 
 Item
5.             Other
Information.
 
 None.
 
 Item
6.             Exhibits.
 
 No.
              Description31.1
              Rule
      13a-14(a)/ 15d-14(a) Certification of Chief Executive
    Officer31.2
              Rule
      13a-14(a)/ 15d-14(a) Certification of principal financial and accounting
      officer32.1
              Section
      1350 Certification of Chief Executive Officer and principal financial and
      accounting officer
 
 26
 
 SIGNATURES
 Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
 TN-K
      ENERGY GROUP INC.November
      16, 2009
              By: /s/ Ken
      PageKen
      Page, Chief Executive Officer, principal financial and accounting
      officer
   27