U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
                                                 -------------

                           COMMISSION FILE NO. 0-20975
                                               -------

                         TENGASCO, INC. AND SUBSIDIARIES
        -----------------------------------------------------------------
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


                 TENNESSEE                           87-0267438
       ------------------------------           -------------------
       STATE OR OTHER JURISDICTION OF              (IRS EMPLOYER
       INCORPORATION OR ORGANIZATION            IDENTIFICATION NO.)


                 603 MAIN AVENUE, SUITE 500, KNOXVILLE, TN 37902
                 -----------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                 (865-523-1124)
                ------------------------------------------------
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)


CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.  YES __X__   NO _____


STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE: 12,003,977 COMMON SHARES AT JUNE 30,
2003.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES _____  NO __X__



                                        1

<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS



PART I.           FINANCIAL INFORMATION                                     PAGE

          ITEM 1. FINANCIAL STATEMENTS

          *       Condensed Consolidated Balance Sheets as of June 30, 2003
                  (unaudited) and December 31, 2002 ......................   3-4

          *       Consolidated Statements of Loss for the three and
                  six months ended June 30, 2003 and 2002 (unaudited) ....     5

          *       Consolidated Statements of Stockholders' Equity for
                  the six months ended June 30, 2003 and 2002 ............     6

          *       Consolidated Statements of Cash Flows for the
                  six months ended June 30, 2003 and 2002 ................     7

          *       Notes to Condensed Consolidated Financial Statements ...  8-14

          ITEM 2. MANAGEMENT'S DISCUSSION AND
                  ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS .............................. 14-19

          ITEM 3. QUANTITATIVE AND QUALITATIVE
                  DISCLOSURE ABOUT MARKET RISK ........................... 20-21

          ITEM 4. CONTROLS AND PROCEDURES ................................    21

PART II.          OTHER INFORMATION

          ITEM 1. LEGAL PROCEEDINGS ...................................... 21-23

          ITEM 2. CHANGES IN SECURITIES AND USE OF
                  PROCEEDS ...............................................    23

          ITEM 3. DEFAULTS UPON SENIOR SECURITIES ........................    23

          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS .......................................    24

          *       EXHIBITS ...............................................    25

                  SIGNATURES .............................................    26



                                       2
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>
                                                     June 30, 2003   December 31, 2002
                                                      (Unaudited)
                                                     -------------   -----------------
<S>                                                   <C>              <C>
Current Assets:
  Cash and cash equivalents                           $   383,058      $   184,130
  Investments                                              34,500           34,500
  Accounts receivable, net                                758,040          730,667
  Participant receivable                                   60,696           70,605
  Inventory                                               262,748          262,748
  Current portion of loan fees, net                       261,591          323,856
                                                      -----------      -----------

      Total current assets                              1,760,633        1,606,506

Oil and gas properties, net (on the basis of
  full cost accounting)                                13,422,702       13,864,321

Completed pipeline facilities, net                     15,439,812       15,372,843

Other property and equipment, net                       1,549,202        1,685,950
Loan fees, net of accumulated amortization                      0           40,158
Other                                                       6,033           14,613
                                                      -----------      -----------

                                                      $32,178,382      $32,584,391
                                                      ===========      ===========
</TABLE>






      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       3
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                 June 30, 2003    December 31, 2002
                                                                  (Unaudited)
                                                                 -------------    -----------------

<S>                                                              <C>                <C>
Current liabilities
   Notes payable to related parties                              $  7,391,029       $  7,861,245
   Accounts payable-trade                                             788,723          1,396,761
   Accrued interest payable                                           112,671             61,141
   Accrued dividends payable                                          352,469            254,389
   Current Maturities of long term debt to related parties          2,084,000            750,000
   Other accrued liabilities                                          226,098             31,805
                                                                 ------------       ------------

Total current liabilities                                          10,954,990         10,355,341
Asset retirement obligations                                          648,079                  0
Long term debt, less current maturities                               614,181          1,256,209
                                                                 ------------       ------------

Total liabilities                                                  12,217,250         11,611,550
                                                                 ------------       ------------

Preferred Stock
   Cumulative convertible redeemable preferred; redemption
    value $7,072,000 and $7,072,000;
    70,720 and 70,720 shares outstanding; respectively              6,870,694          6,762,218
                                                                 ------------       ------------
Stockholders' Equity
  Common stock, $.001 per value, 50,000,000 shares
    authorized                                                         12,019             11,460
  Additional paid-in capital                                       42,831,339         42,237,276
  Accumulated deficit                                             (29,491,533)       (27,776,726)
  Accumulated other comprehensive loss                               (115,500)          (115,500)
  Treasury stock, at cost                                            (145,887)          (145,887)
                                                                 ------------       ------------

Total stockholders' equity                                         13,090,438         14,210,623
                                                                 ------------       ------------

                                                                 $ 32,178,382       $ 32,584,391
                                                                 ============       ============
</TABLE>





      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       4
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                         CONSOLIDATED STATEMENTS OF LOSS


<TABLE>
<CAPTION>
                                                           For the Three Months Ended         For the Six Months Ended
                                                                     June 30,                          June 30,
                                                         -----------------------------     -----------------------------
                                                             2003             2002             2003             2002
                                                         ------------     ------------     ------------     ------------

<S>                                                      <C>              <C>              <C>              <C>
Revenues and other income
  Oil and gas revenues                                   $  1,436,848     $  1,233,473     $  3,360,763     $  2,408,917
  Pipeline transportation revenues                             45,219           63,538           92,723          141,245
  Interest income                                                 323              657              507            1,695
                                                         ------------     ------------     ------------     ------------

Total revenues and other income                             1,482,390        1,297,668        3,453,993        2,551,857

Costs and other deductions
  Productions costs and taxes                                 857,970          545,505        1,627,879        1,269,304
  Depletion, depreciation and amortization                    628,196          487,348        1,259,138          974,696
  Interest expense                                            140,742          148,297          294,098          301,664
  General and administrative costs                            299,158          539,842          810,495        1,126,109
  Public relations                                             23,398          106,326           28,177          160,289
  Professional fees                                           211,518          328,547          420,944          445,860
                                                         ------------     ------------     ------------     ------------

Total costs and other deductions                            2,160,982        2,155,865        4,440,731        4,277,922
                                                         ------------     ------------     ------------     ------------

Net loss                                                     (678,592)        (858,197)        (986,738)      (1,726,065)
                                                         ------------     ------------     ------------     ------------

Dividends on preferred stock                                  134,194          125,942          268,389          238,400
                                                         ------------     ------------     ------------     ------------

Net loss attributable to common shareholders
  Before cumulative effect of a change in
  accounting principle                                   $   (812,786)    $   (984,139)    $ (1,255,127)    $ (1,964,465)
                                                         ------------     ------------     ------------     ------------

Cumulative effect of a change in accounting principle               0                0         (351,204)               0
                                                         ------------     ------------     ------------     ------------
Net loss attributable to common shareholders             $   (812,786)    $   (984,139)    $ (1,606,331)    $ (1,964,465)
                                                         ------------     ------------     ------------     ------------
Net loss attributable to common shareholders
Per share basic and diluted:
Operations                                               $      (0.07)    $      (0.09)    $      (0.11)    $      (0.18)
Cumulative effect of a change in accounting principle    $          0     $          0     $      (0.03)    $          0
                                                         ------------     ------------     ------------     ------------
Total                                                    $      (0.07)    $      (0.09)    $      (0.14)    $      (0.18)
                                                         ------------     ------------     ------------     ------------
Weighted average shares outstanding                        11,944,583       10,784,847       11,854,950       10,714,087
                                                         ------------     ------------     ------------     ------------
</TABLE>




      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                         Common Stock             Additional          Other
                                 ----------------------------      Paid in        Comprehensive    Accumulated
                                     Shares         Amount         Capital            Loss           Deficit
                                 ------------    ------------    ------------     -------------    ------------
<S>                                <C>           <C>             <C>              <C>              <C>
Balance December 31, 2002          11,459,279    $     11,460    $ 42,237,276     $   (115,500)    $(27,776,726)

Net Loss                                    0               0               0                          (986,738)

Common Stock Issued in
Private Placements Net of
Related Expenses                      227,275             227         249,773                                 0

Common Stock Issued for
exercised options                      58,000              58          28,942                                 0

Common Stock Issued in
Conversion of Debt                     60,528              61          69,538                                 0

Common Stock Issued for
Preferred Dividend in Arrears         154,824             154         170,155

Common Stock Issued for
Charity                                 3,571               4           5,710

Retained Earnings-Accretion
of Issue Cost on Preferred
Stock                                                                                                  (108,476)

Common Stock Issued for
Services                               55,000              55          69,945                                 0

Dividends on Convertible
Redeemable Preferred Stock                  0               0               0                          (268,389)

Cumulative effect of a change
in accounting principle                     0               0               0                          (351,204)
                                 ============    ============    ============     ============     ============
Net loss for the six months
ended June 30, 2003                12,018,477    $     12,019    $ 42,831,339     $   (115,500)    $(29,491,533)
                                 ============    ============    ============     ============     ============
</TABLE>


      Treasury Stock
----------------------------
   Shares          Amount           Total
------------    ------------     ------------

      14,500    $   (145,887)     $14,210,623

           0               0         (986,738)



           0               0          250,000


           0               0           29,000


           0               0           69,599


                                      170,309


                                        5,714



                                     (108,476)


           0               0           50,000


           0               0         (268,389)


           0               0         (351,204)
============    ============     ============

      14,500    $   (145,887)    $ 13,090,438
============    ============     ============



      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       6
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                     For the Six       For the Six
                                                                     Months Ended      Months Ended
                                                                    June 30, 2003     June 30, 2002
                                                                     (Unaudited)       (Unaudited)
                                                                    -------------     -------------

<S>                                                                  <C>               <C>
Operating activities
   Net loss                                                          $  (986,738)      $(1,726,065)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
   Depletion, depreciation and amortization                            1,259,138           974,696
   Charitable donation, services paid in stock, stock options            104,714            48,621
   Changes in assets and liabilities
      Accounts receivable                                                (27,373)          (24,054)
      Participant receivables                                              9,909           (33,990)
      Accounts payable-trade                                            (608,038)          (26,245)
      Accrued interest payable                                            51,530                 0
      Other accrued liabilities                                          194,294            (5,825)
      Accrued dividends payable                                                0            13,535
      Other                                                                8,580                 0
                                                                     -----------       -----------

Net cash provided by (used in) operating activities                        6,016          (779,327)
                                                                     -----------       -----------

Investing activities
      Additions to property and equipment                                      0          (118,356)
      Net additions to oil and gas properties                            (13,474)       (1,020,026)
      Net additions to pipeline facilities                              (334,969)         (349,918)
      Decrease in restricted cash                                              0            45,855
      Other                                                                    0           (22,108)
                                                                     -----------       -----------

Net cash used in investing activities                                   (348,443)       (1,464,553)
                                                                     -----------       -----------

Financing activities
      Repayments of borrowings                                        (1,042,645)       (1,268,608)
      Proceeds from borrowings                                         1,334,000         1,018,356
      Dividends on convertible redeemable preferred stock                      0          (238,400)
      Proceeds from private placements of common stock                   250,000         1,111,998
      Proceeds from private placements of preferred stock                      0         1,328,168
                                                                     -----------       -----------

Net cash provided by financing activities                                541,355         1,951,514
                                                                     -----------       -----------

Net change in cash and cash equivalents                                  198,928          (292,366)

Cash and cash equivalents, beginning of period                           184,130           393,451
                                                                     -----------       -----------

Cash and cash equivalents, end of period                             $   383,058       $   101,085
                                                                     ===========       ===========
</TABLE>



      SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       7
<PAGE>


                         TENGASCO, INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


(1)            BASIS OF PRESENTATION

               The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information and with the  instructions to Form 10-Q and Item
210 of Regulation S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of only normal recurring accruals)  considered necessary for a fair presentation
have been included. Operating results for the six months ended June 30, 2003 are
not  necessarily  indicative  of the results  that may be expected  for the year
ended  December 31,  2003.  Additionally,  deferred  income taxes and income tax
expense is not reflected in the Company's  financial  statements due to the fact
that the Company has had recurring  losses and deferred tax assets  arising from
net  operating  loss  carry-forwards  have  been  fully  reserved.  For  further
information,  refer  to the  Company's  consolidated  financial  statements  and
footnotes thereto for the year ended December 31, 2002 included in the Company's
annual report on Form 10-K.

(2)            GOING CONCERN UNCERTAINTY

               The  accompanying  consolidated  financial  statements  have been
prepared in conformity  with  accounting  principles  generally  accepted in the
United States of America,  which  contemplates  continuation of the Company as a
going  concern  and  assume  realization  of  assets  and  the  satisfaction  of
liabilities  in  the  normal  course  of  business.  The  Company  has  incurred
continuous losses since commencing its operations and has an accumulated deficit
of $29,491,533  and a working capital deficit of $9,194,357 as of June 30, 2003.
During  2002,  the  Company was  informed by its primary  lender that the entire
amount of its outstanding  credit  facility was immediately due and payable,  as
provided for in the Credit  Agreement.  These  circumstances  raise  substantial
doubt about the Company's ability to continue as a going concern.

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


(3)            EARNINGS PER SHARE

               In accordance  with Statement of Financial  Accounting  Standards
(SFAS) No. 128, "Earnings Per Share", basic and diluted loss per share are based
on  11,944,583  and  10,784,847  weighted  average  shares  outstanding  for the
quarters ended June 30, 2003 and 2002, respectively.  Basic and diluted loss per
share are based on 11,854,950 and 10,714,087 weighted average shares outstanding
for the six months  ended June 30, 2003 and 2002.  During the six months  period
ended June 30, 2003 and year ended



                                       8
<PAGE>


December 31, 2002 potential weighted average stock equivalents  outstanding were
approximately 1,473,000. These shares are not included in the computation of the
diluted loss per share amount because the Company was in a net loss position and
their effect would have been antidilutive.

               The Company adopted the disclosure  provision of the Statement of
Financial  Accounting  Standards  (SFAS or Statement) No. 148,  "Accounting  for
Stock-Based Compensation--Transition and Disclosure", which amends SFAS No. 123,
"Accounting for  Stock-Based  Compensation",  SFAS No. 148 provides  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for stock-based employee compensation,  which was originally provided
under SFAS No. 123. The Statement also improves the timeliness of disclosures by
requiring the information be included in interim,  as well as annual,  financial
statements.  The adoption of these disclosure provisions did not have a material
affect on the  Company's  2002  consolidated  results of  operations,  financial
position, or cash flows.

               SFAS No. 123 encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees",  and  related  Interpretations.
Accordingly,  compensation  cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's  stock at the date of the grant
over the amount an employee  must pay to acquire the stock.  The option price of
all the Company's stock options is equal to the market value of the stock at the
grant date. As such,  no  compensation  expense is recorded in the  accompanying
consolidated financial statements.

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

<TABLE>
<CAPTION>
                                           Year Ended        Six Months        Six Months
                                       December 31, 2002   June 30, 2002     June 30, 2003
                                       -----------------   -------------     -------------

<S>                                      <C>               <C>               <C>
Net loss as reported                     $(3,661,344)      $(1,964,465)      $(1,606,331)

Stock-based employee compensation
expense determined under fair value
basis                                    $   (77,821)      $  (194,446)      $   (47,209)
                                         -----------       -----------       -----------

Pro forma net loss                       $(3,739,165)      $(2,158,911)      $(1,653,540)

Earning per share:

Basic and diluted as reported            $     (0.33)      $     (0.18)      $     (0.14)

Basic and diluted pro forma              $     (0.34)      $     (0.18)      $     (0.14)
</TABLE>


4) NEW ACCOUNTING PRONOUNCEMENTS:

               In June 2001, the Financial  Accounting  Standards Board ("FASB")
issued Statement Of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations" SFAS



                                       9
<PAGE>


No. 143 addresses financial accounting and reporting for obligations  associated
with the  retirement  of tangible  long-lived  assets and the  associated  asset
retirement cost. This statement  requires  companies to record the present value
of obligations  associated with the retirement of tangible  long-lived assets in
the period in which it is incurred.  The liability is capitalized as part of the
related long-lived assets carrying amount. Over time, accretion of the liability
is recognized as an operating  expense and the  capitalized  cost is depreciated
over  the  expected  useful  life of the  related  asset.  The  Company's  asset
retirement obligations relate primarily to the plugging, dismantlement,  removal
site reclamation and similar activities of its oil and gas properties.  Prior to
adoption of this  statement,  such  obligations  were  accrued  ratably over the
productive  lives  of  the  assets  through  its  depreciation,   depletion  and
amortization for oil and gas properties  without recording a separate  liability
for such amounts. The impact of applying this statement as of January 1,2003 and
June 30, 2003 is discussed in footnote 10.

               In April 2002, the Financial  Accounting  Standards  Board issued
SFAS No. 145,  "Rescission of SFAS No. 4, 44, 64,  Amendment of SFAS No. 13, and
Technical  Corrections"  ("SFAS  145").  SFAS 4,  which was  amended by SFAS 64,
required all gains and losses from the  extinguishment  of debt to be aggregated
and, if material, classified as an extraordinary item, net of related income tax
effect.  As a result of SFAS 145, the criteria in  Accounting  Principles  Board
Opinion 30 will now be used to  classify  those  gains and  losses.  SFAS 13 was
amended to  eliminate  an  inconsistency  between the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.  The  adoption  of SFAS 145 will not have a current  impact on the
Company's consolidated financial statements.

               In July 2002,  FASB  issued SFAS No.  146,  Accounting  for Costs
Associated with Exit or Disposal Activities.  The standard requires companies to
recognize  costs  associated  with  exit or  disposal  activities  when they are
incurred  rather than at the date of  commitment  to an exit or  disposal  plan.
Examples of costs covered by the standard  include lease  termination  costs and
certain  employee  severance  costs  that  are  associated  with  restructuring,
discontinued  operation,  plant  closing,  or other exit or  disposal  activity.
Previous  accounting  guidance was  provided by EITF Issue No. 94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity  (including Certain Costs Incurred in a Restructuring)."  Statement 146
replaces  Issue 94-3.  Statement 146 is to be applied  prospectively  to exit or
disposal  activities  initiated  after  December 31, 2002.  The Company does not
currently have any plans for exit or disposal activities, and therefore does not
expect this  standard to have a material  effect on the  Company's  consolidated
financial statements upon adoption.

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

               In December  2002,  the FASB issued SFAS No. 148,  Accounting for
Stock-Based   Compensation--Transition  and  Disclosure--an  amendment  of  FASB
Statement No. 123 ("Statement



                                       10
<PAGE>


148").  This  amendment  provides two  additional  methods of  transition  for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee compensation.  Additionally,  more prominent disclosures in both annual
and  interim  financial   statements  are  required  for  stock-based   employee
compensation.  The  transition  guidance  and annual  disclosure  provisions  of
Statement 148 are effective for fiscal years ending after December 15, 2002. The
interim  disclosure  provisions are effective for financial  reports  containing
financial  statements for interim periods beginning after December 15, 2002. The
adoption  of  Statement  148 did not have a  material  impact  on the  Company's
consolidated financial statements.

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


              In May 2003, the FASB issued  Statement No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity". SFAS No. 150 requires three types of freestanding financial instruments
to be classified as liabilities in statements of financial position. One type is
mandatorily  redeemable  shares,  which the issuing  company is obligated to buy
back in exchange for cash or other  assets.  A second type,  which  includes put
options and forward  purchase  contracts,  involves  instruments  that do or may
require the issuer to buy back some of its shares in exchange  for cash or other
assets.  The third type of  instrument is  obligations  that can be settled with
shares,  the monetary value of which is fixed, tied solely or predominately to a
variable  such as a market  index,  or  varies  inversely  with the value of the
issuer's  shares.  The majority of the guidance in SFAS No. 150 is effective for
all  financial  instruments  entered into or modified  after May 31,  2003,  and
otherwise is effective at the  beginning of the first interim  period  beginning
after June 15, 2003. In accordance with SFAS No. 150, the Company plans to adopt
this  standard on July 1, 2003.  Adoption of SFAS No. 150 by the Company on July
1, 2003 is not expected to have a material impact on the Company's  consolidated
financial position and results of operations.

(5)            LETTER OF CREDIT AGREEMENT

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



                                       11
<PAGE>


rate is the Bank One base rate plus  one-quarter  percent.


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

               On April 5, 2002,  the  Company  received a notice  from Bank One
stating that it had redetermined and reduced the borrowing base under the Credit
Agreement by  $6,000,000 to  $3,101,766.  Bank One demanded that the Company pay
the $6,000,000 within thirty days of the notice.  The Company filed a lawsuit in
Federal  Court to prevent Bank One from  exercising  any rights under the Credit
Agreement. The Company has been paying $200,000 per month toward the outstanding
balance of the credit facility and any accrued  interest until this situation is
resolved.

(6)            SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
               ACTIVITIES:

               During  the three  months  ended  March  31,  2003,  the  Company
converted  $60,000  of debt and $9,600 of  accrued  interest  owed to holders of
convertible notes into 60,528 shares of common stock.

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

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

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

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



                                       12
<PAGE>


(7)            NOTES PAYABLE

               On February  3, 2003 and  February  28,  2003,  Dolphin  Offshore
Partners,  LP which owns more than 10% of the Company's outstanding common stock
and whose general partner, Peter E. Salas, is a Director of the Company,  loaned
the Company the sum of $250,000 on each such date (cumulatively, $500,000) which
the Company used to pay the  principal and interest due to Bank One for February
and March 2003 and for working capital needs. On May 20, 2003 an additional loan
of $834,000 was loaned by a  combination  of Dolphin  ($750,000)  and Jeffery R.
Bailey who is a Director and President  ($84,000) of the Company.  Each of these
loans is evidenced by a separate  promissory  note each bearing  interest at the
rate of 12% per annum,  with payments of interest only payable quarterly and the
principal  balance  payable on January 4, 2004.  Each of the  February and March
2003  promissory  notes is secured by an undivided 10% interest in the Company's
pipelines.  The May 20, 2003  loans  provide  Dolphin  with a 30%  interest  and
Bailey with a 3.36% interest in the Company's pipelines.

(8)            RECLASSIFICATIONS

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

(9)            LAW SUIT SETTLEMENT

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

(10)           CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

               Effective   January  1,  2003,   the  Company   implemented   the
requirements of Statement of Financial  Accounting Standards No. 143 (SFAS 143),
"Accounting  for Asset  Retirement  Obligations".  Among other things,  SFAS 143
requires entities to record a liability and corresponding increase in long-lived
assets  for the  present  value  of  material  obligations  associated  with the
retirement of tangible long-lived assets. Over the passage of time, accretion of
the liability is recognized as an operating  expense and the capitalized cost is
depleted over the estimated useful life of the related asset. Additionally, SFAS
143 requires that upon initial application of these standards,  the Company must
recognize a cumulative effect of a change in accounting principle  corresponding
to the accumulated accretion and depletion expense that would have



                                       13
<PAGE>


been recognized had this standard been applied at the time the long-lived assets
were acquired or constructed.  The Company's asset retirement obligations relate
primarily to the plugging, dismantling and removal of wells drilled to date.

               Using a  credit-adjusted  risk  free  rate of 12%,  an  estimated
useful life of wells  ranging  from 30 - 40 years,  and  estimated  plugging and
abandonment  costs ranging from $5,000 per well to $10,000 per well, the Company
has recorded a non-cash  charge related to the cumulative  effect of a change in
accounting  principle of $351,204 in its  statement of  operations.  Oil and gas
properties were increased by $260,191, which represents the present value of all
future  obligations  to retire the wells at January 1, 2003,  net of accumulated
depletion on this cost through that date. A  corresponding  obligation  totaling
$611,395 has also been recorded as of January 1, 2003.

               For the six  month  period  ended  June  30,  2003,  the  Company
recorded  accretion  and  depletion  expenses  of $51,968  associated  with this
liability and its corresponding asset. These expenses are included in depletion,
depreciation,  and amortization in the consolidated  statements of loss. Had the
provisions of this statement been reflected in the financial  statements for the
year ended December 31, 2002, an asset  retirement  obligation of $476,536 would
have been recorded as of January 1, 2002.


The  following is a  roll-forward  of activity  impacting  the asset  retirement
obligation for the six months ended June 30, 2003:

     Balance, January 1, 2003:                                $611,395
     Accretion expense through June 30, 2003                    36,684
                                                              --------

     Balance, June 30, 2003                                   $648,079
                                                              ========


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

               RESULTS OF OPERATIONS AND FINANCIAL CONDITION

               Kansas



                                       14
<PAGE>


               During the first six months of 2003,  the  Company  produced  and
sold  65,457  barrels  of oil and  129,995  Mcf of  natural  gas from its Kansas
Properties  comprised of 149 producing oil wells and 59 producing gas wells. The
first six months  production of 65,457 barrels of oil compares to 72,124 barrels
produced  in the first six months of 2002.  The first six months  production  of
129,995 Mcf of gas  compares to 146,783 Mcf  produced in the first six months of
2002. In summary,  the first six months production  reflected expected continued
stable  production  levels  from  the  Kansas  Properties  which  have  been  in
production for many years. The decrease in production  reflects a normal decline
curve for the Kansas properties.  This decline has not been offset by additional
drilling and well work overs due to the Bank One  litigation.  The revenues from
the  Kansas  properties  were  $2,049,781  in the  first  six  months of 2003 as
compared to $1,559,361 in 2002. The increase in revenues is due to a significant
increase in the price of oil and gas for 2003.

              Tennessee

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

               Natural  gas  production  from the Swan Creek field for the first
six  months of 2003 was an average  of 1.150  million  cubic feet per day during
that  period as compared  to 2.270  million  cubic feet per day in the first six
months of 2002.  The first six  months  production  reflected  expected  natural
decline in  production  from the existing  Swan Creek gas wells which were first
brought into production in mid-2001 upon  completion of the Company's  pipeline.
This  natural  decline is normal for any  producing  well,  and this  decline as
experienced on existing wells in Swan Creek was not unexpected; however, volumes
were not replaced as expected.  In order for overall field  production to remain
steady or grow, new wells must be brought  online.  Any of the new wells drilled
by the Company would also experience the same harmonic (i.e. a relatively  steep
initial  decline curve followed by longer  periods of relatively  flat or stable
production)  decline as does every  natural  well in a formation  similar to the
Knox  formation,  so continuous  drilling is vital to  maintaining or increasing
earlier levels of production.  No new gas wells have been drilled by the Company
to date in 2003 because it does not have the funds  necessary for such drilling,
due to the destabilized  lending  arrangements caused by the actions of Bank One
and ongoing litigation  regarding that matter. The Company  anticipates that the
natural  decline of production  from existing  wells is now  predictable in Swan
Creek,  that the total volume of the Company's  reserves remains largely intact,
and that these  reserves can be  extracted  through  existing  wells and also by
steady additional drilling brought on by reliable financial arrangements to fund
drilling.  Upon  conclusion of the Bank One  litigation,  the Company is hopeful
that additional or replacement  financing may more easily be obtainable to allow
drilling to increase;  however,  no assurances  can be made that such  financing
will be obtained. See, Liquidity and Capital Resources discussion, below.



                                       15
<PAGE>


               COMPARISON OF THE SIX MONTHS ENDING JUNE 30 2003 AND 2002

               The Company  recognized  $3,360,763  in oil and gas revenues from
its Kansas  Properties  and the Swan Creek Field  during the first six months of
2003  compared to  $2,408,917  in the first six months of 2002.  The increase in
revenues  was due to an  increase  in price from oil and gas  sales.  Oil prices
averaged  $28.90 per barrel in 2003 as  compared  to $21.54 in 2002.  Gas prices
averaged  $5.71 per Mcf in 2003 as  compared  to $2.80 for 2002.  The Swan Creek
Field  produced  207,056 Mcf and 408,593 Mcf in the first six months of 2003 and
2002,  respectively.  This  decrease was due to natural  declines in  production
which  could  not be offset as the  Company  did not have the funds to  continue
drilling new wells,  due to it's dispute with it's primary lender,  Bank One NA.
The  decrease in  pipeline  transportation  revenues is directly  related to the
decrease in gas volumes.

               The  Company   realized  a  net  loss   attributable   to  common
shareholders of $1,606,331 (($.14) per share of common stock),  during the first
six  months of 2003  compared  to a net loss in the first six  months of 2002 to
common  shareholders  of $1,964,465  (($.18) per share of common stock).  A non-
cash charge of $351,204 was  recognized  as a  cumulative  effect of a change in
accounting   principle  during  the  first  quarter  of  2003  relating  to  the
implementation of SFAS143.

               Production  costs and  taxes in the  first six  months of 2003 of
$1,627,079 were consistent with production  costs and taxes of $1,269,304 in the
first  six  months  of  2002.   The   difference   of  $358,575  was  due  to  a
reclassification of insurance cost relating to field activities of $176,258 from
G&A to production  costs.  Part of the increase in production  costs in 2003 was
due to the fact that the Company's  field  personnel cost was capitalized as the
Company was drilling new wells in 2002,  as compared to 2003 when all  employees
were working to maintain  production.  Field salaries in Swan Creek was $152,217
in the first six months of 2003.

               Depreciation,  Depletion,  and Amortization expense for the first
six months of 2003 was  $1,207,170  compared to $974,696 in the first six months
of 2002. The December 31, 2002, Ryder Scott reserve reports were used as a basis
for the 2003 estimate.  The Company reviews its depletion  analysis and industry
oil and gas prices on a quarterly basis to ensure that the depletion estimate is
reasonable.  The depletion taken in the first six months of 2003 was $700,000 as
compared to $500,000 in the first  quarter of 2002.  The Company also  amortized
$102,422 of loan fees relating to the Bank One note and  convertible  notes,  in
2003 as compared to $86,360 in 2002.

               During the first six months the  Company  reduced its general and
administrative costs significantly  ($315,614) from 2002. Management has made an
effort to control  costs in every aspect of its  operations.  Some of these cost
reductions included the closing of the Company's New York office and a reduction
in personnel from 2002 levels.  The Company's  public relations cost was reduced
($132,112) from 2002, as the Company continues cost cutting measures.

               Professional  fees, in the first six months of 2003 have remained
at a high level, primarily



                                       16
<PAGE>


due to costs incurred for legal and accounting  services as a result of the Bank
One lawsuit and the shareholders's suit.

               Dividends on preferred stock have increased from $238,400 in 2002
to $268,389 in 2003 as a result of the increase in the amount of preferred stock
outstanding from preferred stock sold pursuant to private  placements during the
second quarter of 2002.


               COMPARISON OF THE QUARTERS ENDING JUNE 30 2003 AND 2002

               The Company  recognized  $1,436,848  in oil and gas revenues from
its Kansas Properties and the Swan Creek Field during the second quarter of 2003
compared to $1,233,473 in the second  quarter of 2002.  The increase in revenues
was due to an  increase  in price  from oil and gas sales.  Oil prices  averaged
$26.47 per barrel in 2003 as  compared  to $23.73 in 2002.  Gas prices  averaged
$5.00  per Mcf in 2003 as  compared  to $3.30  for 2002.  The Swan  Creek  Field
produced  95,389 Mcf and  192,960  Mcf in the  second  quarter of 2003 and 2002,
respectively.  This  decrease was due to natural  declines in  production  which
could not be offset as the Company  did not have the funds to continue  drilling
new  wells,  due to it's  dispute  with it's  primary  lender,  Bank One NA. The
decrease in pipeline transportation revenues is directly related to the decrease
in gas volumes.

               The  Company   realized  a  net  loss   attributable   to  common
shareholders  of $812,786  (($.07) per share of common  stock) during the second
quarter of 2003  compared to a net loss in the second  quarter of 2002 to common
shareholders of $984,139 (($.09) per share of common stock).

               Production  costs  and  taxes in the  second  quarter  of 2003 of
$857,970  increased  from $545,505 in the second quarter of 2002. The difference
of $312,465 was due to a  reclassification  of insurance  cost relating to field
activities  of $92,855  from G&A to  production  cost.  Part of the  increase in
production  costs in 2003 was due to the fact that the Company's field personnel
cost was  capitalized as the Company was drilling new wells in 2002, as compared
to 2003 when all employees were working to maintain  production.  Field salaries
in Swan Creek were $67,623 in the second quarter of 2003. An additional  $50,620
was paid in property taxes in Kansas.  The remaining  increase  relates to field
operations  cost  other  than  salaries  that were  capitalized during  drilling
activities.

               Depreciation,  Depletion, and Amortization expense for the second
quarter of 2003 was $602,212 compared to $487,348 in the second quarter of 2002.
The December 31, 2002,  Ryder Scott reserve reports were used as a basis for the
2003 estimate.  The Company reviews its depletion  analysis and industry oil and
gas  prices  on a  quarterly  basis to ensure  that the  depletion  estimate  is
reasonable.  The depletion  taken in the second  quarter of 2003 was $350,000 as
compared to $250,000 in the second



                                       17
<PAGE>


quarter of 2002. The Company also amortized $51,211 of loan fees relating to the
Bank One note and convertible notes, in 2003 as compared to $43,180 in 2002.

               During the second  quarter  the  Company  reduced its general and
administrative costs significantly  ($240,684) from 2002. Management has made an
effort to control  costs in every aspect of its  operations.  Some of these cost
reductions included the closing of the Company's New York office and a reduction
in personnel from 2002 levels.  The Company's  public relations cost was reduced
($82,928) from 2002, as the Company continues cost cutting measures.

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

               Dividends on preferred stock have increased from $125,942 in 2002
to $134,194 in 2003 as a result of the increase in the amount of preferred stock
outstanding from preferred stock sold pursuant to private  placements during the
second quarter of 2002.

               LIQUIDITY AND CAPITAL RESOURCES

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

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

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



                                       18
<PAGE>


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

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

               Although no assurances can be made, the Company  believes that it
will  either be able to resolve  the Bank One  dispute or obtain  additional  or
replacement financing to allow drilling to increase, and that once new wells are
drilled,  production  from the Swan  Creek  Field  will  increase.  However,  no
assurances  can be made that such  financing  will be obtained  or that  overall
produced volumes will increase.

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



                                       19
<PAGE>


ITEM 3         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

               COMMODITY RISK

               The  Company's  major  market  risk  exposure  is in the  pricing
applicable to its oil and gas production.  Realized  pricing is primarily driven
by the prevailing  worldwide  price for crude oil and spot prices  applicable to
natural gas production. Historically, prices received for oil and gas production
have been  volatile  and  unpredictable  and price  volatility  is  expected  to
continue.  Monthly oil price realizations ranged from a low of $18.56 per barrel
to a high of $27.49 per barrel during 2002. Gas price realizations ranged from a
monthly low of $1.91 per Mcf to a monthly  high of $4.01 per Mcf during the same
period.

               INTEREST RATE RISK

               At  December  31,  2002,  the  Company  had debt  outstanding  of
approximately  $9.9 million.  The interest rate on the revolving credit facility
of $7.5 million is variable based on the financial institution's prime rate plus
0.25%.  The remaining debt of $2.4 million has fixed interest rates ranging from
6% to  11.95%.  As a  result,  the  Company's  annual  interest  costs  in  2002
fluctuated based on short-term  interest rates on approximately 78% of its total
debt  outstanding at December 31, 2002.  The impact on interest  expense and the
Company's cash flows of a 10% increase in the financial institution's prime rate
(approximately  0.5  basis  points)  would be  approximately  $32,000,  assuming
borrowed  amounts under the credit facility remain at $7.5 million.  The Company
did not have any open  derivative  contracts  relating to interest rates at June
30, 2003.

               FORWARD-LOOKING STATEMENTS AND RISK

               Certain  statements in this report,  including  statements of the
future  plans,  objectives,   and  expected  performance  of  the  Company,  are
forward-looking  statements  that are dependent upon certain  events,  risks and
uncertainties that may be outside the Company's  control,  and which could cause
actual  results  to differ  materially  from  those  anticipated.  Some of these
include,  but are not limited to, the market prices of oil and gas, economic and
competitive  conditions,  inflation rates,  legislative and regulatory  changes,
financial  market  conditions,  political and economic  uncertainties of foreign
governments,  future business decisions,  and other uncertainties,  all of which
are difficult to predict.

               There  are   numerous   uncertainties   inherent  in   estimating
quantities  of proved oil and gas  reserves  and in  projecting  future rates of
production  and the  timing of  development  expenditures.  The total  amount or
timing of actual  future  production  may vary  significantly  from reserves and
production estimates. The drilling



                                       20
<PAGE>


of exploratory wells can involve  significant risks,  including those related to
timing,  success rates and cost overruns.  Lease and rig  availability,  complex
geology  and  other   factors  can  also  affect  these   risks.   Additionally,
fluctuations  in oil and gas prices,  or a prolonged  period of low prices,  may
substantially  adversely  affect the Company's  financial  position,  results of
operations and cash flows.

ITEM 4         CONTROLS AND PROCEDURES

               EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

               The Company's Chief Executive Officer and Chief Financial Officer
have  evaluated  the  effectiveness  of the  Company's  disclosure  controls and
procedures  (as such is  defined  in Rules  13a-14(c)  and  15d-14(c)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as the end of
the period covered by this quarterly  report (the "Evaluation  Date").  Based on
such  evaluation,  such officers have concluded that, as of the Evaluation Date,
the Company's  disclosure controls and procedures are effective in alerting them
on a timely basis to material information relating to the Company (including the
Company's  consolidated  subsidiaries)  required  to be  included in its reports
filed or submitted under the Exchange Act.

               CHANGES IN INTERNAL CONTROLS

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

PART II        OTHER INFORMATION


ITEM 1         LEGAL PROCEEDINGS

               Except as described hereafter,  the Company is not a party to any
pending material legal proceeding.  To the knowledge of management,  no federal,
state or local  governmental  agency is presently  contemplating  any proceeding
against the Company that would have a result materially  adverse to the Company.
To the knowledge of management,  no director,  executive officer or affiliate of
the Company or owner of record or  beneficially of more than 5% of the Company's
common  stock is a party  adverse  to the  Company  or has a  material  interest
adverse to the Company in any proceeding.



                                       21
<PAGE>


               1. TENGASCO PIPELINE  CORPORATION v. JAMES E. LARKIN AND KATHLEEN
A. O'CONNOR, No. 4929J, Circuit Court for Hawkins County,  Tennessee. This was a
condemnation  proceeding  brought by Tengasco Pipeline  Corporation to acquire a
right of way for a 3000-foot  long portion of Phase I of the Company's  pipeline
in Hawkins County,  TN. The right of way was appraised at $4,000. The landowners
contested the appraised value of the property and claimed  incidental damages to
fish  ponds  there,  despite  a lack of  evidence  of any  aquiculture  business
actually having been operated on the property or of any losses. By counterclaim,
the  landowners  sought  $867,585 in  compensatory  damages and $2.6  million in
punitive  damages  under  various  legal  theories.  The Court  ordered a second
mediation  that occurred on June 2, 2003. At mediation,  settlement  was reached
whereby the Company was to pay the sum of $20,000 to plaintiffs and  plaintiff's
counsel,  and issue to them in the aggregate 10,000 shares of restricted  shares
of the  Company's  common  stock and warrants to purchase  20,000  shares of the
Company's  common stock for three years at 52 cents per share, the closing price
on the settlement date.  Plaintiffs have executed a right of way agreement,  all
settlement payments including the issuance of stock and warrants have been made,
and the litigation was dismissed by agreed order dated July 17, 2003.

               2.  TENGASCO,  INC.,  TENGASCO LAND AND MINERAL  CORPORATION  AND
TENGASCO  PIPELINE  CORPORATION  v. BANK ONE, NA, Docket No.  2:02-CV-118 in the
United  States  District  Court  for  the  Eastern   District  of  Tennessee  at
Greeneville,  TN. In this  action,  the  Company has  brought  suit  against its
primary  lender under a credit  facility for a revolving line of credit of up to
$35 million.  The initial borrowing base under the facility was $10 million.  On
April 5, 2002,  the Company  received a notice from Bank One stating that it had
redetermined  and  reduced  the  then-existing  borrowing  base under the Credit
Agreement by  $6,000,000 to  $3,101,766.  Bank One demanded that the Company pay
the  $6,000,000  within thirty days.  On May 2, 2002,  the Company filed suit to
restrain  Bank One from  taking any steps to enforce its demand that the Company
reduce  its  loan  obligation  or else be  deemed  in  default  and for  damages
resulting from the wrongful demand.

               During the pendency of this action,  the Company has continued to
pay the sum of $200,000 per month of principal  due under the original  terms of
the  Credit  Agreement,  plus  interest,  and  has  reduced  the  principal  now
outstanding  to  approximately  $5,901,766.66  million as of August 14, 2003. As
stated in the Company's  earlier  reports,  on November 5, 2002, the Company and
the Bank reached preliminary agreement on terms of a potential settlement of the
litigation,  subject to execution of formal settlement  documents.  Although the
parties have  attempted  to reach  settlement  of all  outstanding  issues,  the
parties  have not been  able to reach  agreement  upon the  specific  terms of a
settlement agreement.  At a scheduling conference held by the Court on August 6,
2003,  a previous  trial  setting in November  was  continued  and a  procedural
schedule has been set leading toward a trial date of June 22, 2004 if settlement
is not resolved.

               3. PAUL MILLER v. M. E. RATLIFF AND TENGASCO, INC., DOCKET NUMBER
3:02-CV-644. United States District Court for the Eastern District of Tennessee,
Knoxville, The complaint in this action seeks certification of a class action to
recover  on behalf  of the  class of all  persons  who  purchased  shares of the
Company's common stock between August 1, 2001 and April 23, 2002,  damages in an
amount not specified  which were  allegedly  caused by violations of the federal
securities laws,  specifically  Rule 10b-5 issued under the Securities  Exchange
Act of 1934 as to the Company and the Company's former chief executive  officer,
Malcolm E. Ratliff,  and Section 20(a) the Securities Exchange Act of 1934 as to
Mr.



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<PAGE>


Ratliff.  The  complaint  alleges  that  documents  and  statements  made to the
investing  public by the Company and Mr. Ratliff  misrepresented  material facts
regarding  the business  and  finances of the  Company.  The Company has filed a
motion to dismiss the action  based on the failure of the  complaint to meet the
requirements  of the Securities  Litigation  Reform Act of 1995. The Company has
begun  discussions  that may  lead to a  settlement  of this  matter  and  these
discussions are continuing. If settlement is not reached, the Company intends to
vigorously defend against all allegations of the complaint.


ITEM 2         CHANGES IN SECURITIES AND USE OF PROCEEDS

               On January 8, 2003,  Bill L. Harbert,  a Director of the Company,
purchased  227,275  shares of the  Company's  Common Stock from the Company in a
private  placement at a price of $1.10 per share.  The  proceeds  from this sale
were used by the Company to pay the  principal  and interest due to Bank One for
January, 2003 and to provide working capital for the Company's operations.

               On February  3, 2003 and  February  28,  2003,  Dolphin  Offshore
Partners,  LP ("Dolphin") which owns more than 10% of the Company's  outstanding
common  stock and whose  general  partner is Peter E.  Salas,  a Director of the
Company,  loaned the  Company  the sum of  $250,000  on each such date which the
Company used to pay the  principal and interest due to Bank One for February and
March  2003 and for  working  capital.  Each of these  loans is  evidenced  by a
separate  promissory  note each  bearing  interest at the rate of 12% per annum,
with  payments of interest  only payable  quarterly  and the  principal  balance
payable on January 4, 2004 which are secured by an undivided 10% interest in the
Company's  Tennessee  pipelines.  On May 20, 2003 an additional loan of $834,000
was loaned by a  combination  of Dolphin  ($750,000)  and Jeffery R.  Bailey,  a
Director  and  President  of the  Company  ($84,000).  Each of  these  loans  is
evidenced by a separate promissory note each bearing interest at the rate of 12%
per annum,  with payments of interest  only payable  quarterly and the principal
balance payable on January 4, 2004. The May 20, 2003 loans provides Dolphin with
a 30% interest and Bailey with a 3.36%  interest in the Company's  Tennessee and
Kansas pipelines as security for the repayment of these loans.

               During the quarter  ending  June 30,  2003,  the  Company  issued
10,363  shares  of its  common  stock  to  holders  of  Series  A 8%  Cumulative
Convertible  Preferred Stock in lieu of cash quarterly  interest payments due to
those  shareholders.  Also during the quarter,  certain Directors of the Company
exercised options granted to them pursuant to the Tengasco, Inc. Stock Incentive
Plan and purchased the following  number of shares of the Company's common stock
at the  exercise  price of $0.50 per share,  which was the  market  price of the
stock on the date the options were granted: Richard T. Williams - 10,000 shares;
Bill Harbert - 24,000 shares; and, John A. Clendening - 24,000 shares.

ITEM 3         DEFAULTS UPON SENIOR SECURITIES

               NONE



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<PAGE>


ITEM 4         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               (a) The annual meeting of stockholders of the Company was held on
June 27, 2003.

               (b) The  first  item  voted  on was the  election  of  Directors.
Stephen W. Akos,  Joseph E. Armstrong,  Jeffrey R. Bailey,  John A.  Clendening,
Robert L. Devereux, Bill L. Harbert, Peter E. Salas, Charles Stivers and Richard
T.  Williams  were elected as Directors of the Company for a term of one year or
until their successors were elected and qualified. The results of voting were as
follows:  9,484,371  votes for Stephen W. Akos and 52, 804  withheld;  9,484,771
votes for Joseph E. Armstrong and 52,404  withheld;  9,484,193 votes for Jeffrey
R. Bailey and 52,982 withheld; 9,477,914 votes for John A. Clendening and 59,261
withheld;  9,484,571 votes for Robert L. Devereux and 52,604 withheld; 9,483,731
votes for Bill L.  Harbert  and 53,444  withheld;  9,479,003  votes for Peter E.
Salas and 58,172  withheld;  9,474,065  votes for Charles M.  Stivers and 63,110
withheld; and 9,479,003 votes for Richard T. Williams and 58,182 withheld.

               A majority of votes at the meeting having voted for them, Messrs.
Akos,  Armstrong,  Bailey,  Clendening,  Devereux,  Harbert,  Salas, Stivers and
Williams were duly elected as Directors of the Company.

               (c) The next item of  business  was the  proposal  to ratify  the
appointment of BDO Seidman, LLP, the independent certified public accountants of
the Company, for fiscal 2003. The results of the voting were as follows:

               9,497,508 votes for the resolution,
                  25,017 votes against and
                  14,650 votes abstained.

               A majority of the votes cast at the meeting  having voted for the
resolution,  the resolution  was duly passed.  No other matters were voted on at
the meeting.




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<PAGE>


               EXHIBITS

               Exhibit  31:   Certifications  of  Richard  T.  Williams,   Chief
Executive  Officer,  and Mark A. Ruth,  Chief  Financial  Officer,  pursuant  to
Section 302 of the Sarbanes-Oxley Act of 2002.

               Exhibit  32:   Certifications  of  Richard  T.  Williams,   Chief
Executive  Officer,  and Mark A. Ruth,  Chief  Financial  Officer,  pursuant  to
Section 906 of the Sarbanes-Oxley Act of 2002.








                                       25
<PAGE>


   SIGNATURES


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


Dated: August 14, 2003                  TENGASCO, INC.



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



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









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