Natural Gas Systems, Inc. (NGS) is a development company engaged in oil and gas exploration and acquires working interests in oil and gas resources located in established fields and redevelops those fields and converts them into producing reserves. The Company principally focuses on established fields with long-lived production from relatively shallow reservoirs and reservoirs with low permeability. As of June 30, 2005, NGS had four crude oil and natural gas producing fields in the State of Louisiana, of which are referred to as the Delhi Field or the Tullos Field Area. On May 26, 2004, Natural Gas Systems, Inc. (Old NGS) was merged into a wholly owned subsidiary of Reality Interactive, Inc. (Reality). Reality was renamed Natural Gas Systems, Inc. Prior to the merger, Reality did not conduct any operations and had minimal assets and liabilities. NGS sells all of its crude oil production from the Delhi and Tullos Fields to Plains Marketing LP, a crude oil purchaser. A portion of the Company's crude oil production is subject to a fixed-price contract with Plains Marketing that began March 1, 2005 for approximately 2,100 barrels per month. As of June 30, 2005, NGS sold its natural gas liquids to Dufour Petroleum, L.P., a subsidiary of Enbridge Energy Partners. The Company also sells a portion of its natural gas under a short-term contract with Texla Energy Management, Inc., a natural gas marketer/aggregator. Delhi Field Old NGS has 100% working interest and an approximate 80% average net revenue interest in property and wells located in northeastern Louisiana, known as the Delhi Field. This includes six producing wells, one salt water disposal well and 37 shut-in wells with aggregate average production of approximately 18 barrels of crude oil per day (BOPD) and no natural gas sales. The Delhi Field encompasses approximately 13,636 acres. Tullos Field Area In September 2004, NGS completed the acquisition of a 100% working interest and an approximate 78% average net revenue interest, in producing crude oil wells, equipment and improvements located in the Tullos Urania, Colgrade and Crossroads Fields in LaSalle and Winn Parishes, Louisiana, collectively referred to as the Tullos Field Area. The purchased assets included approximately 124 oil wells, nine water disposal wells and all associated infrastructure, including water disposal facilities, crude oil and water tanks, flow lines and pumping units. The Company subsequently acquired new leases for these wells and is attempting to secure new leases for the remainder. In February 2005, the Company completed the acquisition of a 100% working interest and an approximate 79% average net revenue interest in similar properties in the Tullos Field Area. The purchased assets included approximately 121 oil wells, eight saltwater disposal wells and associated infrastructure and equipment. As of June 30, 2005, the productive rate in the Tullos Field Area was approximately 115 BOPD.

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