ATLAS ENERGY, S-1/A Filing by ATLS-Agreements

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									                                   As filed with the Securities and Exchange Commission on April 8, 2004
                                                         Registration No. 333-112653

                                     SECURITIES AND EXCHANGE COMMISSION
                                                             Washington, D.C. 20549



                                                               FORM S-1
                                                  REGISTRATION STATEMENT UNDER
                                                    THE SECURITIES ACT OF 1933

                                                            Amendment No. 2

                                                ATLAS AMERICA, INC.
                                               (Exact name of registrant as specified in its charter)

                 Delaware                                           1311                                           51-0404430
       (State or other jurisdiction of                       (Primary Standard                                  (I.R.S. Employer
      incorporation or organization)                      Industrial Classification                            Identification No.)
                                                               Code Number)

                                                              311 Rouser Road
                                                        Moon Township, PA 15108
                                                               (412) 262-2830
                                (Address, including zip code, and telephone number, including area code, of
                                                   registrant’s principal executive office)

                                                              Edward E. Cohen
                                                             Atlas America, Inc.
                                                              311 Rouser Road
                                                        Moon Township, PA 15108
                                                               (412) 262-2830
                       (Address, including zip code, and telephone number, including area code, of agent for service)

                                                  Please send copies of communications to:

                             J. Baur Whittlesey, Esq.                            Emanuel Faust, Jr., Esq.
                             Lisa A. Ernst, Esq                                  Dickstein Shapiro Morin &
                             Ledgewood Law Firm, P.C.                            Oshinsky LLP
                             1521 Locust Street                                  2101 L Street, N.W.
                             Philadelphia, PA 19102                              Washington, D.C. 20037
                             (215) 731-9450                                      (202) 785-9700

    Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes
effective.

    If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.

    If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

    If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.

    If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
    If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.

     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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     The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

                                                  Subject to Completion, dated April 8, 2004

                                                      2,300,000 Shares of Common Stock

                                                          ATLAS AMERICA, INC.

   This is our initial public offering. We expect the public offering price to be between $14.00 and $16.00 per share. Currently, no public
market exists for the shares. We have applied to have our common stock approved for quotation on the Nasdaq Stock Market under the symbol
―ATLS.‖ Our application currently is being reviewed by Nasdaq.

    You should read ―Risk Factors‖ beginning on page 7 for a discussion of important factors that you should consider before buying
our common stock.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                                                                                                                 Per share          Total
Public offering price                                                                                        $                 $
Underwriting discounts                                                                                       $                 $
Proceeds, before expenses                                                                                    $                 $

    The underwriters may purchase up to an additional 345,000 shares from us at the public offering price, less the underwriting discount, to
cover over-allotments.

     The shares will be ready for delivery on or about _______ ___, 2004

Friedman Billings Ramsey                                                                             KeyBanc Capital Markets


                                                    Prospectus dated _____________ , 2004
                            TABLE OF CONTENTS

SUMMARY                                                            2
RISK FACTORS                                                       7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS                 16
USE OF PROCEEDS                                                   17
CAPITALIZATION                                                    18
SELECTED CONSOLIDATED FINANCIAL DATA                              19
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS                                            22
BUSINESS                                                           35
MANAGEMENT                                                         51
RELATIONSHIP WITH RESOURCE AMERICA                                 57
PRINCIPAL STOCKHOLDER                                              64
DESCRIPTION OF CAPITAL STOCK                                       65
SHARES ELIGIBLE FOR FUTURE SALE                                    68
UNDERWRITING                                                       70
LEGAL MATTERS                                                      73
ENGINEERS                                                          73
EXPERTS                                                            73
WHERE YOU CAN FIND MORE INFORMATION                                73
GLOSSARY                                                           74
INDEX TO FINANCIAL STATEMENTS                                     F-1
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                                                                   SUMMARY

    This summary highlights selected information from this prospectus. You should carefully read the entire prospectus before making an
investment decision. Unless otherwise indicated, this prospectus reflects no exercise of the underwriters’ over-allotment option. We have
provided definitions for some of the oil and gas industry terms used in this prospectus in the “Glossary” beginning on page 74.

    In this prospectus, we refer to Atlas America, Inc, its subsidiaries and predecessors as “we,” “our” or “our company.” Our fiscal year
end is September 30.

                                                                  Our Company

     We are an independent energy company engaged in the development, production and transportation of natural gas and, to a lesser extent,
oil in the Appalachian Basin. Our objective is to increase stockholder value by:

    •    expanding our reserve base through developmental drilling primarily funded by growth in our sponsorship of drilling investment
         partnerships;

    •    increasing our fee-based revenue through the management of our drilling investment partnerships and the wells we drill for them; and

    •    increasing our distributions from our general and limited partner interests and incentive distribution rights in Atlas Pipeline Partners,
         L.P.

     We have been involved in the energy industry since 1968. We periodically seek and evaluate potential opportunities to expand our asset
base or enhance our business through asset or business acquisitions, joint ventures, mergers or similar business combinations or strategic
transactions. We began to expand our operations at the end of fiscal 1998 when we acquired The Atlas Group, Inc., an energy finance and
production company located in Pittsburgh, Pennsylvania. Since fiscal 1998, we have achieved consistent growth in our reserve base through
developmental drilling activities, acquisitions of properties and, in 1999, the acquisition of Viking Resources Corporation, a North Canton,
Ohio exploration and production company. From October 1, 1998 through September 30, 2003, proved reserves net to our interest grew from
93.3 Bcfe to 144.4 Bcfe, and the PV-10 value of these reserves grew from $49.2 million to $191.4 million. During the same period, proved
reserves we manage for our drilling investment partnerships grew from 142.0 Bcfe to 187.8 Bcfe, and the PV-10 value of these reserves grew
from $97.6 million to $273.5 million. As of December 31, 2003, we had an acreage position of approximately 463,000 gross (411,000 net)
acres, of which 235,000 gross (220,000 net) acres were undeveloped. We have also achieved substantial growth in our drilling activities. The
number of wells we have drilled, net to both our interest and that of our sponsored drilling investment partnerships, increased from 145 wells in
fiscal 1999 to 282 wells in fiscal 2003. We expect that we will drill approximately 530 of such net wells in fiscal 2004, of which 111 were
drilled during the three months ended December 31, 2003. Of the 1,234 gross wells we have drilled since fiscal 1999, we have completed
approximately 99% as producing.

    We conduct our natural gas transportation operations through Atlas Pipeline Partners, L.P., whose common units are publicly traded
(AMEX: APL). As of December 31, 2003, Atlas Pipeline Partners owned approximately 1,380 miles of intrastate gathering systems located in
our core New York, Ohio and Pennsylvania operating area to which approximately 4,500 natural gas wells were connected. The general partner
of Atlas Pipeline Partners, Atlas Pipeline Partners GP, LLC, is our wholly-owned subsidiary and conducts its operations using our personnel.
Atlas Pipeline Partners GP owns a substantial interest in Atlas Pipeline Partners, as follows:

    •    a combined 2% general partner interest in Atlas Pipeline Partners and its operating partnership;

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    •    a 37% limited partner interest consisting of 1,641,026 subordinated units, all of which will convert to common units on January 1,
         2005 provided certain financial tests are met; and

    •    incentive distribution rights entitling it to an increasing share of distributions as target levels are met.

     Atlas Pipeline Partners has grown its gathering systems through both extensions to its existing systems to connect to wells drilled for our
drilling investment partnerships and acquisitions. Since its formation, Atlas Pipeline Partners has completed two acquisitions of 120 miles of
gathering systems: in January 2001 it acquired 100 miles of gathering systems in southeastern Ohio from Kingston Oil Corporation and in
March 2001 it acquired 20 miles of gathering systems in Fayette County, Pennsylvania from American Refining and Exploration Company.
Recently, Atlas Pipeline Partners entered into a purchase agreement with SEMCO Energy, Inc. (NYSE: SEN) to acquire Alaska Pipeline
Company for $95 million. Alaska Pipeline Company is the owner of an intrastate transmission system which delivers natural gas to
metropolitan Anchorage.

     We fund our drilling activities through the sponsorship of drilling investment partnerships. Although we have been raising capital through
drilling investment partnerships since 1968, the amount of capital raised through these partnerships has increased substantially since 1998. On a
calendar year basis, which is historically the basis of our fund-raising cycle, the amount of capital we have raised has increased from
$25.1 million in calendar 1998 to $75.1 million in calendar 2003. We act as the general partner of our sponsored drilling investment
partnerships and receive both an interest proportionate to the amount of capital and the value of the properties we contribute, typically 25%,
and a carried interest, typically 7%, both of which are subordinated to specified returns to the investor partners. In addition to providing capital
for our drilling activities, our drilling investment partnerships are a source of fee-based revenue. We drill all of the partnership wells under
―cost plus‖ contracts for which we are paid the costs of drilling the wells plus a fee equal to 15% of those costs. We also act as well operator
and partnership manager, for which we receive specified monthly per well operating and administrative fees.

                                                       Relationship with Resource America

    We are currently owned by a wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI). After the completion of this
offering, Resource America will own approximately 82.3% of the outstanding shares of our common stock, or 80.2% if the underwriters
exercise their over-allotment option.

    Resource America has advised us that it intends to distribute its remaining ownership interest in us to its common stockholders. Resource
America expects the distribution to take the form of a spin-off by means of a special dividend to Resource America common stockholders of all
of our common stock owned by Resource America. Resource America has advised us that it anticipates that the distribution will occur by the
end of 2004. Resource America has sole discretion if and when to complete the distribution and its terms. Resource America does not intend to
complete the distribution unless it receives a ruling from the Internal Revenue Service and/or an opinion from its tax counsel as to the tax-free
nature of the distribution to Resource America and its stockholders for U.S. federal income tax purposes. The Internal Revenue Service
requirements for tax-free distributions of this nature are complex and the Internal Revenue Service has broad discretion, so there is significant
uncertainty as to whether Resource America will be able to obtain such a ruling. Because of this uncertainty and the fact that the timing and
completion of the distribution is in Resource America’s sole discretion, we cannot assure you that the distribution will occur by the
contemplated time or at all. For a discussion of the distribution, see ―Risk Factors — Risks Relating to Our Relationship With Resource
America‖ and ―Relationship with Resource America.‖

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    We believe that our separation from Resource America will enable us to realize the following benefits:

    •    Focused energy company . Our separation from Resource America will allow us to focus managerial attention solely on the needs of
         our business.

    •    Direct access to capital markets . As a separate public company, we will have direct access to the capital markets to issue equity or
         debt securities.

    •    Market recognition of the value of our business . As a separate, stand-alone company, we will offer a more focused investment
         opportunity than that currently presented by a more diversified Resource America. We expect that this will promote a more efficient
         equity valuation of our company.

    •    Increased ability to pursue strategic acquisitions . With the ability to issue our own stock as consideration for an acquisition, we
         expect to be better positioned to pursue strategic acquisitions to grow our business.

    •    Incentives for employees more directly linked to our performance . Our separation from Resource America will enable us to offer our
         employees incentive compensation more directly linked to the performance of our business. We believe that these incentives will also
         enhance our ability to attract and retain qualified personnel.

     Before the completion of this offering, we will enter into agreements with Resource America related to the separation of our business
operations from Resource America. These agreements will govern various interim and ongoing relationships between us. All of the agreements
relating to our separation from Resource America will be made in the context of a parent-subsidiary relationship and will be entered into in the
overall context of our separation from Resource America. Because of Resource America’s control of us, the terms of these agreements may be
more or less favorable to us than if they had been negotiated with unaffiliated third parties. See ―Risk Factors—Risks Relating to Our
Relationship with Resource America‖ and ―Relationship with Resource America.‖

                                                             Company Information

    We were incorporated in Delaware in September 2000 in order to become a holding company for Resource America’s energy assets and
subsidiaries. Our principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania. Our telephone number is (412)
262-2830.



                                                                  The Offering

                                                                      2,300,000 shares; 2,645,000 shares if the underwriters’ over-allotment
Common stock offered                                                  option is exercised in full.

Shares outstanding after this offering                                12,988,333 shares; 13,333,333 shares if the underwriters’
                                                                      over-allotment option is exercised in full.

Use of proceeds                                                       We expect to use the net proceeds from this offering to repay
                                                                      intercompany indebtedness to Resource America and distribute the
                                                                      balance to Resource America as a special dividend.

Risk factors                                                          An investment in our shares involves risks. Please read ―Risk Factors‖
                                                                      beginning on page 7 of this prospectus.

Nasdaq symbol                                                         ATLS



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                                                                Summary Financial Information

     The following table sets forth summary financial data as of and for the three months ended December 31, 2003 and 2002 and the fiscal
years ended September 30, 2003, 2002, 2001, 2000 and 1999. We derived the financial data as of December 31, 2003 and for the three months
ended December 31, 2003 and 2002 from our unaudited financial statements which are included in this prospectus. We derived the financial
data as of September 30, 2003 and 2002 and for the years ended September 30, 2003, 2002 and 2001 from our financial statements, which were
audited by Grant Thornton LLP, independent accountants, and are included in this prospectus. We derived the financial data as of
September 30, 2001 and 2000 and for the year ended September 30, 2000 from our financial statements, which were audited by Grant Thornton
LLP, and are not included in this prospectus. We derived the financial data as of and for the year ended September 30, 1999 from the financial
statements of our predecessors for that period, Atlas America, Resource Energy, Inc. and Viking Resources, which, except for those of Viking
Resources, were audited by Grant Thornton LLP and are not included in this prospectus. We acquired Viking Resources on August 31, 1999.

                                     Three months ended
                                       December 31,                                                   Years ended September   30,
Statement of operations data:
                                    2003                 2002             2003               2002                   2001                2000            1999

                                           (unaudited)
Revenues:                                                                   (in thousands, except per share data)
Well drilling                   $    21,959       $        6,583      $    52,879      $       55,736          $     43,464         $    31,869     $    32,422
Gas and oil production               10,195                8,069           38,639              28,916                36,681              25,231          12,233
Well services                         1,979                1,899            7,634               7,585                 7,403               6,962           6,120
Transportation                        1,599                1,407            5,901               5,389                 5,715               4,770           3,310
Gas marketing                            —                    —                —                   —                  1,030               1,384          14,181
Other                                   127                  177              636               1,670                 1,596               1,044           1,326

Total revenues                       35,859               18,135          105,689              99,296                95,889              71,260          69,592

Costs and expenses:
Well drilling                        19,095                5,725           45,982              48,443                36,602              25,806          26,312
Gas and oil production
and exploration                       1,685                1,586            8,485               8,264                  7,846              8,339           5,366
Well services                         1,004                  839            3,774               3,747                  2,961              2,444           1,378
Transportation                          596                  590            2,444               2,052                  2,001              2,842             649
Gas marketing                            —                    —                —                   —                   1,007              1,195          13,666
Provision for possible
losses                                      —                    —               —                  (117 )                 263                 —               —
General and
administrative                             948             2,246            6,532               7,074                  9,559              7,752           5,887
Depreciation, depletion
and amortization                      3,245                2,872           11,595              10,836                10,782               9,781           5,513
Interest                                487                  629            1,961               2,200                 1,714               2,898           2,064
Minority interest in Atlas
Pipeline Partners                     1,271                     645         4,439               2,605                  4,099              2,058                —

Total costs and expenses             28,331               15,132           85,212              85,104                76,834              63,115          60,835

Income from continuing
 operations before income
 taxes and cumulative
 effect of a change in
 accounting principle                 7,528                3,003           20,477              14,192                19,055               8,145           8,757
Provision for income
 taxes                                2,635                     991         6,757               4,683                  6,613              3,300           3,199

Income from continuing
 operations before
 cumulative effect of a
 change in accounting
 principle                            4,893                2,012           13,720               9,509                12,442               4,845           5,558
Income (loss) from                       —                    —               192              (1,641 )              (1,030 )              (673 )            —
discontinued operations
Cumulative effect of a
change in accounting
principle, net of taxes         —           —            —         (627 ) (1)          —           —           —

Net income                $   4,893   $   2,012   $   13,912   $   7,241        $   11,412   $   4,172   $   5,558

Basic and diluted net
income per share          $     .46   $     .19   $     1.30   $     .68        $     1.07   $     .39   $     .52


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                                    Three months ended
                                      December 31,                                            Years ended September    30,
Operating data:
                                   2003                    2002          2003          2002               2001               2000          1999

 Net production:
 Natural gas (Mmcf) (2)              1,792                   1,780         6,967         7,117                 6,343           6,440         4,342
 Oil (Mbbls)                            42                      41           160           173                   177             196            85
Total (Mmcfe)                        2,042                   2,027         7,927         8,154                 7,407           7,616         4,853
Average sales price:
 Natural gas (per Mcf) (3)    $       5.06       $            3.96   $      4.92   $      3.56       $          5.04     $      3.15   $      2.37
 Oil (per Bbl)                       26.94                   24.71         26.91         20.45                 25.56           24.50         14.57

Other financial
 information (in
 thousands):
Net cash provided by
 operating activities         $     34,705       $          15,229   $    49,174   $     5,452       $      36,190       $    17,157   $    15,630
Capital expenditures          $     10,807       $           4,100   $    28,029   $    21,291       $      14,050       $    10,935   $    11,455
EBITDA (4)                    $     11,260       $           6,504   $    34,033   $    27,228       $      31,551       $    20,824   $    16,334



                                      December       31,                                           September     30,

                                   2003                    2002          2003          2002               2001               2000          1999

                                          (unaudited)                                               (in thousands)
Balance sheet data:
Total assets                  $    230,773       $         225,185   $   232,388   $   192,614       $    199,785        $   158,503   $   155,022

Long-term debt (including
 current maturities)          $     19,180       $          58,255   $    31,194   $    49,505       $      43,284       $    23,506   $    45,511

Stockholder’s equity          $     79,572       $          74,584   $    87,511   $    73,366       $      66,347       $    54,925   $    50,773


(1) Represents write-down of goodwill, net of taxes, by our former technology subsidiary in connection with its adoption of SFAS 142.
(2) Excludes sales of residual gas and sales to landowners.
(3) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57, $5.13, $3.15 and $2.37 for the fiscal years ended 2003, 2002, 2001, 2000 and 1999, respectively.
(4) See note 3 to ―Selected Consolidated Financial Data‖ for a definition of EBITDA and a reconciliation of EBITDA to our income.

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                                                                   RISK FACTORS

    You should carefully consider each of the risks described below, together with all of the other information contained in this prospectus,
before deciding to invest in shares of our common stock. If any of the following risks develop into actual events, our business, financial
condition or results of operations could be materially adversely affected, the trading price of your shares could decline and you may lose all or
part of your investment.

                                                            Risks Relating to Our Business

    Natural gas and oil prices are volatile. A substantial decrease in prices, particularly natural gas prices, would decrease our revenues
and the value of our natural gas and oil properties and could make it more difficult for us to obtain financing for our drilling operations
through drilling investment partnerships.

     Our future financial condition and results of operations, and the value of our natural gas and oil properties, will depend upon market prices
for natural gas and oil. Natural gas and oil prices historically have been volatile and will likely continue to be volatile in the future. Prices we
have received during our past three fiscal years for our natural gas have ranged from a high of $6.12 per Mcf in the quarter ended March 31,
2001 to a low of $3.39 per Mcf in the quarter ended December 31, 2001. Prices for natural gas and oil are dictated by supply and demand. The
factors affecting supply include:

    •    the availability of pipeline capacity;

    •    domestic and foreign governmental regulations and taxes;

    •    political instability or armed conflict in oil producing regions or other market uncertainties; and

    •    the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil prices and production
         controls.

    The factors affecting demand include:

    •    weather conditions;

    •    the price and availability of alternative fuels;

    •    the price and level of foreign imports; and

    •    the overall economic environment.

     These factors and the volatility of the energy markets make it extremely difficult to predict future oil and gas price movements with any
certainty. Price fluctuations can materially adversely affect us because:

    •    price decreases will reduce the amount of cash flow available to us for drilling and production operations and for our capital
         contributions to our drilling investment partnerships;

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    •    price decreases may make it more difficult to obtain financing for our drilling and development operations through sponsored drilling
         investment partnerships, borrowing or otherwise;

    •    price decreases may make some reserves uneconomic to produce, reducing our reserves and cash flow; and

    •    price decreases may cause the lenders under our credit facility to reduce our borrowing base because of lower revenues or reserve
         values, reducing our liquidity and, possibly, requiring mandatory loan repayment.

    Further, oil and gas prices do not necessarily move in tandem. Because approximately 92% of our proved reserves are currently natural gas
reserves, we are more susceptible to movements in natural gas prices.

Drilling wells is highly speculative.

     The amount of recoverable natural gas and oil reserves may vary significantly from well to well. While our average estimated ultimate
recovery from our wells is 150 Mmcfe per well, recoverable natural gas from individual wells ranges up to 1.556 Bcfe. We may drill wells that,
while profitable on an operating basis, do not produce sufficient net revenues to return a profit after drilling, operating and other costs are taken
into account. The geologic data and technologies available do not allow us to know conclusively before drilling a well that natural gas or oil is
present or may be produced economically. The cost of drilling, completing and operating a well is often uncertain. For example, we have
recently experienced an increase in the cost of tubular steel as a result of rising steel prices which will increase well costs. Further, our drilling
operations may be curtailed, delayed or cancelled as a result of many factors, including:

    •    title problems;

    •    environmental or other regulatory concerns;

    •    costs of, or shortages or delays in the availability of, oil field services and equipment;

    •    unexpected drilling conditions;

    •    unexpected geological conditions;

    •    adverse weather conditions; and

    •    equipment failures or accidents.

Any one or more of the factors discussed above could reduce or delay our receipt of drilling and production revenues, thereby reducing our
earnings and could reduce revenues in one or more of our drilling investment partnerships, which may make it more difficult to finance our
drilling operations through sponsorship of future partnerships.

Properties that we acquire may not produce as projected, and we may be unable to identify liabilities associated with the properties or obtain
protection from sellers against them.

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    As part of our business strategy, we continually seek acquisitions of gas and oil properties. We completed two such acquisitions in fiscal
2001, one from Kingston Oil Corporation and one from American Refining and Exploration Company, and have acquired two oil and gas
companies, Viking Resources in fiscal 1999 and The Atlas Group in fiscal 1998, that owned substantial natural gas and oil properties. The
successful acquisition of natural gas and oil properties requires assessment of many factors, which are inherently inexact and may be
inaccurate, including the following:

    •    future oil and natural gas prices;

    •    the amount of recoverable reserves;

    •    future operating costs;

    •    future development costs;

    •    costs and timing of plugging and abandoning wells; and

     • potential environmental and other liabilities.
     Our assessment will not necessarily reveal all existing or potential problems, nor will it permit us to become familiar enough with the
properties to assess fully their capabilities and deficiencies. With respect to properties on which there is current production, we may not inspect
every well, platform or pipeline in the course of our due diligence. Inspections may not reveal structural and environmental problems such as
pipeline corrosion or groundwater contamination. We may not be able to obtain or recover on contractual indemnities from the seller for
liabilities that it created. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the
properties may not perform in accordance with our expectations.



Estimates of proved reserves are uncertain and, as a result, revenues from production may vary significantly from our expectations.

    We base our estimates of our proved natural gas and oil reserves and future net revenues from those reserves upon analyses that rely upon
various assumptions, including those required by the Securities and Exchange Commission, as to natural gas and oil prices, taxes, development
expenses, capital expenses, operating expenses and availability of funds. Any significant variance in these assumptions, and, in our case,
assumptions concerning natural gas prices, could materially affect the estimated quantity of our reserves. As a result, our estimates of our
proved natural gas and oil reserves are inherently imprecise. Actual future production, natural gas and oil prices, taxes, development expenses,
operating expenses, availability of funds and quantities of recoverable natural gas and oil reserves may vary substantially from our estimates or
estimates contained in the reserve reports referred to elsewhere in this prospectus. Our properties also may be susceptible to hydrocarbon
drainage from production by other operators on adjacent properties. In addition, our proved reserves may be revised downward or upward
based upon production history, results of future exploration and development, prevailing natural gas and oil prices, governmental regulation
and other factors, many of which are beyond our control.

    At September 30, 2003, approximately 32% of our estimated proved reserves were undeveloped. Recovery of undeveloped reserves
generally requires significant capital expenditures and successful drilling operations. The reserve data assumes that we will obtain the
necessary capital and conduct these operations successfully which, for the reasons discussed elsewhere in this ―- Risks Relating to Our
Business‖ section, may not occur.

If we cannot replace reserves, our revenues and production will decline.

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    Our proved reserves will decline as reserves are produced unless we acquire or lease additional properties containing proved reserves,
successfully develop new or existing properties or identify additional formations with primary or secondary reserve opportunities on our
properties. If we are not successful in expanding our reserve base, our future natural gas and oil production and drilling activities, the primary
source of our energy revenues, will decrease. Our ability to find and acquire additional reserves depends on our generating sufficient cash flow
from operations and other sources of capital, principally our sponsored drilling investment partnerships, all of which are subject to the risks
discussed elsewhere in this subsection of the prospectus.

If we are unable to acquire assets from others or obtain capital funds through our drilling investment partnerships, our revenues may
decline.

    The growth of our energy operations has resulted from both our acquisition of energy companies and assets and from our ability to obtain
capital funds through our sponsored drilling investment partnerships. If we are unable to identify acquisitions on acceptable terms, or cannot
obtain sufficient capital funds through sponsored drilling investment partnerships, we may be unable to increase or maintain our inventory of
properties and reserve base, or be forced to curtail drilling, production or other activities. This would result in a decline in our revenues.

Changes in tax laws may impair our ability to obtain capital funds through our drilling investment partnerships.

    Under current federal tax laws, there are tax benefits to investing in drilling investment partnerships such as those we sponsor, including
deductions for intangible drilling costs and depletion deductions. Changes to federal tax law that reduce or eliminate these benefits may make
investment in our drilling investment partnerships less attractive and, thus, reduce our ability to obtain funding from this significant source of
capital funds. A recent change to federal tax law that may affect us is the Jobs and Growth Tax Relief Reconciliation Act of 2003, which
reduced the maximum federal income tax rate on long-term capital gains and qualifying dividends to 15% through 2008. These changes may
make investment in our drilling investment partnerships relatively less attractive than investments in assets likely to yield capital gains or
qualifying dividends.

Competition in the oil and natural gas industry is intense, which may hinder our ability to acquire gas and oil properties and companies
and to obtain capital.

     We operate in a highly competitive environment for acquiring properties and other natural gas and oil companies and attracting capital
through our drilling investment partnerships. For example, we have been advised by the Pennsylvania Bureau of Oil and Gas Management that
there are 645 well operators currently bonded in Pennsylvania, one of our core operating areas. We also compete with the exploration and
production divisions of public utility companies for natural gas and oil property acquisitions. Our competitors may be able to pay more for
natural gas and oil properties and to evaluate, bid for and purchase a greater number of properties than our financial or personnel resources
permit. Moreover, our competitors for investment capital may have better track records in their programs, lower costs or better connections in
the securities industry segment that markets oil and gas investment programs than we do. We may not be able to compete successfully in the
future in acquiring prospective reserves and raising additional capital.

We could incur losses from our arrangements for transporting natural gas.

    We pay transportation fees, which are based on gas sales prices, to Atlas Pipeline Partners for natural gas produced by our drilling
investment partnerships and certain unaffiliated producers. If natural gas prices increase 87% or more from prices obtained in fiscal 2003, the
fees we pay to Atlas Pipeline Partners could exceed the transportation fees paid to us, reimbursements and distributions to us from our general
and limited partner interests in Atlas Pipeline Partners, and connection costs and other expenses paid by Atlas Pipeline Partners.

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We may be exposed to financial and other liabilities as the general partner in drilling investment partnerships.

     We currently serve as the managing general partner of 84 drilling investment partnerships and will be the general partner of new drilling
investment partnerships that we sponsor. As general partner, we are contingently liable for the obligations of these partnerships to the extent
that partnership assets or insurance proceeds are insufficient.

We are subject to complex laws that can affect the cost, manner or feasibility of doing business.

    Exploration, development, production and sale of natural gas and oil are subject to extensive federal, state and local regulation. We discuss
our regulatory environment in more detail in ―Business — Governmental Regulation.‖ We may be required to make large expenditures to
comply with these regulations. Failure to comply with these regulations may result in the suspension or termination of our operations and
subject us to administrative, civil and criminal penalties. Other regulations may limit our operations. For example, ―frost laws‖ prohibit drilling
and other heavy equipment from using certain roads during winter, a principal drilling season for us, which may delay us in drilling and
completing wells. Moreover, governmental regulations could change in ways that substantially increase our costs, thereby reducing our return
on invested capital, revenues and net income.

Our operations may incur substantial liabilities to comply with environmental laws and regulations.

     Our natural gas and oil operations are subject to stringent federal, state and local laws and regulations relating to the release or disposal of
materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a
permit before drilling commences, restrict the types, quantities, and concentration of substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and
other protected areas, and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and
regulations may result in the assessment of administrative, civil, and criminal penalties, incurrence of investigatory or remedial obligations, or
the imposition of injunctive relief. Changes in environmental laws and regulations occur frequently, and any changes that result in more
stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to
maintain compliance or could restrict our methods or times of operation. Under these environmental laws and regulations, we could be held
strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were
responsible for the release or if our operations were standard in the industry at the time they were performed. We discuss the environmental
laws that affect our operations in more detail under ―Business—Environmental and Safety Regulation.‖

    Pollution and environmental risks generally are not fully insurable. We may elect to self-insure if we believe that insurance, although
available, is excessively costly relative to the risks presented. The occurrence of an event that is not covered, or not fully covered, by insurance
could reduce our revenues and the value of our assets.

Well blowouts, pipeline ruptures and other operating and environmental problems could result in substantial losses to us.

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    Well blowouts, cratering, explosions, uncontrollable flows of natural gas, oil or well fluids, fires, formations with abnormal pressures,
pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks are inherent operating hazards for us. The
occurrence of any of those hazards could result in substantial losses to us, including liabilities to third parties or governmental entities for
damages resulting from the occurrence of any of those hazards and substantial investigation, litigation and remediation costs.

We may be required to write-down the carrying value of our proved properties; any such write-downs would be a charge to our earnings.

    We may be required to write-down the carrying value of our natural gas and oil properties when natural gas and oil prices are low. In
addition, write-downs may occur if we have:

    •    downward adjustments to our estimated proved reserves;

    •    increases in our estimates of development costs; or

    •    deterioration in our exploration and development results.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oil field services could delay our exploration
and development plans and decrease net revenues from drilling operations.

    Shortages of drilling rigs, equipment, supplies or personnel could delay our development and exploration plans, thereby reducing our
revenues from drilling operations and delaying our receipt of production revenues from wells we planned to drill. Moreover, increased costs,
whether due to shortages or other causes, will reduce the number of wells we can drill for existing drilling investment partnerships and, by
making our drilling investment partnerships less attractive as investments, may reduce the amount of financing for drilling operations we can
obtain from them. This may reduce our revenues not only from drilling operations but also, if fewer wells are drilled, from production of
natural gas and oil.

                                         Risks Relating to Our Relationship with Resource America

Our principal stockholder is in a position to affect our ongoing operations, corporate transactions and other matters.

    After giving effect to this offering, our principal stockholder, Resource America, will own approximately 82.3% of our outstanding shares
of common stock, or 80.2% if the underwriters exercise their over-allotment option in full. As a result, Resource America will be able to
determine the outcome of all corporate actions requiring stockholder approval. For example, Resource America will continue to control
decisions with respect to:

    •    the election and removal of directors;

    •    mergers or other business combinations involving us;

    •    future issuances of our common stock or other securities; and

    •    amendments to our certificate of incorporation and bylaws.

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     Any exercise by Resource America of its control rights may be in its own best interest which may not be in the best interest of our other
stockholders and our company. Resource America’s ability to control our company may also make investing in our stock less attractive. These
factors in turn may have an adverse affect on the price of our common stock. Resource America’s control rights will continue until it distributes
its remaining ownership interest in us to its common stockholders or otherwise disposes of it. While Resource America intends to make the
distribution, it is not obligated to do so. See ―— Resource America may not complete its intended distribution of its holdings of our common
stock, which would result in its continued control of us.‖

Potential conflicts may arise between us and Resource America that may not be resolved in our favor.

     The relationship between us and Resource America may give rise to conflicts of interest with respect to, among other things, transactions
and agreements among us and Resource America, issuances of additional voting securities and the election of directors. When the interests of
Resource America diverge from our interests, Resource America may exercise its substantial influence and control over us in favor of its own
interests over our interests.

Our intercompany agreements with Resource America are not the result of arm’s-length negotiations.

     We have entered or will enter into agreements with Resource America which will govern various transactions between us and our ongoing
relationship following completion of this offering, including registration rights, tax separation and indemnification. All of these agreements
were or will be entered into while we are a wholly-owned subsidiary of Resource America, and were or will be negotiated in the overall context
of this offering and the proposed distribution by Resource America of its interest in us to its stockholders described in ―Relationship with
Resource America.‖ As a result of our current status as a wholly-owned subsidiary of Resource America which is subject to its control, these
agreements were not negotiated at arm’s-length. Accordingly, certain rights of Resource America, particularly the rights relating to the number
of demand and piggy-back registration rights that Resource America will have, the assumption by us of the registration expenses related to the
exercise of these rights and our indemnification of Resource America for any tax liabilities it may incur relating to the distribution to the extent
those liabilities are caused by our actions, may be more favorable to it than if they had been the subject of independent negotiation. We and
Resource America and its other affiliates may enter into other material transactions and agreements from time to time in the future which also
may not be deemed to be independently negotiated.

Our agreements with Resource America may limit our ability to obtain capital, make acquisitions or effect other business combinations.

    Our business strategy anticipates future acquisitions of natural gas and oil properties and companies. Any acquisition that we undertake
could be subject to our ability to access capital from outside sources on acceptable terms through the issuance of our common stock or other
securities. However, for the proposed distribution of Resource America’s common stock in us to its stockholders to be tax-free to them,
Resource America must, among other things, own at least 80% of all of our voting power at the time of the distribution. Therefore, until such
time that Resource America informs us that it will not complete the distribution, which will be in Resource America’s discretion, we will be
limited in our ability to issue voting securities, non-voting stock or convertible debt without Resource America’s prior consent, and Resource
America may be unwilling to give that consent. In addition, our agreements with Resource America prohibit us from making acquisitions or
entering into mergers or other business combinations that would jeopardize the tax-free status of the distribution. See ―Relationship with
Resource America—Tax Matters Agreement.‖

Resource America may not complete its intended distribution of its holdings of our common stock, which would result in its continued
control of us.

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     Resource America intends to distribute to its stockholders all of our common stock it owns by the end of 2004. However, Resource
America is not obligated to make the distribution at any particular time, or at all, and, as a result, the distribution may not occur at any
particular time, or at all. Resource America has advised us that it does not intend to complete the distribution unless it receives a ruling from
the Internal Revenue Service and/or an opinion from its tax counsel as to the tax-free nature of the distribution to Resource America and its
stockholders for U.S. federal income tax purposes. Because the Internal Revenue Service requirements for tax-free distributions of this nature
are complex and the Internal Revenue Service has broad discretion, there is significant uncertainty as to whether Resource America will be able
to obtain such a ruling.

    Unless and until the distribution occurs, we will face the risks discussed in this prospectus relating to Resource America’s control of us and
potential conflicts of interest between Resource America and us. If the distribution is delayed or not completed at all, the liquidity of shares of
our common stock in the market may be constrained for as long as Resource America continues to hold a significant position in our stock. A
lack of liquidity in the market for our common stock may adversely affect our stock price.

                                           Risks Relating to the Offering and Our Common Stock

The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering. In
addition, our stock price may be volatile.

     Before this offering, Resource America held all of our outstanding common stock and, therefore, there has been no public market for our
common stock. An active market for our common stock may not develop or may not be sustained after this offering. The initial public offering
price of our common stock will be determined by negotiations between us and representatives of the underwriters, based on numerous factors
which we discuss in the ―Underwriting‖ section of this prospectus. This price may not be indicative of the market price for our common stock
after this initial public offering. The market price of our common stock could be subject to significant fluctuations after this offering, and may
decline below the initial public offering price. You may not be able to resell your shares at or above the initial public offering price. The
following factors could affect our stock price:

    •    our operating and financial performance and prospects;

    •    quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

    •    changes in revenue or earnings estimates or publication of research reports by analysts;

    •    liquidity and activity in the market for our common stock;

    •    speculation in the press or investment community;

    •    sales of our common stock by Resource America or other stockholders;

    •    actions by institutional investors or by Resource America before its disposition of our common stock;

    •    general market conditions, including fluctuations in and the occurrence of events or trends affecting the price of natural gas and oil;
         and

    •    domestic and international economic, legal and regulatory factors unrelated to our performance.

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   Stock markets in general experience volatility that often is unrelated to the operating performance of particular companies. These broad
market fluctuations may adversely affect the trading price of our common stock.

The net proceeds of this offering will be used to repay our indebtedness, and make a distribution, to Resource America and will not be
available to invest in and expand our business.

     We will use the proceeds of this offering, after underwriting discounts and commissions and offering expenses payable by us, to repay all
intercompany indebtedness that we owe to Resource America. The balance will be distributed to Resource America in accordance with the
master separation and distribution agreement discussed in ―Relationship with Resource America — Master Separation and Distribution
Agreement.‖ As a result, we will not have any of the proceeds of this offering available to us for investment in and expansion of our operations.

Provisions in our organizational documents, Delaware law and agreements we will enter into with Resource America could delay or prevent
a change in control of our company, which may result in reduced prices being obtainable for our common stock.

     The existence of some provisions in our organizational documents and under Delaware law could delay or prevent a change in control of
our company, which may result in reduced prices being obtainable for our common stock. The provisions in our certificate of incorporation and
bylaws that could delay or prevent an unsolicited change in control of our company include a staggered board of directors, board authority to
issue preferred stock, advance notice provisions for director nominations or business to be considered at a stockholder meeting and
supermajority voting requirements. In addition, Delaware law imposes some restrictions on mergers and other business combinations between
us and any holder of 15% or more of our outstanding common stock. See ―Description of Capital Stock—Preferred Stock‖ and ―Description of
Capital Stock—Delaware Anti-Takeover Law and Charter and Bylaw Provisions.‖ Also, certain terms of the agreements between us and
Resource America will have the effect of making it more difficult to effect a change in control of our company. Such terms include the right of
Resource America to prohibit transactions having the effect of diluting its ownership interest in us, and the option grant to Resource America to
participate in offerings of equity securities by us to the extent necessary to maintain its ownership interest in us. See ―Relationship With
Resource America — Master Separation and Distribution Agreement‖ and ―– Tax Matters Agreement.‖

Sales of substantial amounts of our common stock in the public markets, including by Resource America, or the perception that they might
occur could reduce the price our common stock might otherwise obtain.

     Sales by Resource America or, if Resource America completes the distribution, sales in the public market by its stockholders following the
distribution, or the perception that such sales might occur, could reduce the price that our common stock might otherwise obtain or could
impair our ability to obtain capital through an offering of equity securities. Resource America currently intends to distribute all of its remaining
interest in us to its stockholders. We do not know what impact Resource America’s planned or actual divestiture will have on our stock price in
the future. See ―Shares Eligible for Future Sale.‖

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                                  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our
control, which may include statements about our:

    •    business strategy;

    •    reserves;

    •    properties;

    •    financial strategy;

    •    realized oil and natural gas prices;

    •    production;

    •    future operating results; and

    •    plans, objectives, expectations and intentions that are not historical.

    These statements also include statements regarding the future intentions of Resource America with respect to us or its interest in us.

     All statements, other than statements of historical fact included in this prospectus, regarding strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans and objectives of management or plans and intentions of Resource America are
forward-looking statements. When used in this prospectus, the words ―could,‖ ―believe,‖ ―anticipate,‖ ―intend,‖ ―estimate,‖ ―expect,‖ ―project‖
and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such
identifying words. All forward-looking statements speak only as of the date of this prospectus. We disclose important factors that could cause
our actual results to differ materially from our expectations under ―Risk Factors,‖ ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations‖ and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements
attributable to us, persons acting on our behalf or, where indicated, Resource America.

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                                                             USE OF PROCEEDS

    We estimate that the net proceeds from our sale of 2,300,000 shares of common stock in this offering at an initial public offering price of
$15.00 per share, the mid-point of the expected range of offering prices set forth on the cover page of this prospectus, after deducting
underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $31.5 million and
approximately $36.3 million if the underwriters exercise in full their option to purchase 345,000 additional shares. We expect to use the net
proceeds to repay all intercompany indebtedness to Resource America, which was $790,000 at December 31, 2003, and distribute the balance
to Resource America in accordance with the master separation and distribution agreement. See ―Relationship with Resource America —
Master Separation and Distribution Agreement.‖

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                                                               CAPITALIZATION

     The following table presents our capitalization as of December 31, 2003 on an actual basis and on a pro forma basis giving effect to this
offering at a price of $15.00 per share, the mid-point of the expected range of offering prices set forth on the cover page of this prospectus, net
of estimated offering expenses and underwriting discounts and commissions, and the distribution, upon completion of the offering, of
$31.5 million to Resource America.

    You should read this table in conjunction with our consolidated financial statements included in this prospectus.

                                                                                               As of December    31, 2003

                                                                                                                                     % of total
                                                                          Actual           Adjustments              Pro forma      capitalization

                                                                                                 (dollars in thousands)
Cash and cash equivalents                                             $        16,379                           $         16,379

Advances from parent                                                  $           790            ($790 ) (2)                  —              0.00 %
Current portion of long-term debt                                                  56               —                         56             0.06 %
Long-term debt                                                                 19,124               —                     19,124            19.21 %

  Total debt                                                                   19,970             (790 )                  19,180            19.27 %

Stockholders’ equity:
  Preferred stock $0.01 par value, 1,000,000
     authorized shares                                                             —                 —                       —                0.00 %
  Common stock, $0.01 par value, 49,000,000
     authorized shares and 10,688,333 shares
     issued and outstanding                                                       107               23 (1)                   130             0.13 %
  Additional paid-in capital                                                   38,619           31,507 (1)                70,126            70.45 %
  Retained earnings                                                            40,846          (30,740 ) (2)              10,106            10.15 %

    Total stockholders’ equity                                                 79,572              790                    80,362            80.73 %

      Total capitalization                                            $        99,542                —          $         99,542           100.00 %


(1) Reflects the issuance of 2.3 million shares in this offering.
(2) Reflects the distribution of all net proceeds to Resource America in accordance with the master separation and distribution agreement. See
    ―Use of Proceeds‖ and ―Relationship with Resource America.‖

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                                                 SELECTED CONSOLIDATED FINANCIAL DATA

     The following table sets forth selected financial data as of and for the three months ended December 31, 2003 and 2002 and the fiscal years
ended September 30, 2003, 2002, 2001, 2000 and 1999. We derived the financial data as of December 31 2003 and 2002 and for the three
months ended December 31, 2003 and 2002 from our unaudited financial statements which are included in this prospectus. We derived the
financial data as of September 30, 2003 and 2002 and for the years ended September 30, 2003, 2002 and 2001 from our financial statements,
which were audited by Grant Thornton LLP, independent accountants, and are included in this prospectus. We derived the financial data as of
September 30, 2001 and 2000 and for the year ended September 30, 2000 from our financial statements, which were audited by Grant Thornton
LLP, and are not included in this prospectus. We derived the financial data as of and for the year ended September 30, 1999 from the financial
statements of our predecessors for that period, Atlas America, Resource Energy and Viking Resources, which, except for those of Viking
Resources, were audited by Grant Thornton LLP and are not included in this prospectus. We acquired Viking Resources on August 31, 1999.

                                     Three months ended
                                       December 31,                                                   Years ended September   30,
Statement of operations data:
                                    2003                 2002             2003               2002                   2001                2000            1999

                                           (unaudited)
Revenues:                                                                   (in thousands, except per share data)
Well drilling                   $    21,959       $        6,583      $    52,879      $       55,736          $     43,464         $    31,869     $    32,422
Gas and oil production               10,195                8,069           38,639              28,916                36,681              25,231          12,233
Well services                         1,979                1,899            7,634               7,585                 7,403               6,962           6,120
Transportation                        1,599                1,407            5,901               5,389                 5,715               4,770           3,310
Gas marketing                            —                    —                —                   —                  1,030               1,384          14,181
Other                                   127                  177              636               1,670                 1,596               1,044           1,326

Total revenues                       35,859               18,135          105,689              99,296                95,889              71,260          69,592

Costs and expenses:
Well drilling                        19,095                5,725           45,982              48,443                36,602              25,806          26,312
Gas and oil production
 and exploration                      1,685                1,586            8,485               8,264                  7,846              8,339           5,366
Well services                         1,004                  839            3,774               3,747                  2,961              2,444           1,378
Transportation                          596                  590            2,444               2,052                  2,001              2,842             649
Gas marketing                            —                    —                —                   —                   1,007              1,195          13,666
Provision for possible
losses                                      —                    —               —                  (117 )                 263                 —               —
General and
administrative                             948             2,246            6,532               7,074                  9,559              7,752           5,887
Depreciation, depletion
 and amortization                     3,245                2,872           11,595              10,836                10,782               9,781           5,513
Interest                                487                  629            1,961               2,200                 1,714               2,898           2,064
Minority interest in Atlas
 Pipeline Partners                    1,271                     645         4,439               2,605                  4,099              2,058                —

Total costs and expenses             28,331               15,132           85,212              85,104                76,834              63,115          60,835

Income from continuing
 operations before income
 taxes and cumulative
 effect of a change in
 accounting principle                 7,528                3,003           20,477              14,192                19,055               8,145           8,757
Provision for income
 taxes                                2,635                     991         6,757               4,683                  6,613              3,300           3,199

Income from continuing
 operations before
 cumulative effect of a
 change in accounting
 principle                            4,893                2,012           13,720               9,509                12,442               4,845           5,558
Income (loss) from                       —                    —               192              (1,641 )              (1,030 )              (673 )            —
discontinued operations
Cumulative effect of a
change in accounting
principle, net of taxes         —           —            —         (627 ) (1)          —           —           —

Net income                $   4,893   $   2,012   $   13,912   $   7,241        $   11,412   $   4,172   $   5,558

Basic and diluted net
income per share          $     .46   $     .19   $     1.30   $     .68        $     1.07   $     .39   $     .52


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                                     Three months ended
                                       December 31,                                               Years ended September    30,
Operating data:
                                    2003                    2002          2003             2002               2001               2000          1999

 Net production:
 Natural gas (Mmcf) (2)                1,792                  1,780         6,967             7,117                6,343           6,440         4,342
 Oil (Mbbls)                              42                     41           160               173                  177             196            85
Total (Mmcfe)                          2,042                  2,027         7,927             8,154                7,407           7,616         4,853
Average sales price:
 Natural gas (per Mcf) (3)      $       5.06      $            3.96   $      4.92     $        3.56      $          5.04     $      3.15   $      2.37
 Oil (per Bbl)                         26.94                  24.71         26.91             20.45                25.56           24.50         14.57

Other financial
 information (in
 thousands):
Net cash provided by
 operating activities           $     34,705      $          15,229   $    49,174     $       5,452      $      36,190       $    17,157   $    15,630
Capital expenditures            $     10,807      $           4,100   $    28,029     $      21,291      $      14,050       $    10,935   $    11,455
EBITDA (4)                      $     11,260      $           6,504   $    34,033     $      27,228      $      31,551       $    20,824   $    16,334

                                       December       31,                                              September     30,

                                    2003                    2002          2003             2002               2001               2000          1999

                                           (unaudited)
                                                                                    (in thousands)
Balance sheet data:
Total assets                    $   230,773       $         225,185   $   232,388     $    192,614       $    199,785        $   158,503   $   155,022

Long-term debt (including
 current maturities)            $     19,180      $          58,255   $    31,194     $      49,505      $      43,284       $    23,506   $    45,511

Stockholder’s equity            $     79,572      $          74,584   $    87,511     $      73,366      $      66,347       $    54,925   $    50,773


(1) Represents write-down of goodwill, net of taxes, by our former technology subsidiary in connection with its adoption of SFAS 142.
(2) Excludes sales of residual gas and sales to landowners.
(3) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57, $5.13, $3.15 and $2.37 for the fiscal years ended 2003, 2002, 2001, 2000 and 1999, respectively.
(4) We define EBITDA as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is not a measure of performance
    calculated in accordance with generally accepted accounting principles in the United States, or GAAP. Although not prescribed under
    GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors to understand our operating
    performance and makes it easier to compare our results with other companies that have different financing and capital structures or tax
    rates. EBITDA should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash
    flows from operating activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA measures
    reported by other companies. In addition, EBITDA does not represent funds available for discretionary use. The following reconciles
    EBITDA to our income from continuing operations for the periods indicated.

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                                   Three months ended
                                     December 31,                                            Year ended September   30,

                                  2003             2002             2003             2002              2001               2000           1999

                                                                                (in thousands)
Income from continuing
 operations                   $     4,893     $         2,012   $    13,720     $        9,509    $      12,442      $       4,845   $      5,558
 Plus interest expense and
 other debt expenses                  487                 629         1,961              2,200            1,714              2,898          2,064
 Plus income taxes                  2,635                 991         6,757              4,683            6,613              3,300          3,199
 Plus depreciation, depletion
 and amortization                   3,245               2,872        11,595            10,836            10,782              9,781          5,513

EBITDA                       $     11,260     $         6,504   $    34,033     $      27,228     $      31,551      $      20,824   $     16,334


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

Overview

    We were formed in September 2000 to act as the holding company for Resource America’s energy operations, which began in 1968 and
were materially expanded by acquisitions in September 1998 and August 1999. During the fiscal years ended September 30, 2003, 2002 and
2001, our energy operations continued to grow as we increased our gross revenues, number of wells drilled, number of wells operated and total
reserves. While production generally increased 7% from fiscal 2001 to fiscal 2003, production declined 3% from fiscal 2002 to fiscal 2003
principally due to a timing difference between the completion of a group of wells in fiscal 2003 and the extension of the pipeline system to
service them which did not occur until the fourth quarter of fiscal 2003.

     We finance our drilling operations principally through funds raised from investors in our public and private drilling investment
partnerships. The funds we raised in fiscal 2003 grew substantially from those we raised in fiscal 2002 and 2001. The $66.1 million raised in
fiscal 2003 represented a 60% increase over the $41.1 million raised in fiscal 2002, and a 47% increase over the $44.8 million raised in fiscal
2001. Although the funds we raised in fiscal 2002 were 8% less than those we raised in fiscal 2001, this was principally due to timing
differences between the calendar year basis of our fund raising cycle and our September 30 fiscal year-end. On a calendar year basis, we raised
$75.1 million in calendar 2003, a 47% increase over the $51.0 million raised in calendar 2002 and 2001.

     Our gross revenues depend, to a significant extent, on the price of natural gas which has fluctuated significantly in the past three fiscal
years. We seek to balance this volatility with the more stable net income from our well drilling and well servicing operations which are
principally fee-based. Our well drilling operations’ gross margin was $2.9 million and $858,000 for the three months ended December 31, 2003
and 2002 and $6.9 million, $7.3 million and $6.9 million for fiscal 2003, 2002 and 2001, respectively, while our well services gross margin
was $975,000 and $1.1 million for the three months ended December 31, 2003 and 2002 and $3.9 million, $3.8 million and $4.4 million for
fiscal 2003, 2002 and 2001, respectively.

Results of Operations

     The following tables set forth information relating to gas and oil revenues, daily production volumes, average sales prices, production costs
as a percentage of natural gas and oil sales, and production costs per Mcfe for our operations during the periods indicated:

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                                                                        Three months ended
                                                                          December 31,                              Years ended September    30,

                                                                       2003               2002               2003               2002               2001

Revenues (in thousands):
 Gas (1)                                                          $       9,066       $      7,050       $     34,276       $    25,359        $    31,945
 Oil                                                              $       1,123       $      1,016       $      4,307       $     3,533        $     4,535

Production volumes:
 Gas (Mcf/day) (1)                                                       19,479            19,346              19,087            19,499             17,377
 Oil (Bbls/day)                                                             453               447                 438               473                486

Average sales prices:
 Gas (per Mmcf) (2)                                               $        5.06       $       3.96       $        4.92      $      3.56        $      5.04
 Oil (per Bbl)                                                    $       26.94       $      24.71       $       26.91      $     20.45        $     25.56

Production costs (3) :
 As a percent of sales                                                         16 %               19 %               18 %               23 %               17 %
 Per Mcfe                                                         $           .80 $              .76 $              .84 $              .82 $              .84


(1) Excludes sales of residual gas and sales to landowners.

(2) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57 and $5.13 for the fiscal years ended 2003, 2002 and 2001, respectively.

(3) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes,
    severance taxes, insurance, gathering charges and production overhead.

    Our well drilling revenues and expenses represent the billings and costs associated with the completion of net wells for drilling investment
partnerships we sponsored. The following table sets forth information relating to these revenues and costs and expenses during the periods
indicated:

                                                                        Three months ended
                                                                          December 31,                              Years ended September    30,

                                                                       2003               2002               2003               2002               2001

                                                                                                   (dollars in thousands)
Average drilling revenue per well                                 $           198     $          178     $          187     $          230     $          186
Average drilling cost per well (1)                                            172                155                163                200                156

Average drilling gross profit per well                            $            26     $           23     $           24     $           30     $           30

Gross profit margin                                               $       2,864       $          858     $       6,898      $     7,293        $      6,862

Gross margin percent                                                           13 %               13 %               13 %               13 %               16 %

Wells drilled                                                                 111                 37                282                242                234



(1) The amounts shown do not reflect the total cost of a well. The drilling revenue and associated drilling cost reflect that portion of the total
    drilling cost that is attributed to our investor partners in each investment drilling partnership as specified in the relevant drilling contract.

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Three months ended December        31, 2003 Compared to three months ended December          31, 2002

     Our natural gas revenues were $9.1 million in the three months ended December 31, 2003, an increase of $2.0 million (29%) from
$7.1 million in the three months ended December 31, 2002. The increase in the three months ended December 31, 2003 was attributable to an
increase in the average sales price of natural gas of 28%, and an increase in the volume of natural gas produced of 1%. The $2.0 million
increase in gas revenues in the three months ended December 31, 2003 as compared to the prior period consisted of a $1.9 million increase
attributable to increases in natural gas sales prices and $62,000 attributable to increased production volumes.

    Our oil revenues were $1.1 million in the three months ended December 31, 2003, an increase of $107,000 (11%) from $1.0 million in the
three months ended December 31, 2002, which is primarily due to an increase in the average sales price of oil of 9% for the three months ended
December 31, 2003. Oil production volumes increased 1% during the three months ended December 31, 2003 as compared to the three months
ended December 31, 2002. The $107,000 increase in oil revenues in the three months ended December 31, 2003 as compared to the prior
period consisted of increases of $92,000 attributable to increases in oil sales prices and $15,000 attributable to increased production volumes.

     Our well drilling gross margin was $2.9 million in the three months ended December 31, 2003, an increase of $2.0 million (234%) from
$858,000 in the three months ended December 31, 2002. In the three months ended December 31, 2003, the increase of $2.0 million was
attributable to an increase in the number of wells drilled ($1.9 million) and an increase in the gross profit per well ($96,000). Our gross profit
per well increased as a result of an increase in our average cost per well which, because our drilling contracts are on a ―cost plus‖ basis
(typically cost plus 15%), determines our average revenue per well. The increase in our average cost per well in the three months ended
December 31, 2003 resulted from an increase in the cost of tangible equipment used in the wells. In addition, it should be noted that ―Liabilities
associated with drilling contracts‖ on our balance sheet includes $32.3 million of funds raised in our drilling investment programs in late fiscal
2003 and the first three months of fiscal 2004 that had not been applied to drill wells as of December 31, 2003 due to the timing of drilling
operations, and thus had not been recognized as well drilling revenue. We expect to recognize this amount as revenue in the remainder of fiscal
2004. Because we raised $40.2 million in the first quarter of fiscal 2004 alone, we anticipate drilling revenues and related costs to be
substantially higher than in fiscal 2003.

    Our transportation revenues increased 14% in the three months ended December 31, 2003 as compared to the similar prior year period.
This increase resulted from higher gross volumes transported due to the additional volumes associated with new partnership wells drilled by us
and connected to our gathering system and an increase in the average prices received for the natural gas transported, upon which the fees
chargeable under a portion of our transportation arrangements are based.

     Our well services expenses were $1.0 million in the three months ended December 31, 2003, an increase of $165,000 (20%) from $839,000
in the three months ended December 31, 2002. The increase was attributable to an increase in wages and benefits associated with the increase
in the number of wells we operate for our investment partnerships.

    Our general and administrative expenses were $948,000 in the three months ended December 31, 2003, a decrease of $1.3 million (58%)
from $2.2 million for the three months ended December 31, 2002. The decrease was attributable to reimbursements we received for costs we
incurred in our partnership management and drilling activities, resulting from an increase in the number of wells we drilled and managed
during the three months ended December 31, 2003 as compared to the three months ended December 31, 2002.

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Year Ended September       30, 2003 Compared to Year Ended September          30, 2002

    Our natural gas revenues were $34.3 million in fiscal 2003, an increase of $8.9 million (35%) from $25.4 million in fiscal 2002. The
increase was due to a 38% increase in the average sales price of natural gas partially offset by a 2% decrease in production volumes. The
$8.9 million increase in natural gas revenues consisted of $9.7 million attributable to price increases, partially offset by $740,000 attributable to
volume decreases. Production volumes decreased because normal production declines in our existing wells were not offset by the new wells we
had drilled in Crawford County, Pennsylvania, since those wells could not be brought on line until the extension of our Crawford gathering
system had been completed. The Crawford extension was completed in the fourth quarter of fiscal 2003.

     Our oil revenues were $4.3 million in fiscal 2003, an increase of $774,000 (22%) from $3.5 million in fiscal 2002. The increase resulted
from a 32% increase in the average sales price of oil partially offset by a 7% decrease in production volumes. The $774,000 increase in oil
revenues consisted of $1.1 million attributable to price increases partially offset by $342,000 attributable to volumes decreases. The decrease in
oil volumes is a result of the natural production decline inherent in the life of a well. We did not offset the decline through the addition of new
wells, as substantially all of the wells we have drilled during the past several years have targeted natural gas reserves.

     Our well drilling gross margin was $6.9 million in the year ended September 30, 2003, a decrease of $395,000 (5%) from $7.3 million in
the year ended September 30, 2002. During the period, our average cost per well decreased because we drilled many of them to a shallower
formation and, in certain areas where we have become more active, many of our wells either have not required fracture stimulation or have
needed less equipment than wells we have drilled in prior years. Since our drilling contracts are on a ―cost plus‖ basis (typically cost plus 15%),
a decrease in our average cost per well also results in a decrease in our average revenue per well. On the other hand, the decrease in our average
cost per well allowed us to drill more wells with the funds available. In addition, it should be noted that ―Liabilities associated with drilling
contracts‖ includes $14.1 million of funds raised in our drilling investment partnerships in fiscal 2003 that had not been applied to drill wells as
of September 30, 2003 due to the timing of drilling operations, and thus had not been recognized as well drilling revenues. We expect to
recognize this amount as income in fiscal 2004. Because we raised $40.0 million in the first quarter of fiscal 2004 alone, we anticipate drilling
revenues and related costs to be substantially higher than in fiscal 2003.

     Our transportation revenues, which are derived from arrangements with the drilling investment partnerships we sponsor, increased
$512,000 (10%) in fiscal 2003 to $5.9 million from $5.4 million in fiscal 2002. The increase was a result of a 6% increase in natural gas
volumes transported by Atlas Pipeline Partners and an increase in the average prices received for the natural gas transported, upon which the
fees chargeable under a portion of our transportation arrangements are based, in fiscal 2003 as compared to fiscal 2002.

    Our transportation expenses increased 19% in the year ended September 30, 2003, as compared to the similar prior year period. This
increase resulted from an increase in compressor expenses due to the addition of more compressors and increased compressor lease rates.
Compressors were added to increase the transportation capacity of our gathering systems.

    Our average production costs increased from $.82 per Mcf in fiscal 2002 to $.84 Mcf in fiscal 2003 because of a decrease in our production
volumes.

    Our exploration costs were $1.7 million in the year ended September 30, 2003, an increase of $144,000 (9%) from the year ended
September 30, 2002. The increase in the year ended September 30, 2003 as compared to the prior period was attributable to expenditures for
lease costs of $275,000 which were charged to operations upon our decision to discontinue drilling on certain leases.

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     Our general and administrative expenses were $6.5 million in fiscal 2003, a decrease of $542,000 (8%) from $7.1 million in fiscal 2002.
These expenses include, among other things, salaries and benefits not allocated to a specific energy activity, costs of running our energy
corporate office, partnership syndication activities and outside services. These expenses were partially offset by reimbursements we received
for costs we incurred in our partnership management and drilling activities, resulting from an increase in the number of wells we drilled and
managed during the year as compared to the prior year. Reimbursements received by us related to our drilling activities increased $470,000 in
year ended September 30, 2003 as compared to the year ended September 30, 2002. In addition, we more closely allocated direct costs
associated with our other energy activities to those activities, thereby reducing non-direct expenses.

    Depletion of oil and gas properties as a percentage of oil and gas revenues was 21% in fiscal 2003 compared to 26% in fiscal 2002. The
variance from period to period is directly attributable to changes in our oil and gas reserve quantities, product prices and changes in the
depletable cost basis of oil and gas. Higher gas and oil prices caused depletion as a percentage of oil and gas revenues to decrease in fiscal 2003
as compared to fiscal 2002.

Year Ended September      30, 2002 Compared to Year Ended September          30, 2001

    Our natural gas revenues were $25.4 million in fiscal 2002, a decrease of $6.6 million (21%) from $31.9 million in fiscal 2001. The
decrease was due to a 29% decrease in the average sales price of natural gas partially offset by a 12% increase in production volumes. The
$6.6 million decrease in gas revenues consisted of $9.3 million attributable to price decreases, partially offset by $2.7 million attributable to
volume increases. Natural gas volume increases resulted from new wells drilled for our partnerships, partially offset by the natural production
decline inherent in the life of a well.

     Our oil revenues were $3.5 million in fiscal 2002, a decrease of $1.0 million (22%) from $4.5 million in fiscal 2001. The decrease resulted
from a 20% decrease in the average sales price of oil and a 3% decrease in production volumes. The $1.0 million decrease in oil revenues
consisted of $906,000 attributable to price decreases, and $96,000 attributable to volume decreases. The decrease in oil volumes is a result of
the natural production decline inherent in the life of a well. This decline was not offset by new wells added, as the majority of the wells we
have drilled during the past several years targeted gas reserves.

     Our well drilling gross margin was $7.3 million in fiscal 2002, an increase of $431,000 (6%) from $6.9 million in fiscal 2001 due to an
increase in the number of wells drilled ($241,000) and the gross profit per well ($190,000), during fiscal 2002 as compared to fiscal 2001. Both
the average revenue and cost per well, which are affected by changes in oil and gas prices and competition for drilling equipment and services,
increased $44,000 in fiscal 2002 as compared to fiscal 2001. Demand for drilling equipment and services increased in the fiscal year ended
September 30, 2002 as compared to fiscal 2001 as a result of increases in the prices obtainable for natural gas in fiscal 2001, resulting in an
increase in the cost to us of obtaining such equipment and services. In fiscal 2002, we changed the structure of our drilling contracts to a
cost-plus basis from a turnkey basis. Cost-plus contracts protect us in an inflationary environment while limiting our profit margin.

    Our well services revenues increased $182,000 (2%) in fiscal 2002 to $7.6 million as compared to $7.4 million in fiscal 2001 primarily as a
result of an increase in fee income due to an increase in the number of wells we operate. Our well service expenses were $3.7 million in fiscal
2002, an increase of $786,000 (27%) from $3.0 million in fiscal 2001. The increase in fiscal 2002 resulted from a closer allocation of direct
costs associated with our well services activities.

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    Our transportation revenues, which derive from arrangements with the drilling investment partnerships we sponsor, decreased $326,000
(6%) in fiscal 2002 to $5.4 million from $5.7 million in fiscal 2001. The decrease was a result of a decrease in the average prices received for
natural gas transported by our pipelines because a portion of our transportation contracts are based on the price of the gas transported.

    We sold our gas marketing operation in fiscal 2000, and while we maintained a small in-house gas marketing operation in 2001, we
reduced our activities in this area to an immaterial amount in fiscal 2002.

    While we reduced our average production cost from $.84 per Mcf in fiscal 2001 to $.82 per Mcf in fiscal 2002, our production costs
increased $508,000 (8%) to $6.7 million in fiscal 2002 from $6.2 million in fiscal 2001 as a result of an increase in the number of wells in
which we have an interest and transportation expenses associated with the increased volumes we produced to our interest.

    Our general and administrative expenses were $7.1 million in fiscal 2002, a decrease of $2.5 million (26%) from $9.6 million in fiscal
2001. These expenses include, among other things, salaries and benefits not allocated to a specific energy activity, costs of running our energy
corporate office, partnership syndication activities and outside services. These expenses were partially offset by fees we earned from our
partnership management activities, resulting from an increase in the number of wells drilled and managed during the year as compared to the
prior year. In addition, we more closely allocated direct costs associated with our other energy activities to those activities, thereby reducing
non-direct expenses.

    Depletion of oil and gas properties as a percentage of oil and gas revenues was 26% in fiscal 2002 compared to 17% in fiscal 2001. The
variance from period to period is directly attributable to changes in our oil and gas reserve quantities, product prices and changes in the
depletable cost basis of oil and gas. Lower gas prices caused depletion as a percentage of oil and gas revenues to increase in fiscal 2002 as
compared to fiscal 2001.

Other Revenues, Costs and Expenses

Three Months Ended December         31, 2003 Compared to Three Months Ended December            31, 2002

    Our interest expense was $487,000 in the three months ended December 31, 2003, a decrease of $142,000 (23%) from $629,000. This
decrease resulted primarily from decreases in short-term interest rates and a decrease in the outstanding borrowings.

   Our effective tax rate increased to 35% for the three months ended December 31, 2003 as compared to 33% for the three months ended
December 31, 2002 as a result of an increase in state income taxes.

Year Ended September      30, 2003 Compared to Year Ended September          30, 2002

    Our other revenue was $636,000 in fiscal 2003, a decrease of $1.0 million (62%) as compared to $1.7 million in fiscal 2002. Interest
income decreased $466,000 (68%) to $220,000 in fiscal 2003 from $686,000 in fiscal 2002. This decrease was the result of a decrease in funds
invested as well as in the interest rates earned on those funds. In addition, gains associated with the sale of gas and oil assets decreased
$397,000 (97%) to $14,000 in fiscal 2003 from $411,000 in fiscal 2002. This decrease was the result of the sale in fiscal 2002 of certain gas
and oil assets which were not located within the Appalachian Basin and thus did not fit our business model. No such sales occurred in fiscal
2003.

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    Our provision for possible losses was $0 in fiscal 2003 as compared to a recovery of $117,000 in fiscal 2002. This was a result of a
recovery of $117,000 of a receivable previously written off due to the bankruptcy filing of a customer. No provision for possible losses was
required in fiscal 2003.

    Our interest expense was $2.0 million in fiscal 2003, a decrease of $239,000 (11%) from $2.2 million in fiscal 2002. This decrease resulted
primarily from decreases in short-term interest rates and decreases in outstanding borrowings in fiscal 2003 as compared to fiscal 2002.

     We own 39% of the partnership interests in Atlas Pipeline Partners through both our general partner interest and the subordinated units we
received at the closing of Atlas Pipeline Partners’ initial public offering. During the year ended September 30, 2003, our ownership interest in
Atlas Pipeline Partners decreased from 51% to 39% as the result of the completion by Atlas Pipeline Partners of an offering of its common
units. Because we control the operations of Atlas Pipeline Partners, we include it in our consolidated financial statements and show the
ownership by the public as a minority interest. The minority interest in Atlas Pipeline Partners’ earnings was $4.4 million for the year ended
September 30, 2003, as compared to $2.6 million for the year ended September 30, 2002, an increase of $1.8 million (70%). This increase was
the result of an increase in Atlas Pipeline Partners’ net income, principally caused by increases in transportation volumes and rates received,
and the increase in the percentage interest of public unitholders. Atlas Pipeline Partners’ transportation rates vary, to a significant extent, with
the prices of natural gas which, on average, were higher in fiscal 2003 than fiscal 2002.

Year Ended September       30, 2002 Compared to Year Ended September          30, 2001

    Our provision for possible losses was a recovery of $117,000 in fiscal 2002 as compared to a charge of $263,000 in fiscal 2001. This was a
result of a recovery of $117,000 in fiscal 2002 of $263,000 written off in fiscal 2001 due to the bankruptcy of a customer.

    Our interest expense was $2.2 million in fiscal 2002, an increase of $486,000 (28%) from $1.7 million in fiscal 2001. This increase
resulted primarily from increases in outstanding borrowings in fiscal 2002 as compared to fiscal 2001.

      In fiscal 2002 and 2001, we owned 51% of the partnership interest in Atlas Pipeline Partners through both our general partner interest and
the subordinated units we received at the closing of Atlas Pipeline Partners’ initial public offering. The minority interest in Atlas Pipeline
Partners is the interest of Atlas Pipeline Partners’ public unitholders. Because we owned more than 50% of Atlas Pipeline Partners, we included
it in our consolidated financial statements for fiscal 2002 and 2001 and showed the ownership by the public as a minority interest. The minority
interest in Atlas Pipeline Partners earnings was $2.6 million for the year ended September 30, 2002, as compared to $4.1 million for the year
ended September 30, 2001, a decrease of $1.5 million (36%). This decrease was the result of a decrease in Atlas Pipeline Partners’ net income,
principally caused by decreases in transportation fees received. These fees vary with the prices of natural gas, which on average were lower in
fiscal 2002 than fiscal 2001.

     Our effective tax rate decreased to 33% in fiscal 2002 as compared to 35% in fiscal 2001 as a result of differences between book and
taxable income related to permanently non-deductible goodwill amortization and an increase in 2002 in statutory depletion, which were
partially offset by an increase in 2002 in state income taxes.

Discontinued Operations

    In accordance with SFAS 144, ―Accounting for the Impairment or Disposal of Long Lived Assets,‖ our decision in fiscal 2002 to dispose
of Optiron Corporation, our former energy technology subsidiary, resulted in the presentation of Optiron as a discontinued operation for the
three years ended September 30, 2003. We had held a 50% equity interest in Optiron; as a result of the disposition, we currently hold a 10%
equity interest.

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     The plan of disposal required Optiron to pay us 10% of Optiron’s revenues if they exceeded $2.0 million in the 12-month period following
the closing of the transaction. As a result, Optiron paid us $295,000 on March 19, 2004.

Liquidity and Capital Resources

    We fund our exploration and production operations from a combination of cash generated by operations, capital raised through drilling
investment partnerships and, if required, use of our credit facility. We fund our transportation operations, which are conducted through Atlas
Pipeline Partners, through a combination of cash generated by operations, Atlas Pipeline Partners’ credit facility and, in fiscal 2003, the sale of
Atlas Pipeline Partners’ common units.

    During the past three fiscal years, the principal capital requirements for our exploration and production operations have been to fund our
investment in our drilling investment partnerships and, in fiscal 2001, an acquisition of natural gas properties. We funded these requirements
out of cash generated by operations, using our credit facility to bridge timing differences between cash needed for investment and cash
generated by operations. We obtained an increase in our borrowing base under our credit facility to $54.2 million in fiscal 2003, of which
$33.5 million was available at December 31, 2003, and a further increase in the borrowing base in March 2004 to $65 million. For a description
of our credit facility, see ―Business — Credit Facilities.‖

     The principal capital requirements for our transportation operations during the past three fiscal years have been for pipeline extensions,
additional compression, maintenance expenses, quarterly distributions to Atlas Pipeline Partners’ unitholders and debt service. These
requirements principally have been met from cash generated by operations and borrowings under its credit facility. In May 2003, Atlas Pipeline
Partners obtained $25.2 million of additional capital through a sale of its common units and used $8.5 million of that capital to pay down
existing debt. As a result, at December 31, 2003, Atlas Pipeline Partners had credit availability under its credit facility of the full $20 million
stated amount. The remaining $16.7 million from the offering was available to fund future capital expenditures and expansions.

     In September 2003, Atlas Pipeline Partners agreed to acquire Alaska Pipeline Company. We describe this transaction and its effects on our
liquidity in ―—Pending Acquisition.‖

     Our liquidity is affected by national, regional and local economic trends and uncertainties as well as trends and uncertainties more
particular to us, including natural gas prices, interest rates and our ability to raise funds through our sponsorship of drilling investment
partnerships. While the current favorable natural gas pricing and interest rate environments have been positive contributors to our liquidity,
there are numerous risks and uncertainties involved. We describe factors affecting our liquidity in ―—Results of Operations,‖ ―—Changes in
Prices and Inflation,‖ ―—Contractual Obligations and Commercial Commitments‖ and describe risks and uncertainties in ―—Quantitative and
Qualitative Disclosures about Market Risk—Interest Rate Risk‖ and ―Risk Factors.‖

Pending Acquisition

     Atlas Pipeline Partners has agreed to acquire Alaska Pipeline Company for $95 million. The acquiring entity will be a special purpose
vehicle, or SPV, created by Atlas Pipeline Partners. Atlas Pipeline Partners anticipates that expenses in connection with the transaction will be
approximately $4 million. The acquisition is contingent upon the satisfaction of certain conditions, principally the approval of the transaction
by the Regulatory Commission of Alaska and the expiration of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act. The
Hart-Scott-Rodino waiting period terminated in January 2004. Our application for approval of the transaction by the Regulatory Commission
was filed in October 2003 and was deemed complete and filed on November 14, 2003. We have requested that the Regulatory Commission
issue a formal order approving the transaction by April 16, 2004. Once the Regulatory Commission issues its final order, there will be a 30-day
appeal period. If, as we believe will be the case, Atlas Pipeline Partners obtains the approval of the Regulatory Commission and consummates
the transaction, it intends to fund the acquisition price and expenses as follows:

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    •    Atlas Pipeline Partners will invest $24.4 million in common equity of the SPV. It will fund this investment by borrowing all of the
         $20 million available under its existing credit facility and through $4.4 million of advances from us.

    •    Friedman, Billings, Ramsey Group, Inc. has committed to make a $25 million preferred equity investment in the SPV, which will be
         jointly owned by FBR and Atlas Pipeline Partners.

    •    The SPV has received a commitment for a $50 million credit facility to be administered by Wachovia Bank, National Association. It
         will borrow $50 million under this facility.

     All of this funding will be consolidated in our financial statements as indebtedness. Atlas Pipeline Partners may seek to replace or repay
the funding from FBR and some portion of either or both of the Wachovia Bank credit facilities with equity capital obtained through an
offering of Atlas Pipeline Partners’ common units. If Atlas Pipeline Partners determines not to make an offering of common units or seek other
alternative financing, the debt and preferred equity financings will remain in place. Although the continuation of these financings may reduce
the amount of cash from operations that would otherwise be available from Atlas Pipeline Partners’ operations, we believe that our remaining
sources of liquidity and capital resources would be more than sufficient to meet our operational needs.

Changes in Prices and Inflation

     Our revenues, the value of our assets, our ability to obtain bank loans or additional capital on attractive terms and our ability to finance our
drilling activities through drilling investment partnerships have been and will continue to be affected by changes in oil and gas prices. Natural
gas and oil prices are subject to significant fluctuations that are beyond our ability to control or predict. During the three months ended
December 31, 2003 and fiscal year 2003, we received an average of $5.06 and $4.92 per Mcf of natural gas, respectively, and $26.94 and
$26.91 per Bbl of oil as compared to $3.96 and $3.56 per Mcf, respectively, and $24.71 and $20.45 per Bbl in the three months ended
December 31, 2002 and fiscal year 2002.

    Although certain of our costs and expenses are affected by general inflation, inflation has not normally had a significant effect on us.
However, inflationary trends may occur if the price of natural gas were to increase since such an increase may increase the demand for acreage
and for energy equipment and services, thereby increasing the costs of acquiring or obtaining such equipment and services.

Environmental Regulation

    To date, compliance with environmental laws and regulations has not had a material impact on our capital expenditures, earnings or
competitive position. We cannot assure you that compliance with environmental laws and regulations will not, in the future, materially
adversely affect our operations through increased costs of doing business or restrictions on the manner in which we conduct our operations.

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Contractual Obligations and Commercial Commitments

     The following table sets forth our obligations and commitments as of December 31, 2003.

                                                                                                                    Payments due by period
                                                                                                                        (in thousands)

Contractual cash obligations:                                                               Less than                                                      After
                                                                       Total                 1 year               1-3 Years          4-5 Years            5 years

Long-term debt                                                   $       19,180         $            56       $       19,124     $               —    $             —
Secured revolving credit facilities                                          —                       —                    —                      —                  —
Operating lease obligations                                               1,119                     554                  535                     30                 —
Capital lease obligations                                                    —                       —                    —                      —                  —
Unconditional purchase obligations                                           —                       —                    —                      —                  —
Other long-term obligations                                                  —                       —                    —                      —                  —

Total contractual cash obligations                               $       20,299         $           610       $       19,659     $               30   $             —


                                                                                                                   Payments due by period
                                                                                                                       (in thousands)

Other commercial commitments:                                                           Less than                                                          After
                                                                     Total               1 year               1-3 Years              4-5 Years            5 years

Standby letters of credit                                    $          1,695       $          1,695      $               —     $                —    $             —
Guarantees                                                                 —                      —                       —                      —                  —
Standby replacement commitments                                            —                      —                       —                      —                  —
Other commercial commitments                                            1,927                  1,927                      —                      —                  —

Total commercial commitments                                 $          3,622       $          3,622      $               —     $                —    $             —


Critical Accounting Policies

    The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, costs and
expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to
bad debts, deferred tax assets and liabilities, goodwill and identifiable intangible assets, and certain accrued liabilities. We base our estimates
on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the
basis for 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.

     We have identified the following policies as critical to our business operations and the understanding of our results of operations.

     Accounts Receivable and Allowance for Possible Losses. We engage in credit extension, monitoring, and collection. In evaluating our
allowance for possible losses, we perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and
the customer’s current creditworthiness, as determined by our review of our customer’s credit information. We extend credit on an unsecured
basis to many of our energy customers. At December 31, 2003, our credit evaluation indicated that we have no need for an allowance for
possible losses for our oil and gas receivables.

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     Reserve Estimates. Our estimates of proved natural gas and oil reserves and future net revenues from them are based upon reserve analyses
that rely upon various assumptions, including those required by the SEC, as to natural gas and oil prices, drilling and operating expenses,
capital expenditures, taxes and availability of funds. Any significant variance in these assumptions could materially affect the estimated
quantity of our reserves. As a result, our estimates of our proved natural gas and oil reserves are inherently imprecise. Actual future production,
natural gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas and oil
reserves may vary substantially from our estimates or estimates contained in the reserve reports and may affect our ability to pay amounts due
under our credit facilities or cause a reduction in our energy credit facilities. In addition, our proved reserves may be subject to downward or
upward revision based upon production history, results of future exploration and development, prevailing natural gas and oil prices, mechanical
difficulties, governmental regulation and other factors, many of which are beyond our control.

     Impairment of Oil and Gas Properties. We review our producing oil and gas properties for impairment on an annual basis and whenever
events and circumstances indicate a decline in the recoverability of their carrying values. We estimate the expected future cash flows from our
oil and gas properties and compare such future cash flows to the carrying amount of the oil and gas properties to determine if the carrying
amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the
oil and gas properties to their fair value in the current period. The factors used to determine fair value include, but are not limited to, estimates
of reserves, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with
realizing the expected cash flows projected. Because of the complexities associated with oil and gas reserve estimates and the history of price
volatility in the oil and gas markets, events may arise that will require us to record an impairment of our oil and gas properties. Any such
impairment may affect or cause a reduction in our energy credit facilities.

     Dismantlement, Restoration, Reclamation and Abandonment Costs. On an annual basis, we estimate the costs of future dismantlement,
restoration, reclamation and abandonment of our natural gas and oil-producing properties. We also estimate the salvage value of equipment
recoverable upon abandonment. On October 1, 2002 we adopted SFAS 143, as discussed in note 2 to our consolidated financial statements for
the year ended September 30, 2003. As of December 31, 2003 and 2002, our estimate of salvage values was greater than or equal to our
estimate of the costs of future dismantlement, restoration, reclamation and abandonment. A decrease in salvage values or an increase in
dismantlement, restoration, reclamation and abandonment costs from those we have estimated, or changes in our estimates or costs, could
reduce our gross profit.

     Goodwill and Other Long-Lived Assets. As of January 1, 2002, the accounting for goodwill has changed; in prior years, goodwill was
amortized. As of January 1, 2002, goodwill and other intangibles with an indefinite useful life are no longer amortized, but instead are assessed
for impairment at least annually. We have recorded goodwill of $37.5 million in connection with several acquisitions of assets. In assessing
impairment of goodwill, we use estimates and assumptions in estimating the fair value of reporting units. If under these estimates and
assumptions we determine that the fair value of a reporting unit has been reduced, the reduction can result in an ―impairment‖ of goodwill.
However, future results could differ from the estimates and assumptions we use. Events or circumstances which might lead to an indication of
impairment of goodwill would include, but might not be limited to, prolonged decreases in expectations of long-term well servicing and/or
drilling activity or rates brought about by prolonged decreases in natural gas or oil prices, changes in government regulation of the natural gas
and oil industry or other events which could affect the level of activity of exploration and production companies.

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    In assessing impairment of long-lived assets other than goodwill, where there has been a change in circumstances indicating that the
carrying amount of a long-lived asset may not be recoverable, we have estimated future undiscounted net cash flows from the use of the asset
based on actual historical results and expectations about future economic circumstances, including natural gas and oil prices and operating
costs. Our estimate of future net cash flows from the use of an asset could change if actual prices and costs differ due to industry conditions or
other factors affecting our performance.

     Intangible Assets. In connection with a review of the financial statements of Resource America by the staff of the SEC, we have been made
aware that an issue has arisen within the industry regarding the application of provisions of Statement of Financial Accounting Standards No.
141, ―Business Combinations,‖ and Statement of Financial Accounting Standards No. 142, ―Goodwill and Other Intangible Assets,‖ to
companies in the extractive industries, including gas and oil companies. The issue is whether SFAS No. 142 requires companies to reclassify
costs associated with mineral rights, including both proved and unproved leasehold acquisition costs, as intangible assets in the balance sheet,
apart from other capitalized gas and oil property costs. Historically, we and other gas and oil companies have included the cost of these gas and
oil leasehold interests as part of gas and oil properties. Also under consideration is whether SFAS No. 142 requires companies to provide the
additional disclosures prescribed by SFAS No. 142 for intangible assets for costs associated with mineral rights.

     If it is ultimately determined that SFAS No. 142 requires us to reclassify costs associated with mineral rights from property and equipment
to intangible assets, the amounts that would be reclassified would be immaterial to our financial position. The reclassification of these amounts
would not affect the method in which such costs are amortized or the manner in which we assess impairment of capitalized costs. As a result,
our cash flows and results of operations would not be affected by the reclassification.

Quantitative and Qualitative Disclosures About Market Risk

     Interest Rate Risk. At December 31, 2003, the amount outstanding under our credit facility had decreased to $19.0 million from
$31.0 million at September 30, 2003. The weighted average interest rate for this facility increased from 2.90% at September 30, 2003 to 2.98%
at December 31, 2003 due to an increase in market index rates used to calculate the facility’s interest rates. Holding all other variables constant,
if interest rates hypothetically increased or decreased by 10%, our net income would change by approximately $37,000.

    Commodity Price Risk. Our major market risk exposure in commodities is fluctuating prices for our natural gas and oil production.
Realized pricing is primarily driven by the prevailing worldwide prices for crude oil and spot market prices applicable to United States natural
gas production. Pricing for natural gas and oil production has been volatile and unpredictable for many years. To limit our exposure to
changing natural gas prices, we use hedges. Through our hedges, we seek to provide a measure of stability in the volatile environment of
natural gas prices. Our risk management objective is to lock in a range of pricing for expected production volumes.

     We do not hold or issue derivative instruments for trading purposes. Historically, we have entered into financial hedging activities for a
portion of our projected natural gas production. We recognize gains and losses from the settlement of these hedges in gas revenues when the
associated production occurs. The gains and losses realized as a result of hedging are substantially offset in the market when we deliver the
associated natural gas. We determine gains or losses on open and closed hedging transactions as the difference between the contract price and a
reference price, generally closing prices on NYMEX. We did not settle any contracts during the three months ended December 31, 2003. We
recognized losses of $96,000 on settled contracts during the three months ended December 31, 2002. We recognized no gains or losses during
the three months ended December 31, 2003 for hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

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     In addition, FirstEnergy Solutions and other third party marketers to which we sell gas, also use financial hedges to hedge their pricing
exposure and make price hedging opportunities available to us. These transactions are similar to NYMEX-based futures contracts, swaps and
options, but also require firm delivery of the hedged quantity. Thus, we limit these arrangements to much smaller quantities than those
projected to be available at any delivery point. For the fiscal year ending September 30, 2004, we estimate in excess of 50% of our produced
natural gas volumes will be sold in this manner, leaving our remaining production to be sold at contract prices in the month produced or at spot
market prices. We also negotiate with certain purchasers for delivery of a portion of natural gas we will produce for the upcoming twelve
months. The prices under most of our gas sales contracts are negotiated on an annual basis and are index-based. Considering those volumes
already designated for the fiscal year ending September 30, 2004, and current indices, a theoretical 10% upward or downward change in the
price of natural gas would result in approximately a 5% change in our projected natural gas revenues.

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                                                                       BUSINESS

General

     We are an independent energy company engaged in the development, production and transportation of natural gas and, to a lesser extent,
oil in the Appalachian Basin. Our objective is to increase stockholder value by:

    •     expanding our reserve base through developmental drilling primarily funded by growth in our sponsorship of drilling investment
          partnerships;

    •     increasing our fee-based revenue through the management of our drilling investment partnerships and the wells we drill for them; and

    •     increasing our distributions from our general and limited partner interests and incentive distribution rights in Atlas Pipeline Partners,
          L.P.

     We have been involved in the energy industry since 1968. We periodically seek and evaluate potential opportunities to expand our asset
base or enhance our business through asset or business acquisitions, joint ventures, mergers or similar business combinations or strategic
transactions. We began to expand our operations at the end of fiscal 1998 when we acquired The Atlas Group, an energy finance and
production company located in Pittsburgh, Pennsylvania. Since fiscal 1998, we have achieved consistent growth in our reserve base through
developmental drilling activities, acquisitions of properties and, in 1999, the acquisition of Viking Resources, a North Canton, Ohio exploration
and production company. From October 1, 1998 through September 30, 2003, proved reserves net to our interest grew from 93.3 Bcfe to 144.4
Bcfe, and the PV-10 value of these reserves grew from $49.2 million to $191.4 million. During the same period, proved reserves we manage
for our drilling investment partnerships grew from 142.0 Bcfe to 187.8 Bcfe, and the PV-10 value of these reserves grew from $97.6 million to
$273.5 million. As of December 31, 2003, we had an acreage position of approximately 463,000 gross (411,000 net) acres, of which 235,000
gross (220,000 net) acres were undeveloped. We have also achieved substantial growth in our drilling activities. The number of wells we have
drilled, net to both our interest and that of our sponsored drilling investment partnerships, increased from 145 wells in fiscal 1999 to 282 wells
in fiscal 2003. We expect that we will drill approximately 530 of such net wells in fiscal 2004, of which 111 were drilled during the three
months ended December 31, 2003. Of the 1,234 gross wells we have drilled in the past five fiscal years, we have completed approximately
99% as producing.

    We conduct our natural gas transportation operations through Atlas Pipeline Partners, whose common units are publicly traded (AMEX:
APL). As of December 31, 2003, Atlas Pipeline Partners owned approximately 1,380 miles of intrastate gathering systems located in our core
New York, Ohio and Pennsylvania operating area to which approximately 4,500 natural gas wells were connected. The general partner of Atlas
Pipeline Partners, Atlas Pipeline Partners GP is our wholly-owned subsidiary and conducts its operations using our personnel. Atlas Pipeline
Partners GP owns a substantial interest in Atlas Pipeline Partners, as follows:

    •     a combined 2% general partner interest in Atlas Pipeline Partners and its operating partnership;

    •     a 37% limited partner interest consisting of 1,641,026 subordinated units, all of which will convert to common units on January 1,
          2005 provided certain financial tests are met; and

    •     incentive distribution rights entitling it to an increasing share of distributions as target levels are met.

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Atlas Pipeline Partners has grown its gathering systems through both extensions to its existing systems to connect to wells drilled for our
drilling investment partnerships and from acquisitions. Since its formation, Atlas Pipeline Partners has completed two acquisitions of 120 miles
of gathering systems: in January 2001 it acquired 100 miles of gathering systems in southeastern Ohio from Kingston Oil Corporation and in
March 2001 it acquired 20 miles of gathering systems in Fayette County, Pennsylvania from American Refining and Exploration Company.
Recently, Atlas Pipeline Partners entered into a purchase agreement with SEMCO Energy (NYSE: SEN) to acquire Alaska Pipeline Company
for $95 million. Alaska Pipeline Company is the owner of an intrastate transmission system which delivers natural gas to metropolitan
Anchorage.

     We fund our drilling activities through the sponsorship of drilling investment partnerships. Although we have been raising capital through
drilling investment partnerships since 1968, the amount of the capital raised through these partnerships has increased substantially since 1998.
On a calendar year basis, which is historically the basis of our fund-raising cycle, the amount of capital we have raised has increased from
$25.1 million in calendar 1998 to $75.1 million in calendar 2003. We act as the general partner of our sponsored drilling investment
partnerships and receive both an interest proportionate to the amount of capital and the value of the properties we contribute, typically 25%,
and a carried interest, typically 7%, both of which are subordinated to specified returns to the investor partners. In addition to providing capital
for our drilling activities, our drilling investment partnerships are a source of fee-based revenue. We drill all of the partnership wells under
―cost plus‖ contracts for which we are paid the costs of drilling the wells plus a fee equal to 15% of those costs. We also act as well operator
and partnership manager, for which we receive specified monthly per well operating and administrative fees.

Business Strategy

    We plan to focus on the following in order to achieve our objectives:

     Grow our Appalachian Basin Reserve Base.          We believe that our acreage inventory will enable us to create value by drilling the
numerous identified undeveloped locations on our properties and will enable us to continue to identify new potential drilling locations. We
have identified over 790 potential drilling locations on our acreage, 355 of which were classified as proved undeveloped locations. We also
believe that our continuing business strategy of acquiring undeveloped properties, or companies with significant amounts of undeveloped
properties, presents us with additional opportunities for increasing our reserve base. In the past five fiscal years, we have completed three
acquisitions of properties consisting of 73,348 gross acres (73,348 net acres) representing approximately 7.3 Bcfe of proved reserves, and the
acquisition of Viking Resources with 29,832 gross acres (26,621 net acres) of undeveloped properties and proved reserves of approximately
24.3 Bcfe.

    Finance Growth in Our Drilling Operations by Sponsorship of Drilling Investment Partnerships.            We believe we have been one of the
most active drillers in the Appalachian Basin during the past three years. Based upon a report by Rigdata ©, a rig location and permit report
service, we believe that we were the third most active driller, by well starts, in the Appalachian Basin in 2003. We sponsor drilling investment
partnerships which we believe provide us with a cost effective means of financing our drilling activities. From January 1, 1999 through
December 31, 2003, we have sponsored ten private and five public drilling investment partnerships, and have increased the annual amount of
capital we raised through our drilling investment partnerships by 136%. We intend to continue to finance the growth in our drilling activities
through growth in our sponsored drilling investment partnerships.

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     Increase Our Fee-Based Revenues.        We receive fees from both the drilling and management of wells for our drilling investment
partnerships. We receive a per well fee for drilling a well and, after we complete drilling, monthly per well operating and administrative fees.
Through increases in the capital raised by our drilling investment partnerships, the number of wells we have drilled, net to our interest and that
of our sponsored investment partnerships during the past five fiscal years has increased approximately 94% to 282 net wells in fiscal 2003. We
anticipate that we will drill approximately 530 of such net wells in fiscal 2004 of which 111 were drilled during the three months ended
December 31, 2003. We expect that our fee revenues from our drilling and operating agreements with our drilling investment partnerships will
increase as the number of wells we drill annually increases and adds to the number of wells we manage.

    Increase Our Distributions from Atlas Pipeline Partners.       Since inception of operations in January 2000, Atlas Pipeline Partners has
grown by expanding its gathering system to connect to the wells drilled by our drilling investment partnerships, as well as by acquisitions. This
growth has resulted in increased distributions to the partners of Atlas Pipeline Partners, including us. Through the increase of wells drilled by
our drilling investment partnerships and connected to Atlas Pipeline Partners’ gathering systems, as well as further acquisitions such as the
recent agreement to acquire Alaska Pipeline Company, we intend to seek further growth in the distributions made by Atlas Pipeline Partners.

    Maintain Control of Operations.      We believe it is important to be the operator of wells in which we or our drilling investment
partnerships have an interest because we believe it allows us to obtain operating efficiencies and control costs. We are the operator of
approximately 85% of the properties in which we or our drilling investment partnerships had a working interest at September 30, 2003. We
have decreased our production costs from $0.99 per Mcfe in fiscal 1999 to $0.84 per Mcfe during fiscal 2003 and $0.80 per Mcfe during the
three months ended December 31, 2003. In fiscal 2004, we will be the operator on substantially all the wells we drill.

Competitive Strengths

     High Quality Reserve Base.        Our natural gas properties are located in the Appalachian Basin and are characterized by long-lived
reserves, a high success rate in drilling and completing wells, favorable pricing for our production and readily available transportation. Based
upon fiscal 2003 production and reserve levels, our proved reserves-to-production ratio, or reserve life, was 18 years. From fiscal 1999 through
fiscal 2003, we completed 99% of the wells we have drilled as producers. Moreover, because our production in the Appalachian Basin is near
markets in the northeast United States, we generally receive a premium over quoted prices on the NYMEX for the natural gas we produce. This
premium has ranged between $0.33 to $0.46 per Mcf during the past three fiscal years.

    Experienced Management Team.           We have significant technical, geologic and management experience in our core New York, Ohio and
Pennsylvania operating area. Our technical team of 13 geologists and engineers averages 22 years of industry experience, principally in the
Appalachian Basin, while our management team averages 19 years of experience. We believe we are one of the most active drillers in our core
operating area and, as a result, that we have accumulated extensive geological and geographical knowledge about the area.

     Leading Sponsor of Natural Gas Drilling Programs.            We have sponsored limited and general partnerships to raise funds from investors
to finance our development drilling activities since 1968, and we believe that we are one of the leading sponsors of such investment
partnerships in the country. We believe that our lengthy associations with many of the broker-dealers that act as placement agents for our
drilling investment partnerships provides us with a competitive advantage over entities with similar operations. Over the four-year period from
January 1, 2000 to December 31, 2003, 10 broker-dealers raised $150 million, or 71%, of the $212 million we raised from 11 partnership
offerings, and of these, eight sold interests in all of our partnership offerings.

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     Significant Inventory of Future Drilling Locations and Undeveloped Acreage.          We have over 235,000 gross (220,000 net) undeveloped
acres, 99% of which are in the Appalachian Basin and 90% (gross acreage) or 94% (net acreage) of which are in our core operating area.
Through December 31, 2003, we have identified over 790 potential drilling locations on our acreage in our core operating area for use in future
drilling investment partnerships. We believe our inventory of proved undeveloped acreage, as well as the significant amounts of our additional
undeveloped acreage, will permit us to sustain our projected levels of drilling activities and growth for at least the next four years without
additions to our property holdings.

    Our Relationship with Atlas Pipeline Partners.        Gathering systems owned by Atlas Pipeline Partners are situated throughout the areas in
which we drill, are readily accessible by us, and are connected to major regional and interstate utility pipelines. Because a wholly- owned
subsidiary of ours is the general partner of Atlas Pipeline Partners, we control its operations. Our relationship with Atlas Pipeline Partners
permits us to have reliable access to the natural gas markets we serve.

Appalachian Basin Overview

      The Appalachian Basin includes the states of Kentucky, Maryland, New York, Ohio, Pennsylvania, Virginia, West Virginia and Tennessee.
It is the most mature oil and gas producing region in the United States, having established the first oil production in 1859. In addition, the
Appalachian Basin is strategically located near the energy-consuming regions of the mid-Atlantic and northeastern United States which has
historically resulted in Appalachian producers selling their natural gas at a premium to the benchmark price for natural gas on the NYMEX.

    According to the Energy Information Administration, a branch of the U.S. Department of Energy, in 2002 there were 23 Tcf of natural gas
consumed in the United States which represented approximately 23.6% of the total energy used. The Appalachian Basin accounted for
approximately 3.4% of total 2002 domestic natural gas production, or 642.8 Bcf. Additionally, in 2002 there were approximately 145,120 gas
wells in the Appalachian Basin which represented roughly 37.8% of the total number of gas wells in the United States. Of those wells, we and
our drilling investment partnerships own interests in approximately 4,760 proved developed producing wells, 84.5% of which we operate.

     Furthermore, according to the Natural Gas Annual 2002, an annual report published by the Energy Information Administration, Office of
Oil and Gas, the Appalachian Basin holds 10.6 Tcf of economically recoverable reserves, representing approximately 5.7% of total domestic
reserves as of December 31, 2002. World Oil magazine, in its February 2004 issue, predicted that approximately 5,576 oil and gas wells will be
drilled in the Appalachian Basin during 2004, approximately 16.7% of the total number of wells they predict to be drilled in the United States
during 2004, and an increase of 12.8% over the number of Appalachian wells estimated to have been drilled during 2003 compared to an
increase of 9.7% in the wells drilled in the United States from 2003 to 2004.

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Production

    The following table sets forth the quantities of our natural gas and oil production, average sales prices and average production costs per
equivalent unit of production for the periods indicated.

                                                                                                                                                   Average
                                                                                                                                                  production
                                                                                                                                                   costs per
                                                                                                                                                   Mcfe (2)
                                                                            Production                       Average sales price


Period
                                                               Oil (Bbls)            Gas (Mcf)            per Bbl             per Mcf (1)

Fiscal 2004 - first quarter                                       41,676                 1,792,068    $          26.94    $           5.06    $             0.80
Fiscal 2003                                                      160,048                 6,966,899    $          26.91    $           4.92    $             0.84
Fiscal 2002                                                      172,750                 7,117,276    $          20.45    $           3.56    $             0.82
Fiscal 2001                                                      177,437                 6,342,667    $          25.56    $           5.04    $             0.84


(1) Our average sales price before the effects of hedging was $5.19 for the three months ended December 31, 2003 and $5.08, $3.57 and $5.13
    for the fiscal years ending in 2003, 2002 and 2001, respectively.

(2) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes,
    severance taxes, insurance, gathering charges and production overhead.

Productive Wells

   The following table sets forth information as of December 31, 2003 regarding productive natural gas and oil wells in which we have a
working interest:

                                                                                                                                 Number of productive wells

                                                                                                                                Gross (1)           Net (1)

Oil wells                                                                                                                               331                 272
Gas wells                                                                                                                             4,448               2,371

   Total                                                                                                                              4,779               2,643



(1) Includes our interest in wells owned by 84 drilling investment partnerships for which we serve as general partner and various joint
    ventures. Does not include our royalty or overriding interests in 619 other wells that we do not operate.

Developed and Undeveloped Acreage

    The following table sets forth information about our developed and undeveloped natural gas and oil acreage as of December 31, 2003. The
information in this table includes our equity interest in acreage owned by drilling investment partnerships sponsored by us.

                                                                                             Developed acreage                      Undeveloped acreage

                                                                                           Gross             Net                  Gross               Net

Arkansas                                                                                      2,560                 403                  —                 —
Kansas                                                                                          160                  20                  —                 —
Kentucky                                                                                        924                 462              10,494             5,247
Louisiana                                                                                     1,819                 206                  —                 —
Mississippi                                                                                      40                   3                  —                 —
Montana                                                                                          —                   —                2,650             2,650
New York                                                                                     20,236              15,417              37,423            37,423
North Dakota                                                                                    639                  96                  —                 —
Ohio                                                                                        116,087              96,978              40,994            37,485
Oklahoma                                                                         4,323            468             —               —
Pennsylvania                                                                    75,726         75,642        132,110         132,110
Texas                                                                            4,520            329             —               —
West Virginia                                                                    1,078            539         10,806           5,403
Wyoming                                                                             —              —              80              80

                                                                               228,112        190,563        234,557         220,398



(1) The net acreage as to which leases expire in fiscal 2004, 2005 and 2006 are as follows: New York: 2006 — 287 acres; Ohio: 2004 —
    1,283 acres, 2005 — 464 acres, 2006 — 96 acres; Pennsylvania: 2004 — 6,874 acres, 2005 — 16,599 acres, 2006 — 25,071 acres. We
    evaluate acreage as to which leases are to expire in the year of expiration to determine whether we will renew them.



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    The leases for our developed acreage generally have terms that extend for the life of the wells, while the leases on our undeveloped acreage
have terms that vary from less than one year to five years. We paid rentals of approximately $386,300 in fiscal 2003 and $86,300 during the
three months ended December 31, 2003 to maintain our leases.

     We believe that we hold good and indefeasible title to our producing properties, in accordance with standards generally accepted in the
natural gas industry, subject to exceptions stated in the opinions of counsel employed by us in the various areas in which we conduct our
activities. We do not believe that these exceptions detract substantially from our use of any property. As is customary in the natural gas
industry, we conduct only a perfunctory title examination at the time we acquire a property. Before we commence drilling operations, we
conduct an extensive title examination and we perform curative work on defects that we deem significant. We have obtained title examinations
for substantially all of our managed producing properties. No single property represents a material portion of our holdings.

    Our properties are subject to royalty, overriding royalty and other outstanding interests customary in the industry. Our properties are also
subject to burdens such as liens incident to operating agreements, taxes, development obligations under natural gas and oil leases, farm-out
arrangements and other encumbrances, easements and restrictions. We do not believe that any of these burdens will materially interfere with
our use of our properties.

Drilling Activity

    The following table sets forth information with respect to the number of wells on which we have completed drilling during the periods
indicated, regardless of when drilling was initiated.

                                                  Development wells                                              Exploratory wells

                                   Productive                            Dry                       Productive                                  Dry

Period                     Gross                Net(1)           Gross         Net(1)      Gross                Net(1)               Gross           Net(1)

Fiscal 2004 - first
quarter                      122.0                  37.4                 1           .33           —                     —                    —                —
Fiscal 2003                  295.0                  92.9                 1           .33           —                     —                    —                —
Fiscal 2002                  246.0                  78.7                 6          2.00           —                     —                    —                —
Fiscal 2001                  256.0                  76.6                 1           .27           —                     —                   1.0              .18

(1) Includes only our interest in the wells and not those of the other partners in our drilling investment partnerships.

Financing Our Drilling Activities

     We derive a substantial portion of our capital resources for drilling operations from our sponsored drilling investment partnerships.
Accordingly, the amount of development activities we undertake depends upon our ability to obtain investor subscriptions to the partnerships.
During fiscal 2003, 2002 and 2001 our drilling investment partnerships invested $68.6 million, $75.5 million and $55.1 million, respectively, in
drilling and completing wells, of which we contributed $15.7 million, $19.7 million and $14.3 million, respectively.

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     We generally structure our drilling investment partnership so that, upon formation of a partnership, we contribute leaseholds to it, enter
into a drilling and well operating agreement with it and become its general or managing partner. As general partner, we typically receive an
interest in the partnership’s net revenues proportionate to our contributed capital, including the costs of leases contributed, plus a 7% carried
interest. Our interests in partnerships formed during the past three fiscal years generally range from 25% to 27% plus the 7% carried interest, a
portion of which we subordinate to a preferred return to our partnership investors for the first five years of distributions. We also receive
monthly operating fees of $275 per well, $187 net of our interest, and monthly administrative fees of $75 per well, $51 net of our interest.

Natural Gas and Oil Reserves

     The following tables summarize information regarding our estimated proved natural gas and oil reserves as of the dates indicated. All of
our reserves are located in the United States. We base our estimates relating to our proved natural gas and oil reserves and future net revenues
of natural gas and oil reserves upon reports prepared by Wright & Company, Inc. In accordance with SEC guidelines, we make the
standardized and PV-10 estimates of future net cash flows from proved reserves using natural gas and oil sales prices in effect as of the dates of
the estimates which are held constant throughout the life of the properties. We based our estimates of proved reserves upon the following
weighted average prices:

                                                                                                              Years ended September 30,

                                                                                                       2003              2002             2001

Natural gas (per Mcf)                                                                             $        4.96     $        3.80     $       3.81
Oil (per Bbl)                                                                                     $       26.00     $       26.76     $      19.60

    Reserve estimates are imprecise and may change as additional information becomes available. Furthermore, estimates of natural gas and oil
reserves, of necessity, are projections based on engineering data. There are uncertainties inherent in the interpretation of this data as well as the
projection of future rates of production and the timing of development expenditures. Reservoir engineering is a subjective process of estimating
underground accumulations of natural gas and oil that cannot be measured in an exact way and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers
might differ from the reports of our consultants, Wright & Company. Results of drilling, testing and production subsequent to the date of the
estimate may justify revision of this estimate. Future prices received from the sale of natural gas and oil may be different from those estimated
by Wright & Company in preparing its reports. The amounts and timing of future operating and development costs may also differ from those
used. Accordingly, the reserves set forth in the following tables ultimately may not be produced and the proved undeveloped reserves may not
be developed within the periods anticipated. You should not construe the estimated PV- 10 values as representative of the fair market value of
our proved natural gas and oil properties. PV-10 values are based upon projected cash inflows, which do not provide for changes in natural gas
and oil prices or for escalation of expenses and capital costs. The meaningfulness of these estimates depends upon the accuracy of the
assumptions upon which they were based.

     We evaluate natural gas reserves at constant temperature and pressure. A change in either of these factors can affect the measurement of
natural gas reserves. We deduct operating costs, development costs and production-related and ad valorem taxes in arriving at the estimated
future cash flows. We make no provision for income taxes, and base the estimates on operating methods and conditions prevailing as of the
dates indicated. We cannot assure you that these estimates are accurate predictions of future net cash flows from natural gas and oil reserves or
their present value. For additional information concerning our natural gas and oil reserves and estimates of future net revenues, see note 14 to
our consolidated financial statements for the year ended September 30, 2003.

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                                                                                                   Proved natural gas and oil reserves at September 30,

                                                                                                      2003(1)               2002                2001

Natural gas reserves (Mmcf):
  Proved developed reserves                                                                              87,760              83,996              80,249
  Proved undeveloped reserves                                                                            45,533              39,226              37,868

  Total proved reserves of natural gas                                                                 133,293              123,222             118,117


Oil reserves (Mbbl):
  Proved developed reserves                                                                                1,825               1,846               1,735
  Proved undeveloped reserves                                                                                 30                  32                  66

  Total proved reserves of oil                                                                             1,855               1,878               1,801


  Total proved reserves (Mmcfe)                                                                        144,423              134,490             128,923


Standardized measure of discounted future cash flows (in thousands)                               $    144,351        $     104,126       $      98,712


PV-10 estimate of cash flows of proved reserves (thousands):
  Proved developed reserves                                                                       $    164,617        $     120,260       $     109,288
  Proved undeveloped reserves                                                                           26,802               12,209              17,971

  Total PV-10 estimate                                                                            $    191,419        $     132,469       $     127,259



    (1) Projected natural gas and oil volumes for each of fiscal 2004 and the remaining successive years are:

                                                                                                                        Remaining
                                                                                                       2004           successive years         Total

Natural gas (Mmcf)                                                                                         8,377            124,916             133,293
Oil (Mbbl)                                                                                                   147              1,708               1,855

Natural Gas Sales

     We have a natural gas supply agreement with FirstEnergy Solutions Corp. for a 10-year term which began on April 1, 1999. Subject to
certain exceptions, FirstEnergy Solutions has a last right of refusal to buy all of the natural gas produced and delivered by us and our affiliates,
including our drilling investment partnerships, at certain delivery points with the facilities of:

    •    East Ohio Gas Company, National Fuel Gas Distribution, Columbia of Ohio, and Peoples Natural Gas Company, which are local
         distribution companies; and

    •    National Fuel Gas Supply, Columbia Gas Transmission Corporation, Tennessee Gas Pipeline Company, and Texas Eastern
         Transmission Company, which are interstate pipelines.

FirstEnergy Solutions is the marketing affiliate of FirstEnergy Corp. (NYSE: FE), a large regional electric utility based in Akron, Ohio.
FirstEnergy Corp. has provided a guaranty of the monetary obligations of FirstEnergy Solutions of an amount up to $15 million until March 31,
2005, which will continue on a monthly basis thereafter unless terminated on 30 days notice.

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     The majority of our and our drilling investment partnerships’ natural gas is subject to the agreement with FirstEnergy Solutions, with the
following exceptions:

    •    natural gas we sell to Warren Consolidated, an industrial end-user and direct delivery customer;

    •    natural gas that at the time of the agreement was already dedicated for the life of the well to another buyer;

    •    natural gas that is produced by a company which was not an affiliate of ours at the time of the agreement;

    •    natural gas sold through interconnects established subsequent to the agreement;

    •    natural gas that is delivered to interstate pipelines or local distribution companies other than those described above; and

    •    natural gas that is produced from well(s) operated by a third-party or subject to an agreement under which a third-party was to arrange
         for the gathering and sale of the natural gas.

Based on the most recent monthly production data available to us as of January 31, 2004, we anticipate that we and our affiliates, including our
drilling investment partnerships, will sell approximately 56% of our natural gas production under the FirstEnergy Solutions agreement. The
agreement also permits us to implement gas price hedges through FirstEnergy Solutions, as described below under ―—Natural Gas Hedging.‖

     The agreement established an indexed price formula for each of the delivery points during an initial period of one or two years, and
requires the parties to negotiate a new pricing arrangement at each delivery point for subsequent periods. If, at the end of any applicable period,
the parties cannot agree to a new price for any delivery point, then we may solicit offers from third-parties to buy the natural gas for that
delivery point. If FirstEnergy Solutions does not match this price, then we may sell the natural gas to the third-party. This process is repeated at
the end of each contract period which is usually one year. In order to hedge our gas prices over a longer period of time, we recently agreed
upon prices with FirstEnergy Solutions that will be effective through March 2005. We will market the remainder of our natural gas, which is
principally located in the Fayette County area, primarily to Colonial Energy, Inc. and UGI Energy Services, and possibly others.

    Our pricing arrangements with FirstEnergy Solutions and the other third-parties are tied to the NYMEX monthly futures contract price,
which is reported daily in the Wall Street Journal. The total price received for gas is a combination of the monthly NYMEX futures price plus a
negotiated fixed premium.

     The agreement with FirstEnergy Solutions may be suspended for force majeure, which means generally such things as an act of God, fire,
storm, flood, and explosion, but also includes the permanent closing of the factories of Carbide Graphite or Duferco Farrell Corporation during
the term of FirstEnergy Solutions’ agreements to sell natural gas to them. If these factories were closed, however, we believe that FirstEnergy
Solutions would be able to find alternative purchasers and would not invoke the force majeure clause.

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     We expect that natural gas produced from wells drilled in areas of the Appalachian Basin other than described above will be primarily tied
to the spot market price and supplied to:

    •    gas marketers;

    •    local distribution companies;

    •    industrial or other end-users; and/or

    •    companies generating electricity.

Crude Oil Sales

    Crude oil produced from our wells flows directly into storage tanks where it is picked up by the oil company, a common carrier, or pipeline
companies acting for the oil company which is purchasing the crude oil. Unlike natural gas, crude oil does not present any transportation
problem. We anticipate selling any oil produced by our wells to regional oil refining companies at the prevailing spot market price for
Appalachian crude oil in spot sales.

Dismantlement, Restoration, Reclamation and Abandonment Costs

     When we determine that a well is no longer capable of producing natural gas or oil in economic quantities, we must dismantle the well and
restore and reclaim the surrounding area before we can abandon the well. We contract these operations to independent service providers to
whom we pay a fee, currently averaging approximately $7,700 per well. The contractor will also salvage the equipment on the well, which we
then sell in the used equipment market. Our proceeds from the sales of salvaged equipment currently range between $6,900 and $11,000 per
well. Under the partnership agreements of our drilling investment partnerships, which own substantially all of our wells, we are allocated
abandonment costs in proportion to our partnership interest (generally between 27% and 34%) and are allocated between 66% and 100% of the
salvage proceeds. As a consequence, we generally receive revenues from salvaged equipment at least equal to, and typically exceeding, our
share of the related costs. See note 2 of our consolidated financial statements, ―Asset Retirement Obligations.‖

Natural Gas Hedging

    Pricing for gas and oil production has been volatile and unpredictable for many years. To limit exposure to changing natural gas prices,
from time to time we use hedges. Through our hedges, we seek to provide a measure of stability in the volatile environment of natural gas
prices. These hedges may include purchases of regulated NYMEX futures and options contracts and non-regulated over-the-counter futures
contracts with qualified counterparties. The futures contracts are commitments to purchase or sell natural gas at future dates and generally
cover one-month periods for up to 24 months in the future. To assure that the financial instruments will be used solely for hedging price risks
and not for speculative purposes, we have a committee to assure that all financial trading is done in compliance with our hedging policies and
procedures. We do not intend to contract for positions that we cannot offset with actual production.

    FirstEnergy Solutions and other third-party marketers to which we sell gas, such as Colonial Energy, Inc. and UGI Energy Services, also
use NYMEX-based financial instruments to hedge their pricing exposure and make price hedging opportunities available to us. These
transactions, while providing us protection similar to NYMEX-based futures contracts, swaps and options, are not deemed hedges for
accounting purposes because they require firm delivery of natural gas. Thus, we limit these arrangements to much smaller quantities than those
projected to be available at any delivery point. The price paid by FirstEnergy Solutions, Colonial Energy, Inc., UGI Energy Services, and any
other third-party marketers for certain volumes of natural gas sold under these sales agreements may be significantly different from the
underlying monthly spot market value.

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    The portion of natural gas that we hedge and the manner in which it is hedged (e.g., fixed pricing, floor and/or floor price with a cap, which
we refer to as costless collar) changes from time to time. As of January 31, 2004, our overall price hedging position for the future months
ending December 31, 2004 for our natural gas production was approximately as follows:

    •    45.1% was hedged with a fixed price;

    •    13.6% was hedged with a floor price and/or costless collar price; and

    •    41.3% was not hedged and was subject to market-based pricing.

We implemented approximately 79% of these hedges through FirstEnergy Solutions. For information concerning our natural gas hedging, see
―Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about
Market Risk—Commodity Price Risk.‖

Pipeline Operations

    We conduct our natural gas transportation operations through Atlas Pipeline Partners. At December 31, 2003, Atlas Pipeline Partners
owned approximately 1,400 miles of intrastate gathering systems located in eastern Ohio, western New York and western Pennsylvania, to
which approximately 4,500 natural gas wells were connected. Atlas Pipeline Partners’ gathering systems had an average daily throughput of
52.7 Mmcf , 49.7 Mmcf and 45.1 Mmcf of natural gas in fiscal 2003, 2002 and 2001, respectively. We also directly own approximately 200
miles of natural gas gathering systems in Ohio and Pennsylvania, whose throughputs are not material.

     Atlas Pipeline Partners GP, our indirect wholly owned subsidiary, is the general partner of Atlas Pipeline Partners. On a consolidated basis,
it has a 2% interest in Atlas Pipeline Partners. In addition, as of December 31, 2003, Atlas Pipeline Partners GP owned 1,641,026 subordinated
units of Atlas Pipeline Partners, constituting a 37% interest in it. Atlas Pipeline Partners GP manages the activities of Atlas Pipeline Partners
using our personnel who act as its officers and employees.

    The subordinated units in Atlas Pipeline Partners are a special class of interest under which our right to receive distributions is
subordinated to those of the publicly-held common units. The subordination period is scheduled to expire on January 1, 2005 unless certain
financial tests specified in the partnership agreement are not met. We expect that these tests will be met. Upon expiration of the subordination
period, our subordinated units will convert to an equal number of common units.

     As general partner, we have the right to receive incentive distributions if Atlas Pipeline Partners meets or exceeds its minimum quarterly
distribution obligations to the common and subordinated units. The incentive distributions are as follows:

    •    of the first $0.10 per unit available for distribution in excess of the $0.42 minimum quarterly distribution, 85% goes to all unit holders
         (including to us as a subordinated unit holder) and 15% goes to us as a general partner;

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    •    of the next $0.08 per unit available for distribution, 75% goes to all unit holders and 25% goes to us as a general partner, and

    •    after that, 50% goes to all unit holders and 50% goes to us as a general partner.

    We have agreements with Atlas Pipeline Partners that require us to do the following:

    •    Pay gathering fees to Atlas Pipeline Partners for natural gas gathered by the gathering systems equal to the greater of $0.35 per Mcf
         ($0.40 per Mcf in certain instances) or 16% of the gross sales price of the natural gas transported. For the years ended September 30,
         2003, 2002 and 2001, these gathering fees averaged $0.75, $0.57 and $0.81 per Mcf, respectively. The cost to us of paying these fees
         is offset by the transportation fees paid to us by our drilling investment partnerships, reimbursements and distributions to us from
         Atlas Pipeline Partners and connection costs and other expenses paid by Atlas Pipeline Partners.

    •    Connect wells owned or controlled by us that are within specified distances of Atlas Pipeline Partners’ gathering systems to those
         gathering systems.

    •    Provide stand-by construction financing to Atlas Pipeline Partners, at its request, for gathering system extensions and additions, to a
         maximum of $1.5 million per year, until 2005. We have not been required to provide any construction financing under this agreement
         since Atlas Pipeline Partners’ inception.

    We believe that we comply with all the requirements of these agreements.

     On September 16, 2003, Atlas Pipeline Partners entered into an agreement to acquire the Alaska Pipeline Company for $95 million. We
describe the proposed acquisition in ―Management’s Discussion and Analysis of Financial Condition and Results of Operations – Pending
Acquisition.‖ At closing, the seller will enter into gas transportation agreements that will require the seller to pay Alaska Pipeline Company a
minimum monthly capacity reservation fee of $943,000 plus $0.075 per Mcf of gas transported for 10 years. These agreements also require the
seller to provide operational, maintenance and administrative services for five years for $334,000 per month during the first three years, subject
to inflation-based adjustments in the fourth and fifth contract years.

Availability of Oil Field Services

     We contract for drilling rigs and purchase goods and services necessary for the drilling and completion of wells from a number of drillers
and suppliers, none of which supplies a significant portion of our annual needs. During fiscal 2003, we faced no shortage of these goods and
services. We cannot predict the duration of the current supply and demand situation for drilling rigs and other goods and services with any
certainty due to numerous factors affecting the energy industry and the demand for natural gas and oil.

Other Properties

     We own a 24,000 square foot office building in Pittsburgh, Pennsylvania, a 17,000 square foot field office and warehouse facility in
Jackson Center, Pennsylvania and a field office in Deerfield, Ohio. We lease one 1,400 square foot field office in Ohio for $1,575 per month
under a lease expiring in 2009 and one 3,100 square foot field office in Pennsylvania for $3,100 per month under a lease expiring in 2005. We
also rent 9,300 square feet of office space in Uniontown, Ohio for $10,651 per month under a lease expiring in February 2006. We anticipate
that we will enter into subleases with Resource America for the office space we currently use in Philadelphia and New York City.

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Major Customers

    During fiscal 2003, 2002 and 2001, gas sales to FirstEnergy Solutions accounted for 18%, 16% and 17%, respectively, of our total
consolidated revenues.

Competition

    The energy industry is intensely competitive in all of its aspects. Competition arises not only from numerous domestic and foreign sources
of natural gas and oil but also from other industries that supply alternative sources of energy. Competition is intense for the acquisition of
leases considered favorable for the development of natural gas and oil in commercial quantities. Product availability and price are the principal
means of competition in selling oil and natural gas. Many of our competitors possess greater financial and other resources than ours which may
enable them to identify and acquire desirable properties and market their natural gas and oil production more effectively than we do. While it is
impossible for us to accurately determine our comparative industry position, we do not consider our operations to be a significant factor in the
industry. Moreover, we also compete with a number of other companies that offer interests in drilling investment partnerships. As a result,
competition for investment capital to fund drilling investment partnerships is intense.

Markets

     The availability of a ready market for natural gas and oil produced by us, and the price obtained, depends upon numerous factors beyond
our control, as described in ―Risk Factors — Risks Relating to Our Business.‖ During fiscal 2003, 2002 and 2001, we experienced no problems
in selling our natural gas and oil, although prices have varied significantly during and after those periods.

Governmental Regulation

     Regulation of Production.       The production of natural gas and oil is subject to regulation under a wide range of local, state and federal
statutes, rules, orders and regulations. Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and
reports concerning operations. All of the states in which we own and operate properties have regulations governing conservation matters,
including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of
production from oil and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. The effect of these
regulations is to limit the amount of natural gas and oil that we can produce from our wells and to limit the number of wells or the locations at
which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing. Moreover, each state
generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and natural gas liquids within its
jurisdiction.

     The failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry
are subject to the same regulatory requirements and restrictions that affect our operations.

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     Regulation of Transportation and Sale of Natural Gas.       While natural gas pipelines generally are subject to regulation by the Federal
Energy Regulatory Commission, or FERC, under the Natural Gas Act of 1938, because Atlas Pipeline Partners’ individual gathering systems
perform primarily a gathering function, as opposed to the transportation of natural gas in interstate commerce, Atlas Pipeline Partners believes
that it is not subject to regulation under the Natural Gas Act. However, Atlas Pipeline Partners delivers a significant portion of the natural gas it
transports to interstate pipelines subject to FERC regulation. In the past, the federal government has regulated the prices at which natural gas
could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price
controls in the future. Deregulation of wellhead natural gas sales began with the enactment of the Natural Gas Policy Act. In 1989, Congress
enacted the Natural Gas Wellhead Decontrol Act. The Decontrol Act removed all Natural Gas Act and Natural Gas Policy Act price and
non-price controls affecting wellhead sales of natural gas effective January 1, 1993.

     Since 1985, the FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and
non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate
natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with
natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. Beginning in
1992, the FERC issued Order No. 636 and a series of related orders to implement its open access policies. As a result of the Order No. 636
program, the marketing and pricing of natural gas have been significantly altered. The interstate pipelines’ traditional role as wholesalers of
natural gas has been eliminated and replaced by a structure under which pipelines provide transportation and storage service on an open access
basis to others who buy and sell natural gas. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to
foster increased competition within all phases of the natural gas industry.

     In 2000, the FERC issued Order No. 637 and subsequent orders, which imposed a number of additional reforms designed to enhance
competition in natural gas markets. Among other things, Order No. 637 revised the FERC’s pricing policy by waiving price ceilings for
short-term released capacity for a two-year experimental period, and effected changes in FERC regulations relating to scheduling procedures,
capacity segmentation, penalties, rights of first refusal and information reporting. Most pipelines’ tariff filings to implement the requirements
of Order No. 637 have been accepted by the FERC and placed into effect. While most major aspects of Order No. 637 have been upheld on
judicial review, certain issues such as capacity segmentation and right of first refusal were remanded to the FERC for further action. The FERC
recently issued an order affirming Order No. 637. We cannot predict what action the FERC will take on these matters in the future, or whether
the affected parties will seek, or the FERC’s actions will survive, further judicial review.

     Intrastate natural gas transportation is subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas
transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to
state. Insofar as regulation by a particular state will generally affect all intrastate natural gas shippers within the state on a comparable basis, we
believe that we will not be affected in any way that materially differs from the effects on our competitors.

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     Environmental and Safety Regulation.       Under the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act, the Oil Pollution Act of 1990, the Clean Air Act, and other federal and
state laws relating to the environment, owners and operators of wells producing natural gas or oil, and pipelines, can be liable for fines,
penalties and clean-up costs for pollution caused by the wells or the pipelines. Moreover, the owners’ or operators’ liability can extend to
pollution costs from situations that occurred prior to their acquisition of the assets. Natural gas pipelines are also subject to safety regulation
under the Natural Gas Pipeline Safety Act of 1968 and the Pipeline Safety Act of 1992 which, among other things, dictate the type of pipeline,
quality of pipeline, depth, methods of welding and other construction-related standards. State public utility regulators in New York, Ohio and
Pennsylvania have either adopted federal standards or promulgated their own safety requirements consistent with the federal regulations.

    We do not anticipate that we will be required in the near future to expend amounts that are material in relation to our revenues by reason of
environmental laws and regulations, but since these laws and regulations change frequently, we cannot predict the ultimate cost of compliance.
We cannot assure you that more stringent laws and regulations protecting the environment will not be adopted or that we will not otherwise
incur material expenses in connection with environmental laws and regulations in the future.

Credit Facilities

    We have a $75.0 million credit facility administered by Wachovia Bank. The revolving credit facility is guaranteed by our subsidiaries.
Credit availability, which is principally based on the value of our assets, was $54.2 million at December 31, 2003. In March 2004, this facility
was amended to increase the credit availability to $65 million. Up to $10 million of the borrowings under the facility may be in the form of
standby letters of credit. Borrowings under the facility are secured by our assets, including the stock of our subsidiaries. At December 31, 2003,
$19.0 million was outstanding under this facility.

    Loans under the facility bear interest at one of the following two rates, at the borrower’s election:

    •    the base rate plus the applicable margin; or

    •    the adjusted LIBOR plus the applicable margin.

    The base rate for any day equals the higher of the federal funds rate plus 1/2 of 1% or the Wachovia Bank prime rate. Adjusted LIBOR is
LIBOR divided by 1.00 minus the percentage prescribed by the Federal Reserve Board for determining the reserve requirement for euro
currency funding. The applicable margin is as follows:

    •    where utilization of the borrowing base is equal to or less than 50%, the applicable margin is 0.25% for base rate loans and 1.75% for
         LIBOR loans;

    •    where utilization of the borrowing base is greater than 50%, but equal to or less than 75%, the applicable margin is 0.50% for base
         rate loans and 2.00% for LIBOR loans; and

    •    where utilization of the borrowing base is greater than 75%, the applicable margin is 0.75% for base rate loans and 2.25% for LIBOR
         loans.

    At December 31, 2003, borrowings under the Wachovia credit facility bore interest at an average interest rate of 2.98%.

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    The Wachovia credit facility requires us to maintain a specified net worth and specified ratios of current assets to current liabilities and
debt to EBITDA, and requires us to maintain a specified interest coverage ratio. In addition, the facility limits sales, leases or transfers of assets
and the incurrence of additional indebtedness. The facility limits the dividends payable by us to 50% of our cumulative net income from
January 1, 2004 to the date of determination plus $5 million and prohibits us from declaring or paying a dividend during an event of default
under the facility or if the dividend would cause an event of default. As of March 12, 2004, we would be permitted to pay dividends of $5
million under these restrictions. In addition, after the closing of this offering, we will be permitted to repay intercompany debt to Resource
America only as required by the tax matters agreement and the transition services agreement described under ―Relationship with Resource
America.‖ We are permitted to pay Resource America the special dividend described under ―Use of Proceeds.‖ The facility terminates in
March 2007, when all outstanding borrowings must be repaid.

     Atlas Pipeline Partners has a $20 million revolving credit facility administered by Wachovia Bank. Up to $3 million of the facility may be
used for standby letters of credit. Borrowings under the facility are secured by a lien on all the property of Atlas Pipeline Partners’ assets,
including its subsidiaries. The facility has a term ending in December 2005 and bears interest, at Atlas Pipeline Partners’ election, at the base
rate plus the applicable margin or the euro rate plus the applicable margin.

    As used in the facility agreement, the base rate is the higher of:

    •    Wachovia Bank’s prime rate or

    •    the sum of the federal funds rate plus 50 basis points.

     The euro rate is the average of specified LIBORs divided by 1.00 minus the percentage prescribed by the Federal Reserve Board for
determining the reserve requirement for euro currency funding. The applicable margin varies with Atlas Pipeline Partners’ leverage ratio from
between 150 to 250 basis points, for the euro rate option, or 0 to 50 basis points, for the base rate option. Draws under any letter of credit bear
interest as specified under the first bullet point above. The credit facility requires Atlas Pipeline Partners to maintain a specified net worth, ratio
of debt to tangible assets and an interest coverage ratio. In addition, the facility limits sales, leases or transfers of assets, incurrence of other
indebtedness and guarantees, and certain investments, and prohibits Atlas Pipeline Partners from declaring or paying distributions during an
event of default under the facility or if a distribution would cause an event of default. As of December 31, 2003, no amounts were outstanding
under this facility. Atlas Pipeline Partners expects that it will draw the full amount of this facility as part of its financing of its acquisition of
Alaska Pipeline Company.

Employees

    As of December 31, 2003, we employed 201 persons.

Legal Proceedings

     One of our subsidiaries, Resource Energy, Inc., together with Resource America, is a defendant in a proposed class action originally filed
in February 2000 in the New York Supreme Court, Chautauqua County, by individuals, putatively on their own behalf and on behalf of
similarly situated individuals, who leased property to us. The complaint alleges that we are not paying landowners the proper amount of royalty
revenues derived from the natural gas produced from the wells on leased property. The complaint seeks damages in an unspecified amount for
the alleged difference between the amount of royalties actually paid and the amount of royalties that allegedly should have been paid. Plaintiffs
were certified as a class in December 2003; an appeal of that certification is pending. The action is currently in its discovery phase. We believe
the complaint is without merit and are defending ourselves vigorously.

     We are also a party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none
of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.

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                                                              MANAGEMENT

Executive Officers and Directors

    The following table sets forth information regarding our executive officers and directors as of March 16, 2004:

                         Name                                  Age                                       Position

Edward E. Cohen                                                 65          Chairman, Chief Executive Officer and President
Frank P. Carolas                                                44          Executive Vice President
Freddie M. Kotek                                                48          Executive Vice President and Chief Financial Officer
Jeffrey C. Simmons                                              45          Executive Vice President
Michael L. Staines                                              54          Executive Vice President and Secretary
Nancy J. McGurk                                                 48          Senior Vice President and Chief Accounting Officer
Jonathan Z. Cohen                                               33          Vice Chairman
Carlton M. Arrendell                                            42          Director
William R. Bagnell                                              41          Director
Donald W. Delson                                                53          Director
Nicholas DiNubile                                               51          Director
Dennis A. Holtz                                                 63          Director

     Edward E. Cohen has been the Chairman of our board of directors and our Chief Executive Officer and President since our formation in
September 2000. He has been Chairman of the board of directors of Resource America since 1990 and Chief Executive Officer of Resource
America since 1988 and was President of Resource America from September 2000 until October 2003. In addition, Mr. Cohen has been
Chairman of the managing board of Atlas Pipeline Partners GP since its formation in November 1999, a director of TRM Corporation (a
publicly-traded consumer services company) since June 1998 and Chairman of the Board of Brandywine Construction & Management, Inc. (a
property management company) since 1994. Mr. Cohen intends to resign as Chief Executive Officer at Resource America upon the completion
of this offering, but he will remain a director of Resource America. Mr. Cohen is the father of Jonathan Z. Cohen.

     Frank P. Carolas has been an Executive Vice President since January 2001 and served as a director from January 2002 until February
2004. Mr. Carolas has been a Vice President of Resource America since April 2001, and Executive Vice President—Land and Geology and a
director of Atlas Resources, since January 2001. Mr. Carolas is a certified petroleum geologist and has been employed by Atlas Resources and
its affiliates since 1981. Mr. Carolas intends to resign his position at Resource America upon the completion of this offering.

    Freddie M. Kotek has been an Executive Vice President and Chief Financial Officer since February 2004 and served as a director from
September 2001 until February 2004. Mr. Kotek has been a Senior Vice President of Resource America since 1995, President of Resource
Leasing, Inc. (a wholly-owned subsidiary of Resource America) since 1995, Chairman of Atlas Resources, Inc. (our wholly-owned subsidiary
which acts as the managing partner of our drilling investment partnerships) since September 2001 and Chief Executive Officer and President of
Atlas Resources since January 2002. Mr. Kotek was President of Resource Properties from September 2000 to October 2001 and its Executive
Vice President from 1993 to September 2000. Mr. Kotek intends to resign his positions at Resource America and all its subsidiaries which are
not our subsidiaries upon the completion of this offering.

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    Jeffrey C. Simmons has been an Executive Vice President since January 2001 and was a director from January 2002 until February 2004.
Mr. Simmons has been a Vice President of Resource America since April 2001, and Executive Vice President—Operations and a director of
Atlas Resources, since January 2001. Mr. Simmons joined Resource America in 1986 as a senior petroleum engineer and has served in various
executive positions with its energy subsidiaries since then. Mr. Simmons intends to resign his position at Resource America upon the
completion of this offering.

    Michael L. Staines has been an Executive Vice President since our formation. Mr. Staines has been a Senior Vice President of Resource
America since 1989 and was a director from 1989 to February 2000 and Secretary from 1989 to October 1998. Mr. Staines has been President
of Atlas Pipeline Partners GP since January 2001 and its Chief Operating Officer and a member of its Managing Board since its formation in
November 1999. Mr. Staines intends to resign his position at Resource America upon the completion of this offering.

    Nancy J. McGurk has been our Chief Accounting Officer since January 2001, Senior Vice President since January 2002, and served as
our Chief Financial Officer from January 2001 until February 2004. Ms. McGurk has been a Vice President of Resource America since 1992
and its Treasurer and Chief Accounting Officer since 1989. Ms. McGurk has been Senior Vice President of Atlas Resources since January 2002
and Chief Financial Officer and Chief Accounting Officer since January 2001. Ms. McGurk intends to resign her positions at Resource
America upon the completion of this offering.

    Jonathan Z. Cohen has been Vice Chairman of our board of directors since our formation. He has been the President of Resource
America since October 2003 and Chief Operating Officer since April 2002 and a director since October 2002. Before being named President,
he served as Resource America’s Executive Vice President from April 2001 to October 2003, Senior Vice President from May 1999 to April
2001 and Vice President from July 1998 to May 1999. Mr. Cohen has been Vice Chairman of the managing board of Atlas Pipeline Partners
GP since its formation in November 1999, a Trustee and Secretary of RAIT Investment Trust (a publicly-traded real estate investment trust)
since 1997 and Vice Chairman since October 2003, and Chairman of the board of directors of The Richardson Company (a sales consulting
company) since October 1999. Mr. Cohen is the son of Edward E. Cohen.

Independent Directors

       The following directors have been determined by our board to be independent directors as defined under Nasdaq rules and the Securities
Act.

     Carlton M. Arrendell has been a director since February 2004. Mr. Arrendell has been with Investment Trust Corporation (a consultant to
the trustee of the AFL-CIO Building Investment Trust) since December 1997 and currently serves as Chief Investment Officer.

    William R. Bagnell has been a director since February 2004. Mr. Bagnell has been involved in the energy industry in various capacities
since 1990. He has been Vice President—Energy for Planalytics, Inc. (an energy industry software company) since March 2000 and was
Director of Sales for Fisher Tank Company (a national manufacturer of carbon and stainless steel bulk storage tanks) from September 1998 to
January 2000. Before that, he served as Manager of Business Development for Buckeye Pipeline Partners, L.P. (a refined petroleum products
transportation company) from October 1992 until September 1998. Mr. Bagnell has served as an independent member of the managing board
of Atlas Pipeline Partners GP since its formation in November 1999, a position from which he will resign before the completion of this
offering.

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     Donald W. Delson has been a director since February 2004. Mr. Delson has over 20 years of experience as an investment banker
specializing in financial institutions. Mr. Delson has been a Managing Director, Corporate Finance Group, at Keefe, Bruyette & Woods, Inc.
since 1997, and before that was a Managing Director in the Corporate Finance Group at Alex. Brown & Sons from 1982 to 1997. Mr. Delson
has served as an independent member of the managing board of Atlas Pipeline Partners GP since June 2003, a position from which he will
resign before the completion of this offering.

    Nicholas DiNubile has been a director since February 2004. Dr. DiNubile has been an orthopedic surgeon specializing in sports medicine
since 1982. Dr. DiNubile has served as special advisor and medical consultant to the President’s Council on Physical Fitness and as Orthopedic
Consultant to the Philadelphia 76ers basketball team. Dr. DiNubile is also Clinical Assistant Professor of the Department of Orthopedic
Surgery at the Hospital of the University of Pennsylvania.

   Dennis A. Holtz has been a director since February 2004. Mr. Holtz has maintained a corporate law practice with D.A. Holtz, Esquire &
Associates in Philadelphia and New Jersey since 1988.

Other Key Employees

     Jack L. Hollander , 47, has been Senior Vice President—Direct Participation Programs since January 2002. Mr. Hollander has also been
Senior Vice President—Direct Participation Programs of Atlas Resources since January 2002, and before that served as Vice President from
January 2001 until December 2001. Mr. Hollander practiced law with Rattet, Hollander & Pasternak, concentrating in tax matters and real
estate transactions, from 1990 to January 2001, and served as in-house counsel for Integrated Resources, Inc. (a diversified financial services
company) from 1982 to 1990.

    Michael G. Hartzell , 47, has been Vice President—Land Administration since January 2002, and before that served as Senior Land
Coordinator from January 1999 to January 2002. Mr. Hartzell served as general manager of one of our field offices from January 1998 to
January 1999. Mr. Hartzell has also served as Vice President—Land Administration for Atlas Resources since September 2001. Mr. Hartzell
has been employed by Atlas Resources and its affiliates since 1980.

    Marci F. Bleichmar , 33, has been Vice President—Marketing since February 2001. Ms. Bleichmar has also served as Vice
President—Marketing of Atlas Resources since February 2001. From March 2000 until February 2001, Ms. Bleichmar was director of
marketing for Jacob Asset Management (a mutual fund manager) and, from March 1998 until March 2000, was an account executive at
Bloomberg Financial Services, L.P. Before that, Ms. Bleichmar had been an associate on the Derivatives Trading Desk of JPMorgan since
1994.

    Donald R. Laughlin , 55, has been Vice President—Drilling and Production since January 2002, and before that served as Senior Drilling
Engineer since May 2001. Mr. Laughlin has also served as Vice President—Drilling and Production for Atlas Resources since September 2001.
Mr. Laughlin has over 30 years experience as a petroleum engineer in the Appalachian Basin, having been employed by Columbia Gas
Transmission Corporation from October 1995 to May 2001 as a Vice President, Cabot Oil & Gas Corporation from 1989 to 1995 as Manager
of Drilling Operations and Technical Services, Doran & Associates, Inc. (an industrial engineering firm) from 1977 until 1989 as Vice
President—Operations, and Columbia Gas from 1970 to 1977 as Drilling Engineer and Gas Storage Engineer.

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Board Committees

    Our board of directors has established the following committees: an audit committee, a compensation committee and a nominating and
governance committee. Our board may establish other committees from time to time to facilitate our management.

    The principal functions of the audit committee are to assist the board in monitoring the integrity of our financial statements, the
independent auditor’s qualifications and independence, the performance of our independent auditors and our compliance with legal and
regulatory requirements. The audit committee has the sole authority to retain and terminate our independent auditors and to approve the
compensation paid to our independent auditors. The audit committee is also responsible for overseeing our internal audit function. The audit
committee is comprised solely of independent directors, consisting of Messrs. Arrendell, Bagnell and Delson, with Mr. Arrendell acting as the
chairman. Our board has determined that Mr. Delson is an audit committee financial expert.

    The principal functions of the compensation committee are to administer our employee benefit plans (including incentive plans), annually
evaluate salary grades and ranges, establish guidelines concerning average compensation increases, establish performance criteria for and
evaluate the performance of our chief executive officer and approve compensation of all officers and directors. The compensation committee is
comprised solely of independent directors, consisting of Messrs. Delson, DiNubile and Holtz, with Mr. Delson acting as the chairman.

     The principal functions of the nominating and governance committee are to recommend persons to be selected by the board as nominees
for election as directors, recommend persons to be elected to fill any vacancies on the board, consider and recommend to the board
qualifications for the office of director and policies concerning the term of office of directors and the composition of the board and consider
and recommend to the board other actions relating to corporate governance. The nominating and governance committee is comprised solely of
independent directors, consisting Messrs. Bagnell, DiNubile and Holtz, with Mr. Holtz acting as the chairman.

Director Compensation

    Directors who are our employees or employees of Resource America receive no compensation for service as members of the board of
directors or any committees on which they may serve. Independent directors are paid a monthly retainer of $1,000 and a fee of $1,000 for each
board of directors meeting attended. The chairman of a committee receives an additional monthly retainer of $500 and other committee
members receive an additional monthly retainer of $250.

Compensation Committee Interlocks and Insider Participation

     We did not have a compensation committee of our board of directors during our last fiscal year. The compensation paid to our executive
officers has historically been determined by the compensation committee of our parent, Resource America.

Executive Officer Compensation

     We do not directly compensate Messrs. E. Cohen and J. Cohen. Rather, Resource America allocates the compensation of these executive
officers between activities on behalf of us and activities on behalf of Resource America based upon an estimate of the time spent by such
persons on activities for us and for Resource America, and we reimburse Resource America for the compensation allocated to us. Resource
America also similarly allocates compensation for Messrs. E. Cohen, J. Cohen, Carolas, Simmons and Staines and Ms. McGurk to Atlas
Pipeline Partners, which amounts are not included in the following table. The following table sets forth the compensation paid by us to our
chief executive officer and each of our four other most highly compensated executive officers for fiscal 2003.

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                                                       Summary Compensation Table

                                                                                                                                    All other
Name and principal position                                                                     Salary          Bonus            compensation(1)

Edward E. Cohen, Chairman of the Board,
   Chief Executive Officer and President                                                    $    240,000    $    160,000     $             1,708
Jonathan Z. Cohen, Vice Chairman of the Board                                               $    140,000    $    120,000     $             1,996
Freddie M. Kotek, Executive Vice President and
   Chief Financial Officer                                                                  $    250,000    $    200,000     $            6,000
Frank P. Carolas, Executive Vice President                                                  $    141,250    $     50,000     $           10,648
Jeffrey C. Simmons, Executive Vice President                                                $    141,250    $     50,000     $           11,914


(1) Represents 401(k) match contributions.

Employment Agreements

    We currently do not have employment agreements with any of the executive officers listed in the table immediately above. We expect to
enter into an employment agreement with Edward E. Cohen, our Chairman, Chief Executive Officer and President, before the closing of this
offering.

    Under the terms of the expected agreement with Edward E. Cohen, Mr. Cohen is to serve as the chairman of our board of directors, our
chief executive officer and president. The agreement requires him to devote such time to us as is reasonably necessary to the fulfillment of his
duties, although it permits him to invest and participate in outside business endeavors. The agreement provides for initial base compensation of
$350,000 per year, which may be increased by the compensation committee of our board based upon its evaluation of Mr. Cohen’s
performance. Mr. Cohen is eligible to receive incentive bonuses and stock option grants and to participate in all employee benefit plans in
effect during his period of employment. The agreement has a term of three years and, until notice to the contrary, the term is automatically
extended so that on any day on which the agreement is in effect it has a then-current three year term.

     The agreement provides for a Supplemental Executive Retirement Plan, or SERP, pursuant to which Mr. Cohen will receive an annual
retirement benefit equal to the product of:

     •    6.5% multiplied by

     •    his base salary as of the time Mr. Cohen’s employment with us ceases, multiplied by

     •    the number of years (or portions thereof) which Mr. Cohen is employed by us.

The maximum benefit under the SERP is limited to 65% of final base salary. The benefit is guaranteed to his estate for 10 years if he should die
before receiving 10 years of SERP benefits. If there is a change of control and his employment with us is terminated, or if we terminate his
employment without cause, then the SERP benefit will be the greater of the accrued benefit pursuant to the above formula, or 35% of his final
base salary.

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    The agreement provides the following regarding termination and termination benefits:

    •   Upon termination due to death, Mr. Cohen’s estate will receive an amount equal to his final base salary multiplied by the number of
        years (or portion thereof) that he shall have worked for us (but not to be greater than 3 years’ base salary or less than one year’s base
        salary);

    •   We may terminate Mr. Cohen if he is disabled for 180 days consecutive days during any 12-month period. If he is terminated due to
        disability, he will receive his base salary and benefits for 3 years, and such 3 year period will be deemed a portion of his employment
        term for purposes of accruing SERP benefits.

    •   We may terminate his employment without cause upon 30 days’ written notice or upon a change of control after providing at least 30
        days’ written notice. He may terminate his employment for good reason or upon a change in control. Good reason is defined as a
        reduction in his base pay, a demotion, a material reduction in his duties, relocation, his failure to be elected to our board of directors;
        or a material breach of the agreement by us. If employment is terminated by us without cause, by Mr. Cohen for good reason or by
        either party in connection with a change of control, he will be entitled to any amounts then owed to him plus either:

        •    severance benefits under our then current severance policy, if any, or

        •    if Mr. Cohen signs a release, 36 months of continued health insurance coverage and a lump sum payment equal to 3 years of his
             average compensation (which we define as the average of the 3 highest years of total compensation that he shall have earned
             under the agreement, or if the agreement is less than three years old, the highest total compensation in any year or portion
             thereof).

    •   Mr. Cohen may terminate the agreement without cause with 60 days notice to us, and if he does so after January 1, 2006, and signs a
        release, he will receive a severance benefit equal to one-half of one year’s base salary then in effect.

    •   We may terminate his employment for cause (defined as a felony conviction or conviction of a crime involving fraud, embezzlement
        or moral turpitude, intentional and continual failure to perform his material duties after notice, or violation of confidentiality
        obligations) in which case he will receive only accrued amounts then owed to him.

     In the event that any amounts payable to Mr. Cohen upon termination become subject to any excise tax imposed under Section 4999 of the
Internal Revenue Code, we must pay Mr. Cohen an additional sum such that the net amounts retained by Mr. Cohen, after payment of excise,
income and withholding taxes, equals the termination amounts payable, unless Mr. Cohen’s employement terminates because of his death or
disability.

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                                              RELATIONSHIP WITH RESOURCE AMERICA

     We have provided below a summary description of the master separation and distribution agreement between Resource America and
ourselves and the other key agreements that relate to our separation from Resource America. This description, which summarizes all of the
material terms of these agreements, is not complete. We urge you to read the full text of these agreements, which are exhibits to the registration
statement of which this prospectus is a part. References in this section to Resource America include its subsidiaries and references to our
company include our subsidiaries.

Overview

    The master separation and distribution agreement contains the key provisions related to our separation from Resource America, this
offering and the distribution of our shares to Resource America’s common stockholders. The other agreements referenced in the master
separation and distribution agreement govern various interim and ongoing relationships between Resource America and us following the
closing date of this offering. These agreements include:

    •    the registration rights agreement;

    •    the tax matters agreement; and

    •    the transition services agreement.

Master Separation and Distribution Agreement

     Overview.      The master separation and distribution agreement contains the key provisions relating to the separation of our business from
Resource America’s other businesses and sets forth certain covenants we have agreed to until the distribution by Resource America to its
stockholders of the shares of our common stock held by Resource America, which we refer to as the distribution. Although Resource America
intends to complete the distribution, it has sole discretion to decide to do so, and we do not expect Resource America to complete the
distribution unless it is tax-free to Resource America and its stockholders. Because the Internal Revenue Service requirements for tax-free
distributions of this nature are complex and the Internal Revenue Service has broad discretion, Resource America may be unable to obtain such
a ruling. Consequently, we cannot assure you that the distribution will occur, or when it will occur.

    Special Dividend.    Immediately before the completion of this offering, we will declare a special dividend in an amount described above
under ―Use of Proceeds‖ to be paid to Resource America, our only stockholder at the time of the declaration, upon completion of the offering.

     Covenants.    We have agreed that, for so long as Resource America beneficially owns at least 50% of our outstanding common stock, we
will:

    •    not take any action which would limit the ability of Resource America or its transferee to transfer its shares of our common stock; and

    •    not take any actions that could reasonably result in Resource America being in breach of or in default under any contract or
         agreement.

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     Auditors and Audits; Annual Statements and Accounting.         We have agreed that, for so long as Resource America is required to
consolidate our results of operations and financial position with its own or account for its investment in our company on the equity method of
accounting, we will not change our independent auditors without Resource America’s prior written consent (which will not be unreasonably
withheld), and we will use our best efforts to enable our independent auditors to complete their audit of our financial statements in a timely
manner so to permit timely filing of Resource America’s financial statements. We have also agreed to provide to Resource America and its
independent auditors all information required for Resource America to meet its schedule for the filing and distribution of its financial
statements and to make available to Resource America and its independent auditors all documents necessary for the annual audit of our
company as well as access to the responsible company personnel so that Resource America and its independent auditors may conduct their
audits relating to our financial statements. We have also agreed to adhere to certain specified Resource America accounting policies and to
notify and consult with Resource America regarding any changes to our accounting principles and estimates used in the preparation of our
financial statements.

    Indemnification.     Under the master separation and distribution agreement, we and Resource America will indemnify and release each
other as follows:

    •    We will indemnify and hold harmless Resource America and its affiliates and their respective officers, directors, employees, agents,
         successors and assigns against any payments, losses, liabilities, damages, claims and expenses arising out of or relating to our past,
         present and future assets, businesses and operations and other assets, businesses operated or managed by us or persons previously
         associated with us.

    •    Resource America will similarly indemnify us and our affiliates and our and their respective officers, directors, employees, agents,
         successors and assigns for Resource America’s past, present and future assets, businesses and operations, except for assets, businesses
         and operations for which we have agreed to indemnify Resource America.

    •    We will indemnify Resource America and its affiliates against all liabilities arising out of any material untrue statements and
         omissions in any prospectus and any related registration statement filed with the SEC relating to this offering or any other primary
         offering of our common stock or our other securities prior to the date of the distribution or other similar transaction. However, our
         indemnification of Resource America does not apply to information relating to Resource America, excluding information relating to
         us. Resource America has agreed to indemnify us for this information.

    •    Except for the rights and obligations of Resource America and us, which relate to the agreements between Resource America and us
         relating to this offering or the distribution, we will release Resource America and some of its subsidiaries and affiliates and their
         respective officers, directors, employees, agents, successors and assigns for all losses for any and all past actions and failures to take
         actions relating to Resource America’s and our assets, businesses and operations. Resource America will similarly release us.

    All indemnification amounts will be reduced by any insurance proceeds and other offsetting amounts recovered by the party entitled to
indemnification.

    In addition, the transition services agreement, the registration rights agreement and the tax matters agreement referred to below provide for
indemnification between us and Resource America relating to the substance of such agreements.

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    Access to Information.     Under the master separation and distribution agreement, we and Resource America will be obligated to provide
each other access to information as follows:

    •    subject to applicable confidentiality obligations and other restrictions, we and Resource America will give each other any information
         within each other’s possession that the requesting party reasonably needs to comply with requirements imposed on the requesting
         party by a governmental authority, for use in any proceeding or to satisfy audit, accounting or similar requirements, or to comply with
         its obligations under the master separation and distribution agreement or any ancillary agreement;

    •    for so long as Resource America is required to consolidate our results of operations and financial position with its own or account for
         its investment in our company on the equity method of accounting, we will provide to Resource America, at no charge, all financial
         and other data and information that Resource America determines is necessary or advisable in order to prepare its financial statements
         and reports or filings with any governmental authority, including copies of all quarterly and annual financial information and other
         reports and documents we intend to file with the SEC before such filings (as well as final copies upon filing), and copies of our
         budgets and financial projections;

    •    we will consult with Resource America regarding the timing and content of our earnings releases and cooperate fully (and cause our
         independent auditors to cooperate fully) with Resource America in connection with any of its public filings;

    •    we and Resource America will use reasonable efforts to make available to each other’s past and present directors, officers, other
         employees and agents as witnesses in any legal, administrative or other proceedings in which the other party may become involved;

    •    the company providing information, consultant or witness services under the master separation and distribution agreement will be
         entitled to reimbursement from the other for reasonable expenses incurred in providing this assistance; and

    •    we and Resource America will each agree to hold in strict confidence all information concerning or belonging to the other for a period
         of up to 3 years.

    Employee Matters.       Effective as of the closing of this offering, we will hire specified persons who are currently employed by Resource
America and will assume all compensation and employee benefit liabilities relating to them. All of these people are currently involved in our
business and portions of their salaries have historically been allocated to us.

    The Distribution.    The master separation and distribution agreement provides that Resource America has sole discretion to determine if
and when the distribution will occur and all terms of the distribution. Resource America does not intend to make the distribution unless it
receives:

    •    a ruling by the Internal Revenue Service and/or an opinion from its tax counsel that the distribution will qualify as a reorganization
         pursuant to which no gain or loss will be recognized by Resource America or its stockholders for U.S. federal income tax purposes
         under Section 355, 368(a)(1)(D) and related provisions of the Internal Revenue Code; and

    •    any government approvals and material consents necessary to consummate the distribution.

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     It is likely that, in order to obtain a favorable ruling from the Internal Revenue Service and an opinion of counsel, we will need to
reorganize our current corporate structure by merging into us at least one subsidiary which has conducted an active business for at least 5 years.
We will select the subsidiary to be merged into us following completion of this offering. We do not believe that the reorganization will have a
material effect on us. Even with such restructuring, there is significant uncertainty as to whether Resource America will be able to obtain such a
ruling because the Internal Revenue Service requirements for tax-free distributions of this nature are complex and the Internal Revenue Service
has broad discretion. We are required to cooperate with Resource America to accomplish the distribution and, at Resource America’s direction,
to promptly take any and all actions necessary or desirable to effect the distribution.

    Effects of the Distribution on Us and Our Stockholders. If the distribution occurs, its principal effects upon us and our stockholders will be:

    •    Resource America will no longer own any of our common stock and, accordingly, will no longer be in a position to determine the
         outcome of corporate actions requiring stockholder approval. These actions, referred to in ―Risk Factors — Risks Relating to Our
         Relationship with Resource America — Our principal stockholder is in a position to affect our ongoing operations, corporate
         transactions and other matters,‖ will be passed upon by our stockholders existing at the record dates for such matters. Resource
         America’s rights following the distribution will be defined by the master separation and distribution agreement, the tax matters
         agreement and the transition services agreement discussed in this section of the prospectus.

    •    The restrictions on our ability to raise capital, dispose of assets or enter into business combination pending the distribution, referred to
         in ―Risk Factors — Risks Relating to Our Relationship with Resource America — Our agreements with Resource America may limit
         our ability to obtain capital or make acquisitions,‖ will terminate.

    •    The number of our publicly-traded shares will increase by approximately 10.7 million shares which, we believe, will increase the
         liquidity of our shares in public trading. However, the distribution may also affect the price of our common stock as described in
         ―Risk Factors — Risks Relating to the Offering and Our Common Stock — Sales of substantial amounts of our common stock in the
         public markets, including by Resource America, or the perception that they might occur could reduce the price our common stock
         might otherwise obtain.‖


    Termination.     Resource America may terminate the master separation and distribution agreement at any time before completion of this
offering. The master separation and distribution agreement may be terminated after this offering by the mutual consent of Resource America
and us.

     Expenses.      In general, Resource America and our company will each be responsible for our own costs (including all associated
third-party costs) incurred in connection with the transactions contemplated by the master separation and distribution agreement.

Registration Rights Agreement

     Registration Rights.      In the event the distribution is not completed and Resource America does not divest itself of all of its shares of our
common stock, Resource America could not freely sell all these shares without registration under the Securities Act or a valid exemption under
it. Accordingly, we will enter into a registration rights agreement with Resource America to provide it with registration rights relating to the
shares of our common stock which it holds. These registration rights generally become effective when Resource America informs us that it no
longer intends to complete the distribution. Under the registration rights agreement, Resource America has the right to require us to register for
offer and sale all or a portion of our common stock held by Resource America.

    Demand Rights.       Resource America may request registration, which we refer to as a demand registration, under the Securities Act of all
or any portion of the shares covered by the registration rights agreement and we will be obligated to register the shares as requested by
Resource America. The maximum number of demand registrations that we are required to effect is 5. Resource America will designate the
terms of each offering effected pursuant to a demand registration, which may take any form, including a shelf registration, a convertible
registration or an exchange registration.

     We have the right, which may be exercised once in any 12-month period, to postpone the filing or effectiveness of any demand registration
for up to 90 days if our board of directors determines in its good faith judgment that such registration would reasonably be expected to have a
material adverse effect on any then-active proposals to engage in material transactions.

     Piggyback Rights.     If we at any time intend to file on our behalf or on behalf of any of our other security holders a registration statement
in connection with a public offering of any of our securities on a form and in a manner that would permit the registration for offer and sale of
our common stock held by Resource America, Resource America has the right to include its shares in that offering.
    Expenses.      We are responsible for the registration expenses in connection with the performance of our obligations under the registration
rights provisions in the registration rights agreement. Resource America is responsible for all of the fees and expenses of counsel to Resource
America and any applicable underwriting discounts or commissions.

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    Indemnifications.     The registration rights agreement contains indemnification and contribution provisions by us for the benefit of
Resource America and its affiliates and representatives and, in limited situations, by Resource America for the benefit of us and any
underwriters with respect to the information included in any registration statement, prospectus or related document.

     Transfer.     Resource America may transfer shares covered by the registration rights agreement and the holders of such transferred shares
will be entitled to the benefits of the registration rights agreement, provided that each such transferee agrees to be bound by the terms of the
registration rights agreement.

    Duration.   The registration rights under the registration rights agreement will remain in effect with respect to Resource America’s shares
of our common stock until:

    •    the shares have been sold pursuant to an effective registration statement under the Securities Act;

    •    the shares have been sold to the public pursuant to Rule 144 under the Securities Act (or any successor provision);

    •    the shares have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer have been
         delivered by our company, and subsequent public distribution of the shares does not require registration or qualification of them under
         the Securities Act or any similar state law;

    •    the shares have ceased to be outstanding; or

    •    in the case of shares held by a transferee of Resource America, when the shares become eligible for sale pursuant to Rule 144(k)
         under the Securities Act (or any successor provision).

Tax Matters Agreement

     Allocation of Taxes.       In connection with this offering, Resource America and we will enter into a tax matters agreement. The tax matters
agreement will govern the respective rights, responsibilities, and obligations of Resource America and us after this offering with respect to tax
liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns.

    In general, under the tax matters agreement:

    •    Resource America is responsible for any U.S. federal income taxes of the affiliated group for U.S. federal income tax purposes of
         which Resource America is the common parent. With respect to any periods beginning after this offering, we will be responsible for
         any U.S. federal income taxes attributable to us or any of our subsidiaries.

    •    Resource America is responsible for any U.S. state or local income taxes reportable on a consolidated, combined or unitary return that
         includes Resource America or one of its subsidiaries, on the one hand, and us or one of our subsidiaries, on the other hand. However,
         in the event that we or one of our subsidiaries are included in such a group for U.S. state or local income tax purposes for periods (or
         portions thereof) beginning after the date of this offering, we are responsible for our portion of such income tax liability as if we and
         our subsidiaries had filed a separate tax return that included only us and our subsidiaries for that period (or portion of a period).

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    •    Resource America is responsible for any U.S. state or local income taxes reportable on returns that include only Resource America
         and its subsidiaries (excluding us and our subsidiaries), and we are responsible for any U.S. state or local income taxes filed on returns
         that include only us and our subsidiaries.

    •    Resource America and we are each responsible for any non-income taxes attributable to our business for all periods.

     Resource America is primarily responsible for preparing and filing any tax return with respect to the Resource America affiliated group for
U.S. federal income tax purposes and with respect to any consolidated, combined or unitary group for U.S. state or local income tax purposes
that includes Resource America or any of its subsidiaries. Under the tax matters agreement, we generally will be responsible for preparing and
filing any tax returns that include only us and our subsidiaries.

    We generally have exclusive authority to control tax contests with respect to tax returns that include only us and our subsidiaries. Resource
America generally has exclusive authority to control tax contests related to any tax returns of the Resource America affiliated group for U.S.
federal income tax purposes and with respect to any consolidated, combined or unitary group for U.S. state or local income tax purposes that
includes Resource America or any of its subsidiaries.

    Disputes arising between Resource America and us relating to matters covered by the tax matters agreement are subject to resolution
through specific dispute resolution provisions described in the tax matters agreement.

    The tax matters agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due,
retention of records and conduct of audits, examinations or similar proceedings. In addition, the tax matters agreement provides for cooperation
and information sharing with respect to taxes.

     Preservation of the Tax-free Status of the Distribution.       Resource America and we intend the distribution to qualify as a reorganization
pursuant to which no gain or loss is recognized by Resource America or its stockholders for federal income tax purposes under Sections 355,
368(a)(1)(D) and related provisions of the Internal Revenue Code. For the distribution to be tax-free to Resource America and its stockholders,
Resource America must, among other things, own at least 80% of our voting power and at least 80% of any non-voting stock at the time of the
distribution. Resource America intends to seek a ruling from the Internal Revenue Service and/or an opinion from its outside tax advisor to the
effect that the distribution will be tax-free to it and its stockholders. Because the Internal Revenue Service requirements for tax-free
distributions of this nature are complex and the Internal Revenue Service has broad discretion, Resource America may be unable to obtain such
a ruling. If such a ruling is not obtained, we do not expect Resource America to complete the distribution. We have agreed to certain
restrictions that are intended to preserve the tax-free status of the distribution, including restrictions on our:

    •    issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory
         arrangements); and

    •    sales of assets outside the ordinary course of business.

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    We have generally agreed to indemnify Resource America and its affiliates against any and all tax-related liabilities that may be incurred
by them relating to the distribution to the extent such liabilities are caused by our actions. This indemnification applies even if Resource
America has permitted us to take an action that would otherwise have been prohibited under the tax-related covenants as described above.

Transition Services Agreement

    The transition services agreement governs the provision by Resource America to us and by us to Resource America of support services,
such as:

    •    cash management and debt service administration;

    •    accounting and tax;

    •    investor relations;

    •    payroll and human resources administration;

    •    legal;

    •    information technology;

    •    data processing;

    •    real estate management; and

    •    other general administrative functions.

    We and Resource America will pay each other a fee for these services equal to our respective costs in providing them. The fee will be
payable monthly in arrears, 15 days after the close of each month. We have also agreed to pay or reimburse each other for any out-of- pocket
payments, costs and expenses associated with these services.

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                                                        PRINCIPAL STOCKHOLDER

    Before this offering, all of the outstanding shares of our common stock have been owned by Resource America. The voting and investment
power for Resource America resides in its board of directors. The current members of its board of directors are Andrew M. Lubin, P. Sherrill
Neff, Carlos C. Campbell, Jonathan Z. Cohen (a son of Edward E. Cohen), John S. White and Edward E. Cohen. Mr. E. Cohen will remain as a
director of Resource America after this offering.

     After this offering, Resource America will own shares representing 82.3% of the outstanding shares of our common stock, assuming the
underwriters do not exercise their option to purchase additional shares. After completion of this offering and before the intended distribution of
its remaining ownership interest in us to its common stockholders, Resource America will be able, acting alone, to elect our entire board of
directors and to approve any action requiring stockholder approval. While Resource America intends to make the distribution, it is not
obligated to do so. See ―Risk Factors—Risks Relating to Our Relationship with Resource America—Resource America may not complete its
intended distribution of its holdings of our common stock, which would result in its continued control of us.‖ Except for Resource America, we
are not aware of any person or group that will beneficially own more than 5% of our outstanding shares of common stock following this
offering. None of our executive officers or directors currently owns any shares of our common stock.

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                                                     DESCRIPTION OF CAPITAL STOCK

    Upon completion of this offering, our authorized capital stock will consist of 49,000,000 shares of common stock, $.01 par value per share,
and 1,000,000 shares of preferred stock, $.01 par value per share.

     The following summary of our capital stock and certificate of incorporation and bylaws does not purport to be complete and is qualified in
its entirety by reference to the provisions of applicable law and to our certificate of incorporation and bylaws, which are filed as exhibits to the
registration statement of which this prospectus is a part.

Common Stock

    There will be 12,988,333 shares of common stock outstanding after this offering, or 13,333,333 shares if the underwriters exercise their
over-allotment option in full. Resource America will own 10,688,333 shares representing 82.3% of our common stock, or 80.2% if the
underwriters exercise their over-allotment option in full.

     Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of our common stock entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of our common stock are entitled to receive proportionately any dividends if and when
such dividends are declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of our company, the holders of our common stock are entitled to receive ratably our net assets available
after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of our common
stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock
are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and
issue in the future.

    Our credit facility limits the dividends we can pay. See ―Business—Credit Facilities.‖ Our board of directors will determine our dividend
policy based upon its analysis of factors it deems relevant. We expect that these factors will include our results of operations, financial
condition, capital requirements and investment opportunities.

Preferred Stock

     Under the terms of our certificate of incorporation, our board of directors is authorized to designate and issue shares of preferred stock in
one or more series without stockholder approval. Our board of directors has discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of
preferred stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might
include:

    •    restricting dividends on the common stock;

    •    diluting the voting power of the common stock;

    •    impairing the liquidation rights of the common stock; and

    •    delaying or preventing a change in control of our company.

    We have no present plans to issue any shares of preferred stock.

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Delaware Anti-Takeover Law and Charter and Bylaw Provisions

     We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a ―business combination‖ with an ―interested stockholder‖ for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the business combination or the transaction by which the person
became an interested stockholder is approved by the corporation’s board of directors and/or stockholders in a prescribed manner or the person
owns at least 85% of the corporation’s outstanding voting stock after giving effect to the transaction in which the person became an interested
stockholder. The term ―business combination‖ includes mergers, asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an ―interested stockholder‖ is a person who, together with affiliates and associates, owns,
or within three years did own, 15% or more of the corporation’s voting stock. A Delaware corporation may ―opt out‖ from the application of
Section 203 through a provision in its certificate of incorporation or bylaws. We have not ―opted out‖ from the application of Section 203.

   Our bylaws provide that nominations for the election of directors and advance notice of other action to be taken at meetings of stockholders
must be given in the manner provided in our bylaws, which contain detailed notice requirements relating to nominations and other action.

   The foregoing provisions of our certificate of incorporation and bylaws and the provisions of Section 203 of the Delaware General
Corporation Law could have the effect of delaying, deferring or preventing a change of control of our company.

Liability and Indemnification of Officers and Directors

    Our certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent an exemption from liability is not permitted under the Delaware General Corporation
Law. That law currently does not permit limitation of liability:

    •    for any breach of a director’s duty of loyalty to us or our stockholders,

    •    for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law,

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    •    under Section 174 of the Delaware General Corporation Law with respect to unlawful payment of dividends or unlawful stock
         purchases and redemptions, or

    •    for any transaction from which the director derives an improper personal benefit.

Moreover, the provisions do not apply to claims against a director for violations of certain laws, including federal securities laws. If the
Delaware General Corporation Law is amended to authorize the further elimination or limitation of directors’ liability, then the liability of our
directors shall automatically be limited to the fullest extent provided by law. Our certificate of incorporation and bylaws also contain provisions
to indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. In addition, we may enter into
indemnification agreements with our directors and officers. These provisions and agreements may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from directors and officers. We believe that these contractual agreements
and the provisions in our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers.

Transfer Agent and Registrar

    The transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company.

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                                                  SHARES ELIGIBLE FOR FUTURE SALE

General

    Upon completion of this offering, we will have outstanding 12,988,333 shares of our common stock. All of the 2,300,000 shares sold in the
offering will be freely tradable without restriction by persons other than our ―affiliates,‖ as that term is defined under Rule 144 under the
Securities Act of 1933. Persons who may be deemed affiliates generally include individuals or entities that control, are controlled by or are
under common control with us and may include our officers, directors and significant stockholders. The remaining 10,688,333 shares of
common stock that will continue to be held by Resource America after the offering will constitute ―restricted securities‖ within the meaning of
Rule 144 and may not be sold other than through registration under the Securities Act or pursuant to an exemption from registration. See
―—Registration Rights of Resource America.‖

    Before this offering, there has been no public trading market for our common stock. Sales of substantial amounts of common stock in the
open market, or the perception that those sales could occur, could adversely affect prevailing market prices and could impair our ability to raise
capital in the future through the sale of our equity securities.

Rule 144

     In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner (other than an
affiliate of ours) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

    •     1% of the number of shares of common stock then outstanding; or

    •     the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144
          with respect to the sale.

    Sales under Rule 144 also are subject to manner of sale provisions and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of ours at any time during the three months
preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior
owner (other than an affiliate of ours) is entitled to sell those shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

Registration Rights of Resource America

    As described under ―Relationship with Resource America,‖ we will grant registration rights to Resource America pursuant to a registration
rights agreement under which Resource America may require us to register with the SEC its remaining shares of our common stock for sale.

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Distribution

    As described under ―Relationship with Resource America,‖ Resource America has advised us that it intends to distribute its remaining
ownership interest in us to its stockholders in the form of a spin-off by means of a special dividend. Shares of our common stock distributed to
Resource America stockholders in the distribution generally will be freely transferable, except for shares of our common stock received by
persons who are our affiliates.

Lock-up Agreements

     We and our directors and officers and Resource America have agreed with the underwriters that for a period of 180 days from the date of
this prospectus, without the prior written consent of Friedman, Billings, Ramsey, on behalf of the underwriters, we will not dispose of or hedge
any shares of our common stock or any securities convertible into or exchangeable for our common stock. Friedman, Billings, Ramsey on
behalf of the underwriters, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without
notice.

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                                                                UNDERWRITING

     We and the underwriters named below have entered into an underwriting agreement with respect to the shares of common stock being
offered. Subject to specified conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following
table. Friedman, Billings, Ramsey & Co., Inc. and KeyBanc Capital Markets, a division of McDonald Investments Inc., are the representatives
of the underwriters.

                                                                                                                                      Number of
Underwriters                                                                                                                           shares

Friedman, Billings, Ramsey & Co., Inc.
KeyBanc Capital Markets, a division of McDonald Investments Inc.

Total                                                                                                                                   2,300,000


     At our request, the underwriters have reserved from the shares we are offering 40,000 shares for sale to our directors, officers and their
affiliates, and to current stockholders of Resource America and their affiliates, at the public offering price less the selling concessions of $____
per share. No underwriting discounts and commissions are paid upon these shares. Persons who purchase reserved shares will agree not to
offer, sell or contract to sell or otherwise dispose of those shares, without the prior written consent of Friedman, Billings, Ramsey, on behalf of
the underwriters, for a period of 180 days from the date of this prospectus.

    If the underwriters sell more shares than the total number of shares set forth in the table above, the underwriters have an option to buy up to
an additional 345,000 shares from us to cover the sales. They may exercise that option for 30 days. If any shares are purchased pursuant to that
option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

    The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters, assuming both
no exercise and full exercise of the underwriters’ option to purchase additional shares.

                                                                                                                 No exercise         Full exercise

Per share                                                                                                    $                   $

   Total                                                                                                     $                   $


    Shares sold by the underwriters to the public will be offered at the public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount of up to $______ per share from the public offering price.
Securities dealers may resell any shares purchased from the underwriters to various other brokers or dealers at a discount of up to $_____ per
share from the public offering price. If all the shares are not sold at the offering price, the representatives may change the offering price and the
other selling terms.

    The public offering price of the shares in this offering will be determined by negotiations between us and the underwriters. Among the
factors considered in determining the public offering price will be:

     •     prevailing market conditions;

     •     our results of operations in recent periods;

     •     the present stage of our development;

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    •    the market capitalizations of other companies that we and the underwriters believe to be comparable to us; and

    •    estimates of our growth potential.

    The offering of our common stock will be conducted in accordance with Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. Neither the underwriters nor any dealers will confirm sales of the common stock in this offering to accounts over which
they exercise discretionary authority without the prior specific written approval of the customer.

     In connection with the offering, the underwriters may purchase and sell shares in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in the offering. Stabilizing transactions consist of some bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress. Covered short sales are sales
made in an amount not greater than the underwriters’ option to purchase additional shares from us in this offering. The underwriters may close
out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted
to them. Naked short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward
pressure on the price of a common stock in the open market after pricing that could adversely affect investors who purchase shares in this
offering.

    The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have repurchased shares sold by or for the account of the underwriter in
stabilizing or short covering transactions.

    These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the shares. As a result, the price of the
shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. These transactions may be effected on Nasdaq or otherwise.

    We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be
approximately $555,000.

    We have agreed to indemnify the underwriters against various liabilities, including liabilities under the Securities Act.

    Fbr.com, a division of FBR Investment Services Inc., will be facilitating Internet distribution for this offering to certain of its Internet
subscription customers. Friedman, Billings, Ramsey intends to allocate a limited number of shares for sale to its online brokerage customers.
An electronic prospectus is available on the Internet Web site maintained by Friedman, Billings, Ramsey at www.fbr.com. Other than the
prospectus in electronic format, the information of the Friedman, Billings, Ramsey website is not part of this prospectus.

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     Friedman, Billings, Ramsey and KeyBanc Capital Markets have engaged in transactions with, and, from time to time, have performed
services for, Resource America in the ordinary course of business and have received customary fees for performing these services. In addition,
Friedman, Billings, Ramsey and McDonald Investments, of which KeyBanc Capital Markets is a division, acted as the managing underwriters
of Atlas Pipeline Partners’ initial public offering and the follow-on offering in May 2003, and Friedman, Billings, Ramsey is providing
advisory services to Atlas Pipeline Partners in connection with the Alaska Pipeline Company acquisition. Further, as described under
―Management’s Discussion and Analysis of Financial Condition and Results of Operations—Pending Acquisition,‖ an affiliate of Friedman,
Billing, Ramsey has committed to purchase $25 million of the preferred equity of the SPV that will be the actual acquirer of Alaska Pipeline
Company. In the future, these institutions or their affiliates may provide investment banking and similar services to us and receive customary
fees for such services.

    We have not authorized any dealer, salesperson or other person to give any information or to represent anything to you other than the
information contained in this prospectus. You must not rely on unauthorized information. This prospectus does not offer to sell or ask for offers
to buy any of the limited partner interests offered hereby in any jurisdictions where it is unlawful. The information in this prospectus is current
only as of its date.

     We and our directors and officers and Resource America have agreed with the underwriters that for a period of 180 days from the date of
this prospectus, without the prior written consent of Friedman, Billings, Ramsey, on behalf of the underwriters, we will not dispose of or hedge
any shares of our common stock or any securities convertible into or exchangeable for our common stock. Friedman, Billings, Ramsey on
behalf of the underwriters, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without
notice.

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                                                               LEGAL MATTERS

    The validity of the common shares will be passed upon for us by Ledgewood Law Firm, P.C., Philadelphia, Pennsylvania. Specific legal
matters in connection with the shares common stock offered by this prospectus are being passed upon for the underwriters by Dickstein Shapiro
Morin & Oshinsky LLP, Washington D.C.

                                                                   ENGINEERS

    The estimated reserve evaluations and related calculations of Wright & Company, independent petroleum engineering consultants,
included and incorporated by reference in this prospectus have been included in reliance on the authority of that firm as experts in petroleum
engineering.

                                                                     EXPERTS

    The consolidated financial statements as of September 30, 2003 and 2002 and for each of the three years in the period ended September 30,
2003 included in this prospectus have been so included in reliance upon the reports of Grant Thornton LLP, independent certified public
accountants, upon the authority of such firm as experts in accounting and auditing.

                                              WHERE YOU CAN FIND MORE INFORMATION

      We have filed with the SEC under the Securities Act a registration statement on Form S-1 with respect to the common stock offered by this
prospectus. This prospectus, which constitutes part of the registration statement, does not contain all the information set forth in the registration
statement or the exhibits and schedules which are part of the registration statement, portions of which are omitted as permitted by the rules and
regulations of the SEC. Statements made in this prospectus regarding the contents of any contract or other document are summaries of the
material terms of the contract or document. With respect to each contract or document filed as an exhibit to the registration statement, reference
is made to the corresponding exhibit. For further information pertaining to us and the common stock offered by this prospectus, reference is
made to the registration statement, including the exhibits and schedules thereto, copies of which may be inspected without charge at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all or any portion of the registration statement
may be obtained from the SEC at prescribed rates. Information on the public reference facilities may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a web site that contains reports, proxy and information statements and other information that
is filed through the SEC’s EDGAR System. The web site can be accessed at http://www.sec.gov.

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                                                                  GLOSSARY

The terms defined in this glossary are used throughout this prospectus.

BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

BCF. One billion cubic feet of natural gas.

BCFE. One billion cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

DEVELOPMENT WELL. A well drilled within the proved boundaries of a natural gas or oil reservoir with the intention of completing the
stratigraphic horizon known to be productive.

DRY WELL. A development or exploratory well found to be incapable of producing either natural gas or oil in sufficient quantities to justify
completion as an oil or natural gas well.

EXPLORATORY WELL. A well drilled to find natural gas or oil in an unproved area, to find a new reservoir in a field previously found to
be productive of oil or natural gas in another reservoir, or to extend a known reservoir.

FERC. Federal Energy Regulatory Commission.

GROSS ACRES or GROSS WELLS. The total number of acres or wells, as the case may be, in which a working interest is owned.

MBBL. One thousand barrels of crude oil or other liquid hydrocarbons.

MCF. One thousand cubic feet of natural gas.

MCFE. One thousand cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

MMCFE. One million cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

MMCF. One million cubic feet of natural gas.

NET ACRES or NET WELLS. The sum of the fractional working interests owned in gross acres or gross wells. For example, a 50%
working interest in a well is one gross well, but is a .50 net well.

NYMEX. New York Mercantile Exchange.

PRODUCING WELL, PRODUCTION WELL or PRODUCTIVE WELL. A well that is producing natural gas or oil or that is capable of
production.

PROVED DEVELOPED RESERVES. Proved developed reserves are natural gas or oil reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Additional natural gas and oil expected to be obtained through the
application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery
are included as ―proved developed reserves‖ only after testing by a pilot project or after the operation of an installed program has confirmed
through production response that increased recovery will be achieved.

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PROVED RESERVES. The estimated quantities of natural gas, crude oil and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating
conditions.

PROVED UNDEVELOPED RESERVES. Proved undeveloped reserves are natural gas and oil reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on
undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled.
Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production
from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any
acreage for which an application of fluid injection or other improved recovery techniques is contemplated, unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.

PV-10. The present value of proved reserves is an estimate of the discounted future net cash flows from each of the properties at September
30, 2003, or as otherwise indicated. Net cash flow is defined as net revenues less, after deducting production and ad valorem taxes, future
capital costs and operating expenses, but before deducting federal income taxes. As required by rules of the SEC, the future net cash flows have
been discounted at an annual rate of 10% to determine their ―present value.‖ The present value is shown to indicate the effect of time on the
value of the revenue stream and should not be construed as being the fair market value of the properties. In accordance with SEC rules,
estimates have been made using constant oil and natural gas prices and operating costs, at September 30, 2003, or as otherwise indicated.

RECOMPLETION. A recompletion is an operation to abandon the production of oil and/or natural gas from a well in one zone within the
existing wellbore and to make the well produce oil and/or natural gas from a different, separately producible zone within the existing wellbore.

ROYALTY INTEREST. An interest in a natural gas and oil property entitling the owner to a share of natural gas and oil production free of
costs of production.

SECONDARY RECOVERY.                A method of natural gas and oil extraction in which energy sources extrinsic to the reservoir are utilized.

STANDARDIZED MEASURE. Under the standardized measure, future cash flows are estimated by applying year-end prices, adjusted for
fixed and determinable escalations, to the estimated future production of year-end proved reserves. Future cash inflows are reduced by
estimated future production and development costs based on period-end costs to determine pretax cash inflows. Future income taxes are
computed by applying the statutory tax rate to the excess of pretax cash inflows over the tax basis of the associated properties. Tax credits, net
operating loss carryforwards, and permanent differences are also considered in the future tax calculation. Future net cash inflows after income
taxes are discounted using a 10% annual discount rate to arrive at the standardized measure.

TCF. One trillion cubic feet of natural gas.

UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or completed to a point that would permit the
production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

WORKING INTEREST. The operating interest which gives the owner the right to drill, produce and conduct operating activities on the
property and to receive a share of production, subject to all royalties, overriding royalties and other burdens, to all costs of exploration,
development and operations and to all risks in connection therewith.

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                                               ATLAS AMERICA, INC.
                                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                   Page
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants                                                 F-2
Consolidated Balance Sheets – September 30, 2003 and 2002                                          F-3
Consolidated Statements of Income – Years ended September 30, 2003, 2002 and 2001                  F-4
Consolidated Statements of Comprehensive Income – Years ended September 30, 2003, 2002 and 2001    F-5
Consolidated Statements of Changes in Stockholders’ Equity – Years ended
   September 30, 2003, 2002 and 2001                                                               F-6
Consolidated Statements of Cash Flows – Years ended September 30, 2003, 2002 and 2001              F-7
Notes to Consolidated Financial Statements                                                         F-8

INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Unaudited Consolidated Financial Statements                                        F-35
Consolidated Balance Sheet – December 31, 2003                                                     F-36
Consolidated Statements of Income – Three months ended December 31, 2003 and 2002                  F-37
Consolidated Statements of Comprehensive Income – Three months ended December 31, 2003 and 2002    F-38
Consolidated Statement of Changes in Stockholder’s Equity – Three months ended December 31, 2003   F-39
Consolidated Statements of Cash Flows – Three months ended December 31, 2003 and 2002              F-40
Notes to Consolidated Financial Statements                                                         F-41

                                                                F-1
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                                                        ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

 Report of Independent Certified Public Accountants

Stockholder and Board of Directors
ATLAS AMERICA, INC.

    We have audited the accompanying consolidated balance sheets of Atlas America, Inc. (a Wholly-Owned Subsidiary of Atlas Energy
Holdings, Inc.) as of September 30, 2003 and 2002, and the related consolidated statements of income, comprehensive income, changes in
stockholder’s equity, and cash flows for each of the three years in the period ended September 30, 2003. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas
America, Inc. as of September 30, 2003 and 2002, and the consolidated results of its operations and cash flows for each of the three years in the
period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America.

    As discussed in Note 2 to the consolidated financial statements, effective October 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement Obligations , and changed its method of accounting for its plugging and
abandonment liability related to its oil and gas wells and associated pipelines and equipment.

     As discussed in Note 3 to the consolidated financial statements, effective October 1, 2001, the Company changed its method of accounting
for goodwill for the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets .



/s/ Grant Thornton LLP




Cleveland, Ohio
December 5, 2003, except for Note 16, for which the date is February 27, 2004.

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                                                     ATLAS AMERICA, INC.
                                       (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                                CONSOLIDATED BALANCE SHEETS
                                                  SEPTEMBER 30, 2003 AND 2002

                                                                                                         2003               2002

                                                                                                             (in thousands,
                                                                                                           except share data)
ASSETS
Current assets:
  Cash and cash equivalents                                                                          $    25,372      $          8,922
  Accounts receivable                                                                                     12,362                13,768
  Prepaid expenses                                                                                         1,131                   494

         Total current assets                                                                             38,865                23,184

Property and equipment, net                                                                              142,260            118,266
Goodwill                                                                                                  37,470             37,470
Intangible assets                                                                                          8,239              9,305
Other assets                                                                                               5,554              4,389

                                                                                                     $   232,388      $     192,614


LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
  Current portion of long-term debt                                                                  $        56      $            160
  Accounts payable                                                                                        14,663                12,054
  Liabilities associated with drilling contracts                                                          22,157                 4,948
  Accrued liabilities                                                                                      4,151                 2,089

         Total current liabilities                                                                        41,027                19,251

Long-term debt                                                                                            31,138                49,345
Advances from parent                                                                                       4,498                12,070
Deferred tax liability                                                                                    21,031                18,960
Other liabilities                                                                                          3,207                   228

Minority interest                                                                                         43,976                19,394

Commitments and contingencies                                                                                   —                   —

Stockholder’s equity:
   Preferred stock $.01 par value: 1,000,000 authorized shares:                                               —                     —
   Common stock, $0.01 par value: 49,000,000 authorized shares                                               107                   107
   Additional paid-in capital                                                                             38,619                38,619
   Accumulated other comprehensive loss                                                                       —                   (233 )
   Retained earnings                                                                                      48,785                34,873

         Total stockholder’s equity                                                                       87,511                73,366

                                                                                                     $   232,388      $     192,614


                                       See accompanying notes to consolidated financial statements

                                                                  F-3
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                                                        ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                             CONSOLIDATED STATEMENTS OF INCOME
                                          YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                           2003                   2002                   2001

                                                                                            (in thousands, except share and per share data)


REVENUES
Well drilling                                                                        $        52,879      $          55,736       $           43,464
Gas and oil production                                                                        38,639                 28,916                   36,681
Well services                                                                                  7,634                  7,585                    7,403
Transportation                                                                                 5,901                  5,389                    5,715
Gas marketing                                                                                     —                      —                     1,030
Other                                                                                            636                  1,670                    1,596

                                                                                             105,689                 99,296                   95,889

COSTS AND EXPENSES
Well drilling                                                                                 45,982                 48,443                   36,602
Gas and oil production and exploration                                                         8,485                  8,264                    7,846
Well Service                                                                                   3,774                  3,747                    2,961
Transportation                                                                                 2,444                  2,052                    2,001
Gas marketing                                                                                     —                      —                     1,007
Provision for possible losses                                                                     —                    (117 )                    263
General and administrative                                                                     6,532                  7,074                    9,559
Depreciation, depletion and amortization                                                      11,595                 10,836                   10,782
Interest                                                                                       1,961                  2,200                    1,714
Minority interest in Atlas Pipeline Partners, L.P.                                             4,439                  2,605                    4,099

                                                                                              85,212                 85,104                   76,834


Income from continuing operations before income taxes and cumulative effect of
  change in accounting principle                                                              20,477                 14,192                   19,055
Provision for income taxes                                                                     6,757                  4,683                    6,613

Income from continuing operations before cumulative effect of change in
  accounting principle                                                                        13,720                     9,509                12,442
Income (loss) from discontinued operations, net of taxes of $ (103), $883 and $
  463                                                                                             192                 (1,641 )                (1,030 )
Cumulative effect of change in accounting principle, net of taxes of $336                          —                    (627 )                    —

Net income                                                                           $        13,912      $              7,241    $           11,412



Net income per common share – basic and diluted
  From continuing operations                                                         $            1.28    $                .89 $                1.17
  Discontinued operations                                                                          .02                    (.15 )                (.10 )
  Cumulative effect of change in accounting principle                                               —                     (.06 )                  —

Net income per common share                                                          $            1.30    $                .68    $             1.07

Weighted average common shares outstanding                                                10,688,333            10,688,333              10,688,333


                                          See accompanying notes to consolidated financial statements
F-4
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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                       YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                                     2003                 2002                2001

                                                                                                                     (in thousands)


Net income                                                                                       $    13,912         $        7,241       $    11,412

Unrealized holding losses on natural gas futures arising during the period, net of taxes of
  $245, $118 and $181                                                                                       (520 )               (264 )              (403 )
Less: reclassification adjustment for losses realized in net income, net of taxes of $355, $17
  and $186                                                                                                  753                    42                413

                                                                                                            233                  (222 )                10

Comprehensive income                                                                             $    14,145         $        7,019       $    11,422


                                          See accompanying notes to consolidated financial statements

                                                                        F-5
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                                                 ATLAS AMERICA, INC.
                                   (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
                                    YEARS ENDED SEPTEMBER 30, 2003, 2002, AND 2001
                                            (in thousands, except share data)

                                                                          Accumulated
                                          Common Stock                     Additional           Other                               Totals
                                                                            Paid-In         Comprehensive        Retained        Stockholder’s
                                     Shares              Amount             Capital         Income (Loss)        Earnings           Equity

Balance, October 1, 2000 (after
 giving retroactive effect to a
 106,883.33 for 1 stock split on
 February 27, 2004)                  10,688,333    $          107     $        38,619   $              (21 ) $      16,220   $          54,925
Net unrealized gain                          —                 —                   —                    10              —                   10

Net income                                    —                   —                 —                   —           11,412              11,412

Balance, September 30, 2001          10,688,333    $          107     $        38,619   $              (11 ) $      27,632   $          66,347
Net unrealized loss                          —                 —                   —                  (222 )            —                 (222 )

Net income                                   —                 —                   —                    —            7,241               7,241
Balance, September 30, 2002          10,688,333    $          107     $        38,619   $             (233 ) $      34,873   $          73,366
Net unrealized gain                          —                 —                   —                   233              —                  233

Net income                                   —                 —                   —                    —           13,912              13,912
Balance, September 30, 2003          10,688,333    $          107     $        38,619   $               —   $       48,785   $          87,511


                                    See accompanying notes to consolidated financial statements

                                                                  F-6
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                                                         ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                                   2003              2002              2001

                                                                                                                (in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                    $     13,912      $        7,241     $     11,412
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation, depletion and amortization                                                          11,595             10,836            10,782
  Amortization of deferred finance costs                                                               560                310               168
  Provision for possible losses                                                                         —                (117 )             263
  (Income) loss on discontinued operations                                                            (192 )            1,641             1,030
  Cumulative effect of change in accounting principle                                                   —                 627                —
  Minority interest in Atlas Pipeline Partners, L.P.                                                 4,439              2,605             4,099
  Gain on asset dispositions                                                                           (14 )             (411 )             (64 )
  Property impairments and abandonments                                                                 24                 24               207

Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable and other assets                                          639             (1,256 )           4,102
  Increase (decrease) in accounts payable and other liabilities                                     18,211            (16,048 )           4,191


Net cash provided by operating activities of continuing operations                                  49,174               5,452           36,190

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid in asset acquisitions                                                                      —                 —             (7,875 )
Capital expenditures                                                                                (28,029 )         (21,291 )         (14,050 )
Proceeds from sale of assets                                                                            182               721               100
(Increase) decrease in other assets                                                                    (628 )             162            (2,446 )


Net cash used in investing activities of continuing operations                                      (28,475 )         (20,408 )         (24,271 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings                                                                                           68,384           159,329           125,771
Principal payments on borrowings                                                                    (86,694 )        (153,268 )        (105,992 )
Distributions paid to minority interest of Atlas Pipeline Partners, L.P.                             (4,233 )          (3,623 )          (3,783 )
Increase in other assets                                                                             (1,133 )          (1,003 )            (240 )
Net proceeds from Atlas Pipeline Partners, L.P. public offering                                      25,182                —                 —
Net advances from (payments to ) parent                                                              (5,755 )           1,546            (8,889 )


Net cash (used in) provided by financing activities                                                  (4,249 )            2,981            6,867


Net cash used by discontinued operations                                                                  —             (1,398 )         (2,529 )


Increase (decrease) in cash and cash equivalents                                                    16,450            (13,373 )          16,257
Cash and cash equivalents at beginning of year                                                       8,922             22,295             6,038

Cash and cash equivalents at end of year                                                      $     25,372      $        8,922     $     22,295


                                           See accompanying notes to consolidated financial statements
F-7
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — NATURE OF OPERATIONS

     Atlas America, Inc. (the ―Company‖ or ―AAI and its subsidiaries‖), a Delaware Corporation, is an energy company which drills for,
produces and sells natural gas and, to a significantly lesser extent, oil. The Company, through Atlas Pipeline Partners, L.P. (―Atlas Pipeline‖),
transports natural gas from wells it owns and operates and wells owned by others to interstate pipelines and, in some cases, to end users. Atlas
Pipeline is a master limited partnership in which the Company has a 39% interest. A subsidiary of the Company is the general partner of Atlas
Pipeline. The Company finances a substantial portion of its drilling activities through drilling partnerships it sponsors. The Company typically
acts as the managing general partner of these partnerships and has a material partnership interest.

    The Company was incorporated in Delaware on September 27, 2000, and is a wholly-owned subsidiary of Atlas Energy Holdings, Inc.,
which is a wholly-owned subsidiary of Resource America, Inc. (―RAI‖). RAI is a publicly traded company (trading under the symbol REXI on
the NASDAQ system) operating in the energy, real estate and financial services sectors.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

    The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for
Atlas Pipeline. The Company also owns individual interests in the assets, and is separately liable for its share of the liabilities of energy
partnerships, whose activities include only exploration and production activities. In accordance with established practice in the oil and gas
industry, the Company includes its pro-rata share of assets, liabilities, income and costs and expenses of the energy partnerships in which the
Company has an interest. All material intercompany transactions have been eliminated.

Use of Estimates

    Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and costs and
expenses during the reporting period. Actual results could differ from these estimates.

Stock-Based Compensation

     The Company accounts for its employees’ participation in RAI’s stock option plans in accordance with the provisions of Accounting
Principles Board Opinion No. 25, ―Accounting for Stock Issued to Employees (―APB 25‖), and related interpretations. Compensation expense
is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company adopted the
disclosure requirement of Statement of Financial Accounting Standards (―SFAS‖) No. 123, ―Accounting for Stock-Based Compensation
(―SFAS 123‖) as amended by the required disclosures SFAS No. 148, ―Accounting for Stock-Based Compensation—Transition and
Disclosure.‖ (See Note 7 for required pro forma disclosures.)

                                                                       F-8
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Stock-Based Compensation

    SFAS 123 requires the disclosure of pro forma net income and earnings per share as if the Company had adopted the fair value method for
stock options granted after June 30, 1996. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of
option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from RAI’s stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made
using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, 10 years following vesting;
stock volatility, 70%, 64% and 68% in fiscal 2003, 2002 and 2001, respectively; risk-free interest rate, 4.0%, 4.4% and 5.5% in fiscal 2003,
2002 and 2001, respectively; dividends were based on RAI’s historical rate.

     The Company accounts for its employees’ participation in RAI’s existing employee stock option plans under the recognition and
measurement principles of APB No. 25 and related interpretations. No stock-based employee compensation cost is reflected in net income of
the Company, as all options granted under those plans had an exercise price equal to RAI’s market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of
SFAS 123 to stock-based employee compensation.

                                                                                                              Years Ended September 30,

                                                                                                     2003                 2002                2001

                                                                                                                     (in thousands)

Net income, as reported                                                                         $      13,912        $        7,241       $    11,412
Stock-based employee compensation expense reported in net income, net of tax                               —                     —                 —
Less total stock-based employee compensation expense determined under the fair value
   based method for all awards, net of income taxes                                                         (488 )               (467 )              (421 )

Pro forma net income                                                                            $      13,424        $        6,774       $    10,991


Net income per share:
  Basic and diluted – as reported                                                               $           1.30     $            .68     $          1.07
  Basic and diluted – pro forma                                                                 $           1.26     $            .63     $          1.03


Impairment of Long Lived Assets

   The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an
impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value.

Earning Per Share

     There is no difference between basic and diluted net income per share since there are no potentially dilutive shares outstanding. Earnings
per share is determined by dividing net income by the weighted average number of outstanding common shares during the three years ended
September 30, 2003, after giving retroactive effect to the 106,883.33 to 1 stock split discussed in note 16.

                                                                       F-9
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                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Comprehensive Income

     Comprehensive income includes net income and all other changes in the equity of a business during a period from transactions and other
events and circumstances from non-owner sources. These changes, other than net income, are referred to as ―other comprehensive income‖ and
for the Company only include changes in the fair value, net of taxes, of unrealized hedging gains and losses.

Property and Equipment

    Property and equipment consists of the following:

                                                                                                                       At September 30,

                                                                                                                     2003                    2002

                                                                                                                            (in thousands)
Mineral interest in properties:
   Proved properties                                                                                            $        844         $           843
   Unproved properties                                                                                                   563                     584
Wells and related equipment                                                                                          184,227                 152,225
Support equipment                                                                                                      2,189                   1,422
Other                                                                                                                  7,298                   7,090

                                                                                                                     195,121                 162,164

Accumulated depreciation, depletion, amortization and valuation allowances:
  Oil and gas properties                                                                                             (50,170 )               (41,893 )
  Other                                                                                                               (2,691 )                (2,005 )

                                                                                                                     (52,861 )               (43,898 )

                                                                                                                $    142,260         $       118,266


Oil and Gas Properties

     The Company follows the successful efforts method of accounting. Accordingly, property acquisition costs, costs of successful exploratory
wells, all development costs, and the cost of support equipment and facilities are capitalized. Costs of unsuccessful exploratory wells are
expensed when such wells are determined to be nonproductive or, if this determination cannot be made, within twelve months of completion of
drilling. The costs associated with drilling and equipping wells not yet completed are capitalized as uncompleted wells, equipment, and
facilities. Geological and geophysical costs and the costs of carrying and retaining undeveloped properties, including delay rentals, are
expensed as incurred. Production costs, overhead and all exploration costs other than the costs of exploratory drilling are charged to expense as
incurred.

     Oil and gas properties include mineral rights with a cost at September 30, 2003 of $1.4 million before accumulated depletion. In
connection with a review of RAI’s financial statements by the staff of the Securities and Exchange Commission, the Company has been made
aware that an issue has arisen within the industry regarding the application of provisions of Statement of Financial Accounting Standards
(―SFAS‖) No. 142, ―Goodwill and Other Intangible Assets‖ and SFAS No. 141, ―Business Combinations,‖ to companies in the extractive
industries, including gas and oil companies. The issue is whether SFAS No. 142 requires companies to reclassify costs associated with mineral
rights, including both proved and unproved leasehold acquisition costs, as intangible assets in the balance sheet, apart from other capitalized
gas and oil property costs. Historically, the Company and other gas and oil companies have included the cost of these gas and oil leasehold
interests as part of gas and oil properties. Also under consideration is whether SFAS No. 142 requires companies to provide the additional
disclosures prescribed by SFAS No. 142 for intangible assets for costs associated with mineral rights.
F-10
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Oil and Gas Properties — (Continued)

    If it is ultimately determined that SFAS No. 142 requires the Company to reclassify costs associated with mineral rights from property and
equipment to intangible assets, the amounts would be immaterial to the Company’s financial position. The reclassification of these amounts
would not affect the method in which such costs are amortized or the manner in which the Company assesses impairment of capitalized costs.
As a result, net income would not be affected by the reclassification.

     The Company assesses unproved and proved properties periodically to determine whether there has been a decline in value and, if a decline
is indicated, a loss is recognized. The assessment of significant unproved properties for impairment is on a property-by-property basis. The
Company considers whether a dry hole has been drilled on a portion of, or in close proximity to, the property, the Company’s intentions of
further drilling, the remaining lease term of the property, and its experience in similar fields in close proximity. The Company assesses
unproved properties whose costs are individually insignificant in the aggregate. This assessment includes considering the Company’s
experience with similar situations, the primary lease terms, the average holding period of unproved properties and the relative proportion of
such properties on which proved reserves have been found in the past.

    The Company compares the carrying value of its proved developed gas and oil producing properties to the estimated future cash flow from
such properties in order to determine whether their carrying values should be reduced. No adjustment was necessary during any of the fiscal
years in the three year period ended September 30, 2003.

     Upon the sale or retirement of a complete or partial unit of a proved property, the cost and related accumulated depletion are eliminated
from the property accounts, and the resultant gain or loss is recognized in the statement of operations. Upon the sale of an entire interest in an
unproved property where the property had been assessed for impairment individually, a gain or loss is recognized in the statement of
operations. If a partial interest in an unproved property is sold, any funds received are accounted for as a reduction of the cost in the interest
retained.

     On an annual basis, the Company estimates the costs of future dismantlement, restoration, reclamation, and abandonment of its gas and oil
producing properties. Additionally, the Company estimates the salvage value of equipment recoverable upon abandonment. At September 30,
2002, the Company’s estimate of equipment salvage values was greater than or equal to the estimated costs of future dismantlement,
restoration, reclamation, and abandonment. On October 1, 2002, the Company adopted SFAS No. 143 ―Accounting for Asset Retirement
Obligations‖ (―SFAS 143‖) as discussed further in this footnote.

Depreciation, Depletion and Amortization

    The Company amortizes proved gas and oil properties, which include intangible drilling and development costs, tangible well equipment
and leasehold costs, on the unit-of-production method using the ratio of current production to the estimated aggregate proved developed gas
and oil reserves.

    The Company computes depreciation on property and equipment, other than gas and oil properties, using the straight-line method over the
estimated economic lives, which range from three to 39 years.

                                                                       F-11
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Asset Retirement Obligations

      Effective October 1, 2002, the Company adopted SFAS 143 which requires the Company to recognize an estimated liability for the
plugging and abandonment of its oil and gas wells and associated pipelines and equipment. Under SFAS 143, the Company must currently
recognize a liability for future asset retirement obligations if a reasonable estimate of the fair value of that liability can be made. The present
values of the expected asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 requires the
Company to consider estimated salvage value in the calculation of depletion, depreciation and amortization. Consistent with industry practice,
historically the Company had determined the cost of plugging and abandonment on its oil and gas properties would be offset by salvage values
received. The adoption of SFAS 143 resulted in (i) an increase of total liabilities because retirement obligations are required to be recognized,
(ii) an increase in the recognized cost of assets because the retirement costs are added to the carrying amount of the long-lived assets and (iii) a
decrease in depletion expense, because the estimated salvage values are now considered in the depletion calculation.

    The estimated liability is based on historical experience in plugging and abandoning wells, estimated remaining lives of those wells based
on reserves estimates, external estimates as to the cost to plug and abandon the wells in the future, and federal and state regulatory
requirements. The liability is discounted using an assumed credit-adjusted risk-free interest rate. Revisions to the liability could occur due to
changes in estimates of plugging and abandonment costs or remaining lives of the wells, or if federal or state regulators enact new plugging and
abandonment requirements.

    The adoption of SFAS 143 as of October 1, 2002 resulted in a cumulative effect adjustment to record (i) a $1.9 million increase in the
carrying values of proved properties, (ii) a $1.5 million decrease in accumulated depletion and (iii) a $3.4 million increase in non-current
plugging and abandonment liabilities. The cumulative and pro forma effects of the application of SFAS 143 were not material to the
Company’s consolidated statements of operations.

     The Company has no assets legally restricted for purposes of settling asset retirement obligations. Except for the item previously
referenced, the Company has determined that there are no other material retirement obligations associated with tangible long-lived assets.

     A reconciliation of the Company’s liability for well plugging and abandonment costs for the year ended September 30, 2003 is as follows
(in thousands):

                      Asset retirement obligations, September 30, 2002                                            $      —
                      Adoption of SFAS 143                                                                            3,380
                      Liabilities incurred                                                                               93
                      Liabilities settled                                                                               (52 )
                      Revision in estimates                                                                            (494 )
                      Accretion expense                                                                                 204

                      Asset retirement obligations, September 30, 2003                                            $   3,131


    The above accretion expense is included in depreciation, depletion and amortization in the Company’s consolidated statements of
operations and the asset retirement obligation liabilities are included in other liabilities in the Company’s consolidated balance sheet.

                                                                        F-12
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                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Fair Value of Financial Instruments

    The Company used the following methods and assumptions in estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.

     For cash and cash equivalents, receivables and payables, the carrying amounts approximate fair value because of the short maturity of these
instruments.

    For secured revolving credit facilities and all other debt, the carrying value approximates fair value because of the short term maturity of
these instruments and the variable interest rates in the debt agreements.

Concentration of Credit Risk

    Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of periodic temporary
investments of cash. The Company places its temporary cash investments in high-quality short-term money market instruments and deposits
with high-quality financial institutions and brokerage firms. At September 30, 2003, the Company had $28.8 million in deposits at various
banks, of which $27.9 million is over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on
such investments.

Environmental Matters

    The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company
has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and to comply with
regulatory policies and procedures.

    The Company accounts for environmental contingencies in accordance with SFAS No. 5 ―Accounting for Contingencies.‖ Environmental
expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused
by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or clean-ups are probable, and the costs can be reasonably estimated. The Company maintains insurance which may cover in
whole or in part certain environmental expenditures. For the three years ended September 30, 2003, the Company had no environmental
matters requiring specific disclosure or requiring recording of a liability.

Revenue Recognition

     The Company conducts certain energy activities through, and a portion of its revenues are attributable to, sponsored energy limited
partnerships. These energy partnerships raise capital from investors to drill gas and oil wells. The Company serves as general partner of the
energy partnerships and assumes customary rights and obligations for them. As the general partner, the Company is liable for partnership
liabilities and can be liable to limited partners if it breaches its responsibilities with respect to the operations of the partnerships. The income
from the Company’s general partner interest is recorded when the gas and oil are sold by a partnership.

     The Company contracts with the energy partnerships to drill partnership wells. The contracts require that the energy partnerships must pay
the Company the full contract price upon execution. The income from a drilling contract is recognized as the services are performed. The
contracts are typically completed in less than 60 days. The Company classifies the difference between the contract payments it has received and
the revenue earned as a current liability, included in liabilities associated with drilling contracts.



                                                                         F-13
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                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Revenue Recognition — (Continued)

    The Company recognizes transportation revenues at the time the natural gas is delivered to the purchaser.

    The Company recognizes well services revenues at the time the services are performed.

     The Company is entitled to receive management fees according to the respective partnership agreements. The Company recognizes such
fees as income when earned and includes them in well services revenues.

    The Company sells interests in gas and oil wells and retains a working interest and/or overriding royalty. The Company records the income
from the working interests and overriding royalties when the gas and oil are sold.

Supplemental Cash Flow Information

     Changes in deferred tax liabilities and advances from parent are combined in the consolidated statements of cash flows since all tax
liabilities are settled by the parent (see Income Taxes below).

    The Company considers temporary investments with maturity at the date of acquisition of 90 days or less to be cash equivalents.

    Supplemental disclosure of cash flow information:

                                                                                                           Years Ended September 30,

                                                                                                    2003              2002             2001

                                                                                                                 (in thousands)
Cash paid during the years for:
  Interest                                                                                      $      1,591     $        1,730 $         1,564
  Income taxes (refunded) paid                                                                  $        359     $         (301 ) $         160

Non-cash activities include the following:
  Atlas Pipeline units issued in exchange for gas gathering and
    transmission facilities                                                                     $         —      $            —    $      2,250
  Asset retirement obligation                                                                   $      2,979     $            —    $         —

Details of acquisitions:
  Fair value of assets acquired                                                                 $          —     $            —    $    10,555
  Atlas Pipeline units issued in exchange for gas gathering and
     transmission facilities                                                                               —                  —          (2,250 )
  Liabilities assumed                                                                                      —                  —            (430 )

        Net cash paid                                                                           $          —     $            —    $      7,875


Income Taxes

     The Company is included in the consolidated federal income tax return of RAI. Income taxes are calculated as if the Company had filed a
return on a separate company basis. Deferred taxes reflect the tax effect of temporary differences between the tax basis of the Company’s assets
and liabilities and the amounts reported in the financial statements. See Note 6 for the components of deferred taxes. Separate company state
tax returns are filed in those states in which the Company is registered to do business.

                                                                      F-14
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 3 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL

Other Assets

    The following table provides information about other assets at the dates indicated.

                                                                                                                         At September 30,

                                                                                                                      2003                    2002

                                                                                                                             (in thousands)
Deferred financing costs, net of accumulated amortization of
   $1,091 and $531                                                                                               $       1,548        $            975
Investments                                                                                                              2,974                   3,317
Other                                                                                                                    1,032                      97

                                                                                                                 $       5,554        $          4,389


    Deferred financing costs are amortized over the terms of the related loans.

Intangible Assets

     Intanglible assets consists of partnership management and operating contracts acquired through acquisitions and recorded at fair value on
their acquisition dates. The Company amortizes contracts acquired on a declining balance method, over their respective estimated lives, ranging
from five to thirteen years. Amortization expense for the years ended September 30, 2003, 2002 and 2001 was $1.1 million, $1.2 million and
$1.5 million, respectively. The aggregate estimated annual amortization expense is approximately $1.1 million for each of the succeeding five
years.

    The following table provides information about intangible assets at the dates indicated:

                                                                                                                         At September 30,

                                                                                                                      2003                    2002

                                                                                                                             (in thousands)

Partnership management and operating contracts                                                                   $      14,343 $               14,343
Accumulated amortization                                                                                                (6,104 )               (5,038 )

Intangible assets, net                                                                                           $       8,239        $          9,305


Goodwill

     On October 1, 2001, the Company early-adopted SFAS No. 142 (―SFAS 142‖) ―Goodwill and Other Intangible Assets,‖ which requires
that goodwill no longer be amortized, but instead tested for impairment at least annually. At that time, the Company had unamortized goodwill
of $31.1 million. The transitional impairment test required upon adoption of SFAS 142, which involved the use of estimates related to the fair
market value of the business operations associated with the goodwill, did not indicate an impairment loss. The Company will continue to
evaluate its goodwill at least annually and will reflect the impairment of goodwill, if any, in operating income in the statement of operations in
the period in which the impairment is indicated.

                                                                       F-15
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                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 3 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL — (Continued)

Goodwill — (Continued)

    Changes in the carrying amount of goodwill for the periods indicated are as follows:

                                                                                                           Years Ended September 30,

                                                                                                    2003              2002               2001

                                                                                                                 (in thousands)
Goodwill at beginning of period, (less accumulated amortization of $4,241, $3,508 and
  $2,094)                                                                                      $      37,470     $      31,088       $    28,115
Additions to goodwill related to asset acquisitions                                                       —                 15             4,387
Amortization expense                                                                                      —                 —             (1,414 )
Atlas Pipeline goodwill amortization, whose fiscal year began January 1, 2002, at which
  time it adopted SFAS 142                                                                                 —                 (22 )              —
Syndication network reclassified from other assets in accordance with SFAS 142 (net of
  accumulated amortization of $711)                                                                        —              6,389                 —

Goodwill at end of period (net of accumulated amortization of $4,241, $4,241 and $3,508)       $      37,470     $      37,470       $    31,088


    Adjusted net income from continuing operations for the year ended September 30, 2001 would have been $13.4 million, excluding
goodwill amortization, net of taxes, using the Company’s effective tax rate in fiscal 2001 of 35%. Adjusted basic and diluted net income per
share from continuing operations for the year ended September 30, 2001 would have been $1.25 giving effect to the retroactive stock split
discussed in Note 16.

NOTE 4 — CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS



    The Company conducts certain energy activities through, and a substantial portion of its revenues are attributable to energy limited
partnerships (―Partnerships‖). The Company serves as general partner of the Partnerships and assumes customary rights and obligations for the
Partnerships. As the general partner, the Company is liable for Partnership liabilities and can be liable to limited partners if it breaches its
responsibilities with respect to the operations of the Partnerships. The Company is entitled to receive management fees, reimbursement for
administrative costs incurred, and to share in the Partnerships’ revenue and costs and expenses according to the respective Partnership
agreements.

     The advances from Parent represent amounts owed for advances and transactions in the normal course of business. These advances, which
are non-interest bearing, have no repayment terms and are subordinated to the Company’s $75.0 million revolving credit facility (See Note 5).

    The Company reimburses RAI for all direct and indirect costs of services provided. For the years ended September 30, 2003, 2002 and
2001, such reimbursements were approximately $1.4 million, $1.2 million and $660,000, respectively, representing the allocable portion of the
personnel costs of Resource America employees, including executives, for time spent on the Company’s business.

                                                                      F-16
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — DEBT

                                                                                                                          At September 30,

                                                                                                                       2003                    2002

                                                                                                                              (in thousands)

Revolving credit facilities                                                                                       $      31,000        $        49,345
Other debt                                                                                                                  194                    160

                                                                                                                         31,194                 49,505
Less current maturities                                                                                                      56                    160

                                                                                                                  $      31,138        $        49,345


    Following is a description of borrowing arrangements in place at September 30, 2003 and 2002:

    Revolving Credit Facilities.      In July 2002, the Company entered into a $75.0 million credit facility led by Wachovia Bank. The
revolving credit facility has a current borrowing base of $54.2 million which may be increased or decreased subject to growth in the
Company’s oil and gas reserves. The facility permits draws based on the remaining proved developed non-producing and proved undeveloped
natural gas and oil reserves attributable to the Company’s wells and the projected fees and revenues from operation of the wells and the
administration of energy partnerships. Up to $10.0 million of the facility may be in the form of standby letters of credit. The facility is secured
by the Company’s assets. The revolving credit facility has a term ending in July 2005 and bears interest at one of two rates (elected at the
borrower’s option) which increase as the amount outstanding under the facility increases: (i) Wachovia prime rate plus between 25 to 75 basis
points, or (ii) LIBOR plus between 175 and 225 basis points.

     The Wachovia credit facility requires the Company to maintain specified net worth and specified ratios of current assets to current
liabilities and debt to EBITDA, and requires the Company to maintain a specified interest coverage ratio. In addition, the facility limits sales,
leases or transfers of assets and the incurrence of additional indebtedness. The facility limits the dividends payable by the Company to RAI, on
a cumulative basis, to 50% of the Company’s net income from and after April 1, 2002 plus $5.0 million. In addition, the Company is permitted
to repay intercompany debt to RAI only up to the amount of the Company’s federal income tax liability and accrued interest on RAI’s senior
notes. The facility terminates in July 2005, when all outstanding borrowings must be repaid. At September 30, 2003 and 2002, $32.3 million
and $45.0 million, respectively, were outstanding under this facility, including $1.3 million each year under letters of credit. The interest rates
ranged from 2.88% to 2.90% at September 30, 2003.

                                                                       F-17
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — DEBT — (Continued)

    In September 2003, Atlas Pipeline amended and increased its revolving credit facility with Wachovia Bank to provide for maximum
borrowings of $20.0 million. Up to $3.0 million of the facility may be used for standby letters of credit. Borrowings under the facility are
secured by a lien on and security interest in all the property of Atlas Pipeline and its subsidiaries, including pledges by Atlas Pipeline of the
issued and outstanding units of its subsidiaries. The revolving credit facility has a term ending in December 2005 and bears interest at one of
two rates, elected at Atlas Pipeline’s option: (i) the Base Rate plus the Applicable Margin or (ii) the Euro Rate plus the Applicable Margin. As
used in the facility agreement, the Base Rate is the higher of (a) Wachovia Bank’s prime rate or (b) the sum of the federal funds rate plus 50
basis points. The Euro Rate is the average of specified LIBOR rates divided by 1.00 minus the percentage prescribed by the Federal Reserve
Board for determining the reserve requirements for euro currency funding. The Applicable Margin varies with Atlas Pipeline’s leverage ratio
from between 150 to 250 basis points (for the Euro Rate option) or 0 to 75 basis points (for the Base Rate option). Draws under any letter of
credit bear interest as specified under (i), above. The credit facility contains financial covenants, including the requirement that Atlas Pipeline
maintain: (a) a leverage ratio not to exceed 3.0 to 1.0, (b) an interest coverage ratio greater than 3.5 to 1.0 and (c) a minimum tangible net worth
of $30.5 million. In addition, the facility limits, among other things, sales, leases or transfers of property by Atlas Pipeline, the incurrence by
Atlas Pipeline of other indebtedness and certain investments by Atlas Pipeline. There were no outstanding borrowings on this facility at
September 30, 2003 and $5.6 million at September 30, 2002.

    Annual debt principal payments over the next five fiscal years ending September 30 are as follows: (in thousands):

                             2004                                                                        $     56
                             2005                                                                        $ 31,056
                             2006                                                                        $     56
                             2007                                                                        $     26
                             2008                                                                        $     —

    At September 30, 2003, the Company has complied with all financial covenants in its debt agreements.

NOTE 6 — INCOME TAXES

   The following table details the components of the Company’s income tax expense from continuing operations for the fiscal years 2003,
2002 and 2001.

                                                                                                             Years Ended September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)
Provision (benefit) for income taxes:
  Current:
     Federal                                                                                     $       5,069     $        5,454 $         6,931
     State                                                                                                  60                 39              —
  Deferred                                                                                               1,628               (810 )          (318 )

                                                                                                 $       6,757     $        4,683    $      6,613


                                                                       F-18
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 6 — INCOME TAXES — (Continued)

    A reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate is as follows:

                                                                                                          Years Ended September 30,

                                                                                                   2003              2002                    2001

Statutory tax rate                                                                                        35 %                35 %                   35 %
Statutory depletion                                                                                       (2 )                (3 )                   (2 )
Non-conventional fuel credit                                                                              (1 )                (1 )                   (1 )
Goodwill                                                                                                  —                   —                       3
State income taxes, net of federal tax benefit                                                             1                   2                     —

                                                                                                          33 %                33 %                   35 %


    The components of the net deferred tax liability are as follows:

                                                                                                                            September 30,

                                                                                                                     2003                    2002

                                                                                                                            (in thousands)
Deferred tax assets related to:
  Accrued liabilities                                                                                            $          434      $              105

                                                                                                                 $          434      $              105


Deferred tax liabilities related to:
  Property and equipment bases differences                                                                            (15,601 )              (13,267 )
  Other, net                                                                                                           (5,864 )               (5,798 )

                                                                                                                      (21,465 )              (19,065 )

Net deferred tax liability                                                                                       $    (21,031 ) $            (18,960)


    The Company’s liability for its share of current payable federal income taxes are included in Advances from Parent in the Company’s
consolidated balance sheets.

    SFAS No. 109, ―Accounting for Income Taxes‖, requires that deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax assets will not be realized. No valuation allowance was needed at September 30, 2003 or
2002.

NOTE 7 — EMPLOYEE BENEFIT PLANS

     Employee Stock Ownership Plan.        RAI sponsors an Employee Stock Ownership Plan (―ESOP‖), which is a qualified non-contributory
retirement plan established to acquire shares of RAI’s common stock. Employees of the Company who are 21 years of age or older and have
completed 1,000 hours of service are eligible to participate in RAI’s ESOP. Contributions to the ESOP are made at the discretion of RAI’s
Board of Directors and are included in the general and administrative expense of RAI.

    Employee Savings Plan.       RAI sponsors an Employee Retirement Savings Plan and Trust under Section 401(k) of the Internal Revenue
Code which allows employees to defer up to 15% of their income, subject to certain limitations, on a pretax basis through contributions to the
savings plan. Prior to March 1, 2002, RAI matched up to 100% of each employee’s contribution, subject to certain limitations; thereafter, up to
50%. Included in general and administrative expenses are $164,000, $202,000 and $236,000 for the Company’s contributions for the years
ended September 30, 2003, 2002 and 2001, respectively.

                                                                   F-19
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                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — EMPLOYEE BENEFIT PLANS — (Continued)

   Stock Options.    The following table summarizes certain information about RAI’s equity compensation plans as they pertain to the
Company, in the aggregate, as of September 30, 2003.



                                                                                              (a) (1)              (b) (1)               (c) (2)

                                                                                                                                        Number of
                                                                                                                                         securities
                                                                                                                                        remaining
                                                                                             Number of                                 available for
                                                                                          securities to be                           future issuance
                                                                                            issued upon                               under equity
                                                                                             exercise of                              compensation
                                                                                            outstanding       Weighted-average       plans excluding
                                                                                              options,         exercise price of         securities
                                                                                           warrants and      outstanding options,       reflected in
Plan category                                                                                  rights        warrants and rights        column (a)


Equity compensation plans
  approved by security
  holders                                                                                       226,447      $               10.73         227,688

Equity compensation plans
  not approved by security
  holders                                                                                        36,554      $                 .11                 —

Total                                                                                           263,001      $                9.25         227,688



(1) Represents amounts allocable to the Company.

(2) Represents shares available to eligible employees of RAI and its subsidiaries including the Company.

    RAI has three existing employee stock option plans, those of 1997, 1999 and 2002, in which the Company’s employees are participants.
Options under all plans become exercisable as to 25% of the optioned shares each year after the date of grant, and expire not later than ten
years after the date of grant.

    The 1997 Key Employee Stock Option Plan authorized the granting of up to 825,000 shares of RAI’s common stock in the form of ISO’s,
non-qualified stock options and SAR’s. No options were issued under this plan during fiscal 2003 or fiscal 2002. In fiscal 2001, options for
47,500 shares were issued under this plan to the Company’s employees.

    The 1999 Key Employee Stock Option Plan authorized the granting of up to 1,000,000 shares of RAI’s common stock in the form of
ISO’s, non-qualified stock options and SAR’s. No options were issued under this plan during fiscal 2003. In fiscal 2002 and 2001, options for
10,000 and 72,000 shares, respectively, were issued under this plan to the Company’s employees.

    In April 2002, RAI’s stockholders approved the 2002 Key Employee Stock Option Plan. This plan, for which 750,000 shares were
reserved, provides for the issuance of ISO’s, non-qualified stock options and SAR’s. In fiscal 2003 and 2002, option for 0 and 65,500 shares,
respectively, were issued under this plan to the Company’s employees.

                                                                     F-20
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                                                     ATLAS AMERICA, INC.
                                        (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — EMPLOYEE BENEFIT PLANS — (Continued)

     Transactions for RAI’s three employee stock option plans in which the Company’s employees participate are summarized as follows:

                                                                               Years Ended September 30,

                                                       2003                                    2002                                    2001

                                                                Weighted                                Weighted                                Weighted
                                                                Average                                 Average                                 Average
                                              Shares          Exercise Price    Shares                Exercise Price       Shares             Exercise Price


Outstanding – beginning of year                281,666        $       11.55       209,927             $         12.86       101,500           $       15.21
 Granted                                            —         $          —         75,500             $          7.91       119,500           $       11.05
 Exercised                                          —         $          —             —              $            —             —            $          —
 Forfeited                                     (55,219 )      $       14.94        (3,761 )           $         11.06       (11,073 )         $       11.06

 Outstanding – end of year                     226,447        $       10.73       281,666             $         11.55       209,927           $       12.86


Exercisable, at end of year                    116,224        $       11.91        97,542             $         13.97        46,000           $       15.18

Available for grant                            227,688 (1)                         86,719 (1)                                42,458 (1)

Weighted average fair value per
 share of options granted
  during the year                                             $            —                          $           5.93                        $        8.54




(1) Shares represent amounts available under RAI’s plans which are available to eligible employees of RAI and its subsidiaries, including the
    Company.

   The following information applies to employee stock options outstanding attributable to the Company’s employees as of September 30,
2003:

                                                                               Outstanding                                           Exercisable

                                                                                 Weighted
                                                                                 Average                    Weighted                            Weighted
Range of                                                                        Contractual                 Average                             Average
Exercise Prices                                                   Shares        Life (Years)              Exercise Price    Shares            Exercise Price

$ 7.71 — $ 8.08                                                     68,500                8.31        $            7.73        20,125         $        7.78
         $ 9.19                                                      7,500                 .88        $            9.19         1,875         $        9.19
$11.03 — $11.06                                                    112,447                7.33        $           11.05        56,224         $       11.05
         $15.50                                                     38,000                6.64        $           15.50        38,000         $       15.50

                                                                   226,447                                                   116,224


    In connection with the acquisition of the Company, RAI issued options for 120,213 shares at an exercise price of $.11 per share to certain
employees of the Company who had held options of Atlas America before its acquisition by RAI. Options for 36,554 shares remain outstanding
and are exercisable as of September 30, 2003.

                                                                        F-21
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 8 — COMMITMENTS AND CONTINGENCIES

    The Company leases office space and equipment under leases with varying expiration dates through 2008. Rental expense was $1.6
million, $1.4 million and $772,000 for the years ended September 30, 2003, 2002 and 2001, respectively. At September 30, 2003, future
minimum rental commitments for the next five fiscal years were as follows (in thousands):

                             2004                                                                          $    572
                             2005                                                                               462
                             2006                                                                               145
                             2007                                                                                16
                             2008                                                                                16

     The Company is the managing general partner of various energy partnerships, and has agreed to indemnify each investor partner from any
liability that exceeds such partner’s share of partnership assets. The Company has never had to reimburse a limited partner for this purpose.
Subject to certain conditions, investor partners in certain energy partnerships have the right to present their interests for purchase by the
Company, as managing general partner. The Company is not obligated to purchase more than 5% or 10% of the units in any calendar year.
Based on past experience, the Company believes that any liability incurred would not be material.

     The Company may be required to subordinate a part of its net partnership revenues to the receipt by investor partners of cash distributions
from the energy partnerships equal to at least 10% of their agreed subscriptions determined on a cumulative basis, in accordance with the terms
of the partnership agreements.

    The Company is a defendant in a proposed class action originally filed in February 2000 in the New York Supreme Court, Chautauqua
County, by individuals, putatively on their own behalf and on behalf of similarly situated individuals, who leased property to the Company.
The complaint alleges that the Company is not paying lessors the proper amount of royalty revenues derived from the natural gas produced
from the wells on the leased property. The complaint seeks damages in an unspecified amount for the alleged difference between the amount of
royalties actually paid and the amount of royalties that allegedly should have been paid. No estimate of possible loss can be made at this time,
however, the Company believes the complaint is without merit and is defending itself vigorously.

     The Company is also a party to various routine legal proceedings arising out of the ordinary course of its business. Management believes
that none of these actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial position or results of
operations.

NOTE 9 — HEDGING ACTIVITIES

     The Company, through its subsidiaries, from time to time enters into natural gas futures and option contracts to hedge its exposure to
changes in natural gas prices. At any point in time, such contracts may include regulated New York Mercantile Exchange (―NYMEX‖) futures
and options contracts and non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally
settled with offsetting positions, but may be settled by the delivery of natural gas.

                                                                       F-22
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 — HEDGING ACTIVITIES — (Continued)

     The Company formally documents all relationships between hedging instruments and the items being hedged, including the Company’s
risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options
contracts to the forecasted transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the
derivatives are highly effective in offsetting changes in the fair value of hedged items. Historically these contracts have qualified and been
designated as cash flow hedges and recorded at their fair values. Gains or losses on future contracts are determined as the difference between
the contract price and a reference price, generally prices on NYMEX. Such gains and losses are charged or credited to accumulated other
comprehensive income (loss) and recognized as a component of sales revenue in the month the hedged gas is sold. If it is determined that a
derivative is not highly effective as a hedge or it has ceased to be a highly effective hedge, due to the loss of correlation between changes in gas
reference prices under a hedging instrument and actual gas prices, the Company will discontinue hedge accounting for the derivative and
subsequent changes in fair value for the derivative will be recognized immediately into earnings.

    At September 30, 2003, the Company had no open natural gas futures contracts related to natural gas sales and accordingly, had no
unrealized loss or gain related to open NYMEX contracts at that date. Its net unrealized gain was approximately $316,600 at September 30,
2002. The Company recognized losses of $1.1 million, $59,000 and $599,000 on settled contracts covering natural gas production for the years
ended September 30, 2003, 2002 and 2001, respectively. The Company recognized no gains or losses during the three year period ended
September 30, 2003 for hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

    Although hedging provides the Company some protection against falling prices, these activities could also reduce the potential benefits of
price increases, depending upon the instrument.

NOTE 10 — DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
          ACCOUNTING PRINCIPLE

Discontinued Operations

     In June 2002, the Company adopted a plan to dispose of Optiron Corporation, an energy technology subsidiary. The Company had owned
50% of Optiron, and reduced its interest to 10% through a sale to management that was completed in September 2002. In connection with the
sale, the Company forgave $4.3 million of the $5.9 million of indebtedness owed to it by Optiron. The remaining $1.6 million of indebtedness
was retained by the Company in the form of a promissory note secured by all of Optiron’s assets and by the common stock of Optiron’s 90%
shareholder. The note bears interest at the prime rate plus 1% payable monthly; an additional 1% will accrue until the maturity date of the note
in 2022.

    Under the terms of the plan of disposal, Optiron was obligated to pay to the Company 10% of Optiron’s revenues if such revenues
exceeded $2.0 million in the twelve month period following the closing of the transaction. As a result, in September 2003, Optiron became
obligated to pay the Company $295,000. This payment is due in March 2004.

    In accordance with SFAS No. 144, the results of operations have been prepared under the financial reporting requirements for discontinued
operations, pursuant to which, all historical results of Optiron are included in the results of discontinued operations rather than the results of
continuing operations for all periods presented.

                                                                       F-23
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                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 10 — DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
          ACCOUNTING PRINCIPLE — (Continued)

Discontinued Operations — (Continued)

    Summarized operating results of the discontinued Optiron operations are as follows:

                                                                                                            Years Ended September 30,

                                                                                                    2003               2002              2001

                                                                                                                  (in thousands)

Loss from discontinued operations before income taxes                                           $           —     $           (553 ) $     (1,493 )
Income tax benefit                                                                                          —                  193            463

Loss from discontinued operations                                                               $           —     $           (360 ) $     (1,030 )


Income (loss) on disposal of discontinued operations before income taxes                        $           295 $         (1,971 ) $            —
Income tax (provision) benefit                                                                             (103 )            690                —

Income (loss) on disposal of discontinued operations                                            $          192    $       (1,281 ) $            —


Total gain (loss) on discontinued operations                                                    $          192    $       (1,641 ) $       (1,030 )


Cumulative Effect of Change in Accounting Principle

   Optiron adopted SFAS 142 on January 1, 2002, the first day of its fiscal year. Optiron performed the evaluation of its goodwill required by
SFAS 142 and determined that it was impaired due to uncertainty associated with the on-going viability of the product line with which the
goodwill was associated. This impairment resulted in a cumulative effect adjustment on Optiron’s books of $1.9 million before tax. The
Company recorded its 50% share of this cumulative effect adjustment in fiscal 2002.

NOTE 11 — ACQUISITIONS

     In January 2001, the Company and its consolidated subsidiary, Atlas Pipeline, acquired certain energy assets of Kingston Oil Corporation
for $4.5 million of cash and 88,235 common units of Atlas Pipeline. In March 2001, the Company and Atlas Pipeline acquired certain energy
assets of American Refining and Exploration Company for $2.0 million of cash and 32,924 common units of Atlas Pipeline. Atlas Pipeline
borrowed $1.4 million under its $10.0 million revolving credit facility to fund its share of the cash payments for these acqusitions. In August
2001, the Company acquired certain energy assets of Castle Gas company for $1.4 million. These acquisitions were accounted for under the
purchase method of accounting and, accordingly, the purchase prices were allocated to the assets acquired based on their fair values at the dates
of acquisition and the results of the operations of the businesses acquired are included in the consolidated statements of income from such
dates. The pro forma effect of these acquisitions on operations prior to the acquisition dates is not material.

                                                                      F-24
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 12 — OPERATIONS OF ATLAS PIPELINE

     In February 2000, the Company’s natural gas gathering operations were sold to Atlas Pipeline in connection with a public offering by Atlas
Pipeline of 1,500,000 common units. The Company received net proceeds of $15.3 million for the gathering systems, and Atlas Pipeline issued
to the Company 1,641,026 subordinated units constituting a 51% combined general and limited partner interest in Atlas Pipeline. A subsidiary
of the Company is the general partner of Atlas Pipeline and has a 2% partnership interest on a consolidated basis.

     The Company’s subordinated units are a special class of limited partnership interest in Atlas Pipeline under which its rights to distributions
are subordinated to those of the publicly held common units. The subordination period extends until December 31, 2004 and will continue
beyond that date if financial tests specified in the partnership agreement are not met. The Company’s general partner interest also includes a
right to receive incentive distributions if the partnership meets or exceeds specified levels of distributions.

    In May 2003, Atlas Pipeline completed a public offering of 1,092,500 common units of limited partner interest. The net proceeds after
underwriting discounts and commissions were approximately $25.2 million. These proceeds were used in part to repay existing indebtedness of
$8.5 million. Atlas Pipeline intends to use the balance of these proceeds to fund future capital projects and for working capital. Upon the
completion of this offering the Company’s combined general and limited partner interest in Atlas Pipeline was reduced to 39%. Because the
Company, through its general partner interest, controls the decisions and operations of Atlas Pipeline it is consolidated in the Company’s
financial statements.

    In connection with the Company’s sale of the gathering systems to Atlas Pipeline, the Company entered into agreements that:

    •    Require it to provide stand-by construction financing to Atlas Pipeline for gathering system extensions and additions to a maximum of
         $1.5 million per year for five years.

    •    Require it to pay gathering fees to Atlas Pipeline for natural gas gathered by the gathering systems equal to the greater of $.35 per Mcf
         ($.40 per Mcf in certain instances) or 16% of the gross sales price of the natural gas transported.

   During fiscal 2003, 2002 and 2001, the fee paid to Atlas Pipeline was calculated based on the 16% rate. Through September 30, 2003, the
Company has not been required to provide any construction financing.

                                                                       F-25
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 12 — OPERATIONS OF ATLAS PIPELINE — (Continued)

    In September 2003, Atlas Pipeline entered into a purchase and sale agreement with SEMCO Energy, Inc. (―SEMCO‖) pursuant to which
Atlas Pipeline or its designee will purchase all of the outstanding equity of SEMCO’s wholly-owned subsidiary, Alaska Pipeline Company
(―Alaska Pipeline‖), which owns an intrastate natural gas transmission pipeline that delivers gas to metropolitan Anchorage (the
―Acquisition‖). The total consideration, payable in cash at closing, will be approximately $95.0 million, subject to an adjustment based on the
amount of working capital that Alaska Pipeline has at closing.

    Consummation of the Acquisition is subject to a number of conditions, including receipt of governmental and non-governmental consents
and approvals and the absence of a material adverse change in Alaska Pipeline’s business. Among the required governmental authorizations are
approval of the Regulatory Commission of Alaska and expiration, without adverse action, of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act. The purchase and sale agreement may be terminated by either Atlas Pipeline or SEMCO if the transaction is not
consummated by June 16, 2004. The purchase and sale agreement contains customary representations, warranties and indemnifications.

     As part of the Acquisition, at closing, Alaska Pipeline and ENSTAR Natural Gas Company (―ENSTAR‖), a division of SEMCO which
conducts its gas distribution business in Alaska, will enter into a Special Contract for Gas Transportation pursuant to which ENSTAR will pay
a reservation fee for use of all of the pipeline’s transportation capacity of $943,000 per month, plus $.075 per thousand cubic feet, or mcf, of
gas transported, for 10 years. During 2002, total gas volumes transported on the Alaska Pipeline system averaged 130,000 mcf per day.
SEMCO will execute a gas transmission agreement with Alaska Pipeline pursuant to which SEMCO will be obligated to make up any
difference if the Regulatory Commission of Alaska reduces the transportation rates payable by ENSTAR pursuant to the Special Contract.

    Further, Alaska Pipeline will enter into an Operation and Maintenance and Administrative Services Agreement with ENSTAR under which
ENSTAR will continue to operate and maintain the pipeline for at least 5 years for a fee of $334,000 per month for the first three years.
Thereafter, ENSTAR’s fee will be adjusted for inflation.

     Atlas Pipeline has received a commitment from Friedman, Billings, Ramsey Group, Inc. (―FBR‖) to make a $25.0 million preferred equity
investment in a special purpose vehicle (the ―SPV‖), to be jointly owned and controlled by FBR and Atlas Pipeline; such entity will be the
acquirer of Alaska Pipeline. Under the terms of the FBR commitment, Atlas Pipeline will have the right, during the 18 months following the
closing of the Acquisition, to purchase FBR’s preferred equity interest in the SPV at FBR’s original cost plus accrued and unpaid preferred
distributions and a premium. If Atlas Pipeline does not purchase FBR’s interest, FBR has the right to require RAI to purchase this interest. RAI
will then have the right to require Atlas Pipeline to purchase the equity interest from it. Atlas Pipeline intends to make a $24.0 million common
equity investment in the SPV which Atlas Pipeline will fund in part through its existing $20.0 million credit facility. The SPV has received a
commitment from Wachovia Bank, National Association and Wachovia Capital Markets, LLC for a $50.0 million credit facility to partially
finance the Acquisition. Up to $25.0 million of borrowings under the facility will be secured by a lien on and security interest in all of the
SPV’s property. In addition, upon the earlier to occur of the termination of Atlas Pipeline’s subordination period or the amendment of the
restrictions in the partnership agreement on Atlas Pipeline’s incurrence of debt, Atlas Pipeline will guarantee all borrowings under the facility,
securing the guarantee with a pledge of its interest in the SPV. SPV will be a consolidated subsidiary of Atlas Pipeline at the consummation of
the acquisition.

                                                                      F-26
Back to Index

                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 — OPERATING SEGMENT INFORMATION AND MAJOR CUSTOMERS

     The Company’s operations include two reportable operating segments. In addition to the reportable operating segments, certain other
activities are reported in the ―Other energy‖ category. These operating segments reflect the way the Company manages its operations and
makes business decisions. The Company does not allocate income taxes to its operating segments. Operating segment data for the periods
indicated are as follows:

Year Ended September 30, 2003 (in thousands):
                                                                                               Production and         Other
                                                                               Well Drilling    Exploration         Energy (a)     Total

Revenues from external customers                                              $      52,879    $     38,639     $       14,171 $   105,689
Interest income                                                                          —               —                 220         220
Interest expense                                                                         —               —               1,961       1,961
Depreciation, depletion and amortization                                                 —            8,042              3,553      11,595
Segment profit (loss)                                                                 5,320          21,465             (6,308 )    20,477
Other significant items:
  Segment assets                                                                      7,844         145,614             78,930     232,388

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

Year Ended September 30, 2002 (in thousands):
                                                                                               Production and         Other
                                                                               Well Drilling    Exploration         Energy (a)     Total

Revenues from external customers                                              $      55,736    $     28,916     $       14,644 $     99,296
Interest income                                                                          —               —                 686          686
Interest expense                                                                         —               —               2,200        2,200
Depreciation, depletion and amortization                                                 —            7,550              3,286       10,836
Segment profit (loss)                                                                 6,057          12,708             (4,573 )     14,192
Other significant items:
  Segment assets                                                                      7,555         119,125             65,934     192,614

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

                                                                     F-27
Back to Index

                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 — OPERATING SEGMENT INFORMATION AND MAJOR CUSTOMERS — (Continued)

Year Ended September 30, 2001 (in thousands):
                                                                                                  Production and         Other
                                                                                  Well Drilling    Exploration         Energy (a)        Total

Revenues from external customers                                                 $      43,464    $     36,681     $       15,744 $        95,889
Interest income                                                                             —               —                 791             791
Interest expense                                                                            —               —               1,714           1,714
Depreciation, depletion and amortization                                                   236           6,148              4,398          10,782
Segment profit (loss)                                                                    6,626          22,687            (10,258 )        19,055
Other significant items:
  Segment assets                                                                         5,646         102,756             86,127        194,529

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

    Operating profit (loss) per segment represents total revenues less costs and expenses attributable thereto, including interest, provision for
possible losses and depreciation, depletion and amortization.

     The Company’s natural gas is sold under contract to various purchasers. For the years ended September 30, 2003, 2002 and 2001, gas sales
to First Energy Solutions Corporation accounted for 18%, 16% and 17%, respectively, of total revenues.

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION

    Results of operations from oil and gas producing activities:

                                                                                                             Years Ended September 30,


                                                                                                      2003               2002            2001

                                                                                                                   (in thousands)

Revenues                                                                                          $     38,639 $           28,916 $        36,681
Production costs                                                                                        (6,770 )           (6,691 )        (6,184 )
Exploration expenses                                                                                    (1,715 )           (1,573 )        (1,662 )
Depreciation, depletion and amortization                                                                (8,042 )           (7,550 )        (6,148 )
Income taxes                                                                                            (7,519 )           (4,005 )        (7,223 )

Results of operations from oil and gas producing activities                                       $     14,593     $        9,097    $     15,464


                                                                       F-28
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    Capitalized Costs Related to Oil and Gas Producing Activities.      The components of capitalized costs related to the Company’s oil and gas
producing activities are as follows:

                                                                                                                  At September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)

Proved properties                                                                                $        844      $         843     $     1,861
Unproved properties                                                                                       563                584             481
Wells and related equipment and facilities                                                            184,176            152,174         126,971
Support equipment and facilities                                                                        2,189              1,422           1,052
Uncompleted wells equipment and facilities                                                                 51                 51              38

                                                                                                      187,823            155,074         130,403
Accumulated depreciation, depletion, amortization and valuation allowances                            (50,170 )          (41,893 )       (33,129 )

        Net capitalized costs                                                                    $    137,653      $     113,181     $    97,274


   Costs Incurred in Oil and Gas Producing Activities.      The costs incurred by the Company in its oil and gas activities during fiscal years
2003, 2002 and 2001 are as follows:

                                                                                                             Years Ended September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)
Property acquisition costs:
  Unproved properties                                                                            $         —       $           9     $        90
  Proved properties                                                                              $        412      $         154     $     7,031
Exploration costs                                                                                $      1,715      $       1,573     $     1,662
Development costs                                                                                $     28,007      $      20,934     $    13,579


    The development costs above for the years ended September 30, 2003, 2002 and 2001 were substantially all incurred for the development
of proved undeveloped properties.

    Oil and Gas Reserve Information (Unaudited). The estimates of the Company’s proved and unproved gas reserves are based upon
evaluations made by management and verified by Wright & Company, Inc., an independent petroleum engineering firm, as of September 30,
2003, 2002 and 2001. All reserves are located within the United States. Reserves are estimated in accordance with guidelines established by the
Securities and Exchange Commission and the Financial Accounting Standards Board which require that reserve estimates be prepared under
existing economic and operating conditions with no provisions for price and cost escalation except by contractual arrangements.

    Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating
conditions, i.e. prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions.

    •    Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation tests. The
         area of a reservoir considered proved includes (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts,
         if any; and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on
         the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural
         occurrence of hydrocarbons controls the lower proved limit of the reservoir.
F-29
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                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    •    Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are
         included in the ―proved‖ classification when successful testing by a pilot project, or the operation of an installed program in the
         reservoir, provides support for the engineering analysis on which the project or program was based.

    •    Estimates of proved reserves do not include the following: (a) oil that may become available from known reservoirs but is classified
         separately as ―indicated additional reservoirs‖; (b) crude oil, natural gas, and natural gas liquids, the recovery of which is subject to
         reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors; (c) crude oil, natural gas and
         natural gas liquids, that may occur in undrilled prospects; and (d) crude oil and natural gas, and natural gas liquids, that may be
         recovered from oil shales, coal, gilsonite and other such sources.

     Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and
operation methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of primary recovery should be included as ―proved developed reserves‖ only
after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery
will be achieved.

    There are numerous uncertainties inherent in estimating quantities of proven reserves and in projecting future net revenues and the timing
of development expenditures. The reserve data presented represents estimates only and should not be construed as being exact. In addition, the
standardized measures of discounted future net cash flows may not represent the fair market value of the Company’s oil and gas reserves or the
present value of future cash flows of equivalent reserves, due to anticipated future changes in oil and gas prices and in production and
development costs and other factors for effects have not been proved.

                                                                       F-30
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    The Company’s reconciliation of changes in proved reserve quantities is as follows (unaudited):

                                                                                                                 Gas                Oil
                                                                                                                (Mcf)              (Bbls)



Balance September 30, 2000                                                                                    113,142,544          1,766,654
  Current additions                                                                                            19,891,663             68,895
  Sales of reserves in-place                                                                                      (88,068 )              (61 )
  Purchase of reserves in(place                                                                                 7,159,387             40,881
  Transfers to limited partnerships                                                                           (11,871,230 )               —
  Revisions                                                                                                    (3,774,259 )          102,136
  Production                                                                                                   (6,342,667 )         (177,437 )

Balance September 30, 2001                                                                                    118,117,370          1,801,068
  Current additions                                                                                            19,303,971             55,416
  Sales of reserves in-place                                                                                     (510,812 )          (23,676 )
  Purchase of reserves in(place                                                                                   280,594              2,180
  Transfers to limited partnerships                                                                            (6,829,047 )          (45,001 )
  Revisions                                                                                                       (23,057 )          260,430
  Production                                                                                                   (7,117,276 )         (172,750 )

Balance September 30, 2002                                                                                    123,221,743          1,877,667
  Current additions                                                                                            27,440,261             44,868
  Sales of reserves in-place                                                                                      (56,480 )          (14,463 )
  Purchase of reserves in(place                                                                                   986,463             18,998
  Transfers to limited partnerships                                                                            (8,669,521 )          (31,386 )
  Revisions                                                                                                    (2,662,812 )          119,038
  Production                                                                                                   (6,966,899 )         (160,048 )

Balance September 30, 2003                                                                                    133,292,755          1,854,674


Proved developed reserves at:
   September 30, 2001                                                                                           80,249,011         1,735,376
   September 30, 2002                                                                                           83,995,712         1,846,281
   September 30, 2003                                                                                           87,760,113         1,825,280

    The following schedule presents the standardized measure of estimated discounted future net cash flows relating to proved oil and gas
reserves. The estimated future production is priced at fiscal year-end prices, adjusted only for fixed and determinable increases in natural gas
and oil prices provided by contractual agreements. The resulting estimated future cash inflows are reduced by estimated future costs to develop
and produce the proved reserves based on fiscal year-end cost levels. The future net cash flows are reduced to present value amounts by
applying a 10% discount factor. The standardized measure of future cash flows was prepared using the prevailing economic conditions existing
at September 30, 2003, 2002 and 2001 and such conditions continually change. Accordingly such information should not serve as a basis in
making any judgment on the potential value of recoverable reserves or in estimating future results of operations (unaudited).

                                                                     F-31
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

                                                                                                       Years Ended September 30,

                                                                                                2003              2002             2001

                                                                                                             (in thousands)
Future cash inflows                                                                         $    715,539 $         518,118 $        485,781
Future production costs                                                                         (185,442 )        (147,279 )       (126,979 )
Future development costs                                                                         (72,476 )         (55,644 )        (50,953 )
Future income tax expense                                                                       (125,556 )         (79,557 )        (76,584 )


Future net cash flows                                                                            332,065           235,638          231,265
  Less 10% annual discount for estimated timing of cash flows                                   (187,714 )        (131,512 )       (132,553 )

  Standardized measure of discounted future net cash flows                                  $    144,351     $     104,126     $     98,712


   The future cash flows estimated to be spent to develop proved undeveloped properties in the years ended September 30, 2004, 2005 and
2006 are $27.6 million, $29.3 million and $15.6 million, respectively.

    The following table summarizes the changes in the standardized measure of discounted future net cash flows from estimated production of
proved oil and gas reserves after income taxes (unaudited):

                                                                                                       Years Ended September 30,

                                                                                                2003              2002             2001

                                                                                                             (in thousands)
Balance, beginning of year                                                                  $    104,126     $      98,712     $     98,599
Increase (decrease) in discounted future net cash flows:
   Sales and transfers of oil and gas, net of related costs                                      (31,869 )         (22,223 )        (30,496 )
   Net changes in prices and production costs                                                     44,232               249          (21,530 )
   Revisions of previous quantity estimates                                                         (229 )           3,787           (4,184 )
   Development costs incurred                                                                      3,689             4,107            4,011
   Changes in future development costs                                                              (166 )            (149 )           (853 )
   Transfers to limited partnerships                                                              (3,313 )          (3,970 )         (4,177 )
   Extensions, discoveries, and improved recovery less related costs                              24,272            12,057           20,716
   Purchases of reserves in-place                                                                  1,730               340            7,984
   Sales of reserves in-place, net of tax effect                                                    (200 )            (799 )           (204 )
   Accretion of discount                                                                          13,247            12,726           14,078
   Net changes in future income taxes                                                            (18,749 )             203           13,636
   Estimated settlement of asset retirement obligations                                           (3,131 )               –                –
   Estimated proceeds on disposal of well equipment                                                3,381                 –                –
   Other                                                                                           7,331              (914 )          1,132

Balance, end of year                                                                        $    144,351     $     104,126     $     98,712


                                                                       F-32
Back to Index

                                                     ATLAS AMERICA, INC.
                                        (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 15 — QUARTERLY RESULTS (Unaudited)

                                                                      Dec 31                  March 31                June 30               September 30

                                                                                      (in thousands, except share and per share data)
Year ended September 30, 2003
Revenues                                                        $          18,135        $          36,474       $          21,867      $          29,213
Costs and expenses                                                         15,132                   30,126                  17,995                 21,959

Income from continuing operations before taxes and cumulative
  effect of change in accounting principle                      $           3,003        $            6,348      $           3,872      $           7,254

Discontinued operations                                         $               —        $               —       $               —      $             192

Net income                                                      $           2,012        $            4,254      $           2,557      $           5,089


Net income per common share – basic and diluted:
 From continuing operations                                     $               .19      $               .40     $               .24    $              .45
 Discontinued operations                                                         —                        —                       —                    .02

Net income per common share                                     $               .19      $               .40     $               .24    $              .47

Weighted average common shares outstanding                            10,688,333               10,688,333             10,688,333              10,688,333


Year ended September 30, 2002
Revenues                                                        $          28,986        $          27,485       $          19,260      $          23,565
Costs and expenses                                                         24,598                   23,769                  17,276                 19,461

Income from continuing operations before taxes and cumulative
  effect of change in accounting principle                      $           4,388        $            3,716      $           1,984      $           4,104

Discontinued operations                                         $               —        $               —       $          (1,583 ) $                 (58 )

Cumulative effect of change in accounting principle             $              (655 ) $                  —       $               —      $                  28

Net income (loss)                                               $           2,197        $            2,578      $              (254 ) $            2,720


Net income (loss) per common share – basic and diluted:
 From continuing operations                                     $               .27 $                    .24     $               .12 $                 .26
 Discontinued operations                                                         —                        —                     (.15 )                  —
 Cumulative effect of change in accounting principle                           (.06 )                     —                       —                     —

Net income (loss) per common share                              $               .21      $               .24     $              (.03 ) $               .26

Weighted average common shares outstanding                            10,688,333               10,688,333             10,688,333              10,688,333


                                                                    F-33
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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – SUBSEQUENT EVENT

    On December 16, 2003, the Board of Directors of Resource America, Inc. approved the filing of a registration statement on Form S-1 with
respect to a proposed public offering of up to 19.9% of the Company’s common stock. The consolidated financial statements have been
adjusted to give effect to a 106,883.33 for 1 stock split on February 27, 2004 to allow the Company to have available shares in a number
appropriate for a public offering and for the proposed subsequent distribution by Resource America, Inc. of its shares in the Company to its
common stockholders. Income (loss) per share reflecting the retroactive effect of the stock split is presented on the face of the consolidated
statements of income and in the quarterly results disclosed in Note 15.

                                                                     F-34


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

    These unaudited consolidated financial statements as of December 31, 2003 and for the three month periods ended December 31, 2003 and
2002 were prepared by the Company and should be read in conjunction with the audited consolidated financial statements contained in this
registration statement, which include the Company’s audited consolidated balance sheets as of September 30, 2003 and 2002 and the
consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated
statements of changes in shareholder’s equity for the years ended September 30, 2003, 2002 and 2001.

                                                                     F-35


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                                   CONSOLIDATED BALANCE SHEET
                                                     (in thousands, except share data)

                                                                                                                December 31,
                                                                                                                    2003
                                                                                                                (Unaudited)
                 ASSETS
                Current assets:
                   Cash and cash equivalents                                                              $               16,379
                   Accounts receivable                                                                                    11,643
                   Prepaid expenses                                                                                        1,079
                     Total current assets                                                                                 29,101
                Property and equipment, net                                                                              150,102
                Goodwill                                                                                                  37,470
                Intangible assets                                                                                          7,974
                Other assets                                                                                               6,126
                                                                                                          $              230,773
                LIABILITIES AND STOCKHOLDER’S EQUITY
                Current liabilities:
                  Current portion of long-term debt                                                       $                    56
                  Accounts payable                                                                                         18,837
                  Liabilities associated with drilling contracts                                                           40,552
                  Accrued liabilities                                                                                       3,416
                      Total current liabilities                                                                                   62,861
                Long-term debt                                                                                                    19,124
                Advances from Parent                                                                                                 790
                Deferred tax liability                                                                                            21,690
                Other liabilities                                                                                                  3,186

                Minority interest                                                                                                 43,550
                Commitments and contingencies                                                                                          -
                Stockholder’s equity:
                   Preferred stock $.01 par value: 1,000,000 authorized shares                                                     -
                   Common stock, $0.01 par value: 49,000,000 authorized shares                                                   107
                   Additional paid-in capital                                                                                 38,619
                   Retained earnings                                                                                          40,846
                        Total stockholder’s equity                                                                            79,572
                                                                                                              $              230,773
                                            See accompanying notes to consolidated financial statements

                                                                       F-36


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                                                         ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                               CONSOLIDATED STATEMENTS OF INCOME
                                          THREE MONTHS ENDED DECEMBER 31, 2003 and 2002
                                               (in thousands, except share and per share data)


                                                                                                                  2003                     2002
                                                                                                                           (unaudited)
REVENUES
Well drilling                                                                                             $              21,959     $              6,583
Gas and oil production                                                                                                   10,195                    8,069
Well services                                                                                                             1,979                    1,899
Transportation                                                                                                            1,599                    1,407
Other                                                                                                                       127                      177
                                                                                                                         35,859                   18,135
COSTS AND EXPENSES
Well drilling                                                                                                            19,095                    5,725
Gas and oil production and exploration                                                                                    1,685                    1,586
Well services                                                                                                             1,004                      839
Transportation                                                                                                              596                      590
General and administrative                                                                                                  948                    2,246
Depreciation, depletion and amortization                                                                                  3,245                    2,872
Interest                                                                                                                    487                      629
Minority interest in Atlas Pipeline Partners, L.P.                                                                        1,271                      645
                                                                                                                         28,331                   15,132
Income from operations before income taxes                                                                                7,528                    3,003
Provision for income taxes                                                                                                2,635                      991
Net Income                                                                                         $                      4,893     $              2,012
Net Income Per Common Share — Basic and Diluted
   Net income per common share                                                                     $                      .46       $              .19
   Weighted average common shares outstanding                                                                     10,688,333               10,688,333
                                       See accompanying notes to consolidated financial statements

                                                                       F-37


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                     THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
                                                      (in thousands)

                                                                                                   2003                        2002


                                                                                                              (unaudited)


Net income                                                                                $               4,893          $              2,012
Unrealized loss on natural gas futures and options contracts,
  net of taxes of $142                                                                                        —                          (275 )
Less reclassification adjustment for losses realized in net income,
  net of taxes of $33                                                                                        —                             63
                                                                                                             —                           (212 )
Comprehensive income                                                                      $               4,893          $              1,800
                                          See accompanying notes to consolidated financial statements

                                                                      F-38


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
                                      THREE MONTHS ENDED DECEMBER 31, 2003
                                                       (Unaudited)
                                             (in thousands, except share data)

                                                                                      Additional                                       Total
                                                         Common Stock                  Paid-In                Retained             Stockholder’s
                                                  Shares            Amount             Capital                Earnings                Equity
Balance, October 1, 2003                        10,688,333   $            107     $         38,619    $             48,785     $           87,511
Cash dividend to parent                                  -                   -                    -                (12,832 )              (12,832 )
Net income                                               -                   -                    -                  4,893                  4,893
Balance, December 31, 2003                      10,688,333   $            107     $         38,619    $             40,846     $           79,572
                                          See accompanying notes to consolidated financial statements

                                                                      F-39


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        THREE MONTHS ENDED DECEMBER 31, 2003 and 2002
                                                         (Unaudited)
                                                       (in thousands )

                                                                                                               2003                    2002


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                                $           4,893    $              2,012
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation, depletion and amortization                                                                            3,245                   2,872
  Amortization of deferred finance costs                                                                                127                     153
  Minority interest Atlas Pipeline Partners L.P                                                                    1,271                 645
  Gain on asset dispositions                                                                                         (19 )                (5 )
  Property impairments and abandonments                                                                                6                   6
  Deferred income taxes                                                                                            2,635                 991
Changes in operating assets and liabilities                                                                       22,547               8,555
Net cash provided by operating activities                                                                         34,705              15,229

 CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                                                                              (10,807 )           (4,100 )
Proceeds from sale of assets                                                                                           43                  5
(Increase) decrease in other assets                                                                                  (697 )               15
Decrease in other liabilities                                                                                                            (38 )
Net cash used in investing activities                                                                             (11,461 )           (4,118 )

 CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings                                                                                                         23,000             35,155
Principal payments on borrowings                                                                                  (35,014 )          (26,405 )
Distributions paid to minority interests of Atlas Pipeline Partners, L.P                                           (1,682 )             (875 )
(Payments to) advances from Parent                                                                                (18,516 )              526
Increase in other assets                                                                                              (25 )             (325 )
Net cash (used in) provided by financing activities                                                               (32,237 )            8,076
Increase (decrease) in cash and cash equivalents                                                                   (8,993 )           19,187
Cash and cash equivalents at beginning of year                                                                     25,372              8,922
Cash and cash equivalents at end of period                                                             $           16,379     $       28,109
                                           See accompanying notes to consolidated financial statements

                                                                     F-40


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 1 – MANAGEMENT’S OPINION REGARDING INTERIM FINANCIAL STATEMENTS

    The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for
Atlas Pipeline Partners, L.P. (―Atlas Pipeline‖).

     The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements as of
December 31, 2003 and for the three months ended December 31, 2003 and 2002 are unaudited. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been condensed or omitted in these statements pursuant to the rules and regulations of the Securities and Exchange Commission.
However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of
the interim periods presented. The results of operations for the three months ended December 31, 2003 may not necessarily be indicative of the
results of operations for the full fiscal year ending September 30, 2004.

    Certain reclassifications have been made to the consolidated financial statements for the three months ended December 31, 2002 to
conform to the presentation as of and for the three months ended December 31, 2003.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment consists of the following (in thousands):

                Mineral interests in properties:
                    Proved properties                                                                         $            844
                    Unproved properties                                                                                    943
                Wells and related equipment                                                                            194,540
                Support equipment                                                                                        2,240
                Other                                                                                                    7,353
                                                                                                                       205,920
                Accumulated depreciation, depletion, amortization and
                  valuation allowances:
                    Oil and gas properties and other                                                                      (55,818 )
                                                                                                                $         150,102
                                                                        F-41


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Fair Value of Financial Instruments

    The Company uses the following methods and assumptions in estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.

     For cash and cash equivalents, receivables and payables the carrying amounts approximate fair value because of the short maturity of these
instruments.

    For secured revolving credit facilities and all other debt, the carrying value approximates fair value because of the short term maturity of
these instruments and the variable interest rates in the debt agreement.

Earnings Per Share

     There is no difference between basic and diluted net income per share since there are no potentially dilutive shares outstanding. Earnings
per share is determined by dividing net income by the weighted average number of outstanding common shares during the three months ended
December 31, 2003 and 2002.

Asset Retirement Obligations

   The Company accounts for its estimated plugging and abandonment of its oil and gas properties in accordance with SFAS 143,
―Accounting for Asset Retirement Obligations.‖

    A reconciliation of the Company’s liability for well plugging and abandonment costs for the periods indicated follows:

                                                                                                                        Three Months Ended
                                                                                                                           December 31,
                                                                                                                 2003                        2002
                                                                                                                          (in thousands)
Asset retirement obligations, beginning of period                                                         $              3,131      $                   –
Liabilities incurred                                                                                                        30                          –
Adoption of SFAS 143                                                                                                         –                      3,380
Liabilities settled                                                                                                        (28 )                        –
Accretion expense                                                                                                           47                          –
Asset retirement obligations, end of period                                                               $              3,180      $               3,380
                                                                        F-42


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Asset Retirement Obligations — (Continued)

    The above accretion expense is included in depreciation, depletion and amortization in the Company’s consolidated statements of income
and the asset retirement obligation liabilities are included in other liabilities in the Company’s consolidated balance sheets.

Supplemental Cash Flow Information
    The Company considers temporary investments with a maturity at the date of acquisition of 90 days or less to be cash equivalents.

    Supplemental disclosure of cash flow information:

                                                                                                                       Three Months Ended
                                                                                                                          December 31,
                                                                                                                2003                        2002

                                                                                                                         (in thousands)
Cash paid during the period for:
  Interest                                                                                               $               406        $              542

  Income taxes                                                                                           $                 –        $               –

Derivative Instruments and Hedging Activities

    The Company from time to time enters into natural gas futures and option contracts to hedge its exposure to changes in natural gas prices.
At any point in time, such contracts may include regulated New York Mercantile Exchange (―NYMEX‖) futures and options contracts and
non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally settled with offsetting
positions, but may be settled by the delivery of natural gas.

     The Company formally documents all relationships between hedging instruments and the items being hedged, including the Company’s
risk management objectives and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options
contracts to the hedged asset. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are
highly effective in offsetting changes in fair value of hedged items. When it is determined that a derivative is not highly effective as a hedge or
it has ceased to be a highly effective hedge due to the loss of correlation between changes in gas reference prices under a hedging instrument
and actual gas prices, the Company will discontinue hedge accounting for the derivative and further changes in fair value for the derivative will
be recognized immediately into earnings. Gains or losses on these instruments are accumulated in other comprehensive income (loss) to the
extent that these hedges are deemed to be highly effective as hedges, and are recognized in earnings in the period in which the hedged item is
recognized in earnings.

                                                                       F-43


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Derivative Instruments and Hedging Activities — (Continued)

     At December 31, 2003, the Company had no open natural gas futures contracts related to natural gas sales. Gains or losses on futures
contracts are determined as the difference between the contract price and a reference price, generally prices on NYMEX. The Company did not
settle any contracts during the three months ended December 31, 2003. The Company recognized losses of $96,000 on settled contracts during
the three months ended December 31, 2002. The Company recognized no gains or losses during the three months ended December 31, 2003 for
hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

    Although hedging provides the Company some protection against falling prices, these activities could also reduce the potential benefits of
price increases, depending upon the instrument.

Recently Issued Financial Accounting Standards

    In December 2003, the Financial Accounting Standards Board (―FASB‖) revised SFAS No. 132, ―Employers’ Disclosures about Pensions
and other Postretirement Benefits,‖ (―SFAS No. 132‖) establishing additional annual disclosures about plan assets, investment strategy,
measurement date, plan obligations and cash flows. In addition, the revised standard established interim disclosure requirements related to the
net periodic benefit cost recognized and contributions paid or expected to be paid during the current fiscal year. The new annual disclosures are
effective for financial statements with fiscal years ending after December 15, 2003 and the interim-period disclosures are effective for interim
periods beginning after December 15, 2003. The adoption of the revised SFAS No. 132 will have no impact on the Company’s results of
operations or financial position.

    In April 2003, the FASB issued SFAS No. 149 (―SFAS 149‖) ―Amendment of Statement 133 on Derivative Instruments and Hedging
Activates.‖ SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and amends and clarifies financial accounting and
reporting for derivative instruments. The adoption of SFAS 149 did not have a material effect on the Company’s financial position or results of
operations.

                                                                        F-44


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                                                            ATLAS AMERICA, INC.
                                              (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 3 – OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL

Other Assets

The following table provides information about other assets (in thousands):

                Deferred financing costs, net of accumulated amortization of
                   $1,281 and $1,091                                                                           $         1,445
                Investments                                                                                              2,937
                Other                                                                                                    1,744

                Total other assets                                                                             $         6,126


Intangible Assets

     Intangible assets consists of partnership management and operations contracts acquired through acquisitions and recorded at fair value on
their acquisition dates. The Company amortizes contracts acquired on a declining balance method over their respective estimated lives, ranging
from five to thirteen years. Amortization expense for the three months ended December 31, 2003 and 2002 was $265,000 and $318,000,
respectively. The aggregate estimated annual amortization expense is approximately $1.1 million for each of the succeeding five years.

The following table provides information about intangible assets (in thousands):

                Partnership management and operating contracts                                                 $        14,343
                 Accumulated amortization                                                                               (6,369 )
                Intangible assets, net                                                                         $         7,974
                                                                        F-45


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                                                            ATLAS AMERICA, INC.
                                              (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 3 – OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL — (Continued)

Goodwill

     The Company accounts for its goodwill in accordance with SFAS 142 ―Goodwill and Other Intangible Assets.‖ The Company evaluates its
goodwill at least annually as of the last day of the fiscal year and will reflect the impairment of goodwill, if any, in operating income in the
statement of income in the period in which the impairment is indicated. At December 31, 2003 the Company had goodwill of $37.5 million, net
of accumulated amortization of $4.2 million .

NOTE 4 — DEBT

Total debt consists of the following (in thousands) :

                Revolving credit facilities                                                                    $        19,000
                Other debt                                                                                                 180
                                                                                                                        19,180
                Less current maturities                                                                                    (56 )
                                                                                                               $        19,124
NOTE 5 — OPERATING SEGMENT AND MAJOR CUSTOMER INFORMATION

     The Company’s operations include two reportable operating segments. In addition to the reportable operating segments, certain other
activities are reported in the ―Other energy‖ category. These operating segments reflect the way the Company manages its operations and
makes business decisions. The Company does not allocate income taxes to its operating segments. Operating segment data for the periods
indicated are as follows:

Three Months Ended December 31, 2003 (in thousands):

                                                                                          Production
                                                                   Well                      and                Other
                                                                  Drilling                Exploration          Energy (a)                Total

Revenues from
   external customers                                        $          21,959        $          10,196    $            3,704        $       35,859
Interest income                                                              –                        –                    39                    39
Interest expense                                                             –                        –                   487                   487
Depreciation, depletion and
   amortization                                                              –                     2,210                1,035                    3,245
Operating profit (loss)                                                  2,498                     6,184               (1,154 )                  7,528
Other significant items:
   Segment assets                                                        7,715                  149,924               73,134                230,773

                                                                      F-46


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 5 - OPERATING SEGMENT AND MAJOR CUSTOMER INFORMATION — (Continued)

Three months ended December 31, 2002 (in thousands):

                                                                                          Production
                                                                   Well                      and                Other
                                                                  Drilling                Exploration          Energy (a)                Total

Revenues from
   external customers                                        $           6,583        $            8,069   $            3,483        $       18,135
Interest income                                                              -                         -                   91                    91
Interest expense                                                             -                         -                  629                   629
Depreciation, depletion and
     amortization                                                               -                  1,932                     940                 2,872
Operating profit (loss)                                                      (127 )                3,620                    (568 )               3,003
Other significant items:
     Segment assets                                                      6,884                  137,117               84,485                228,486

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and natural gas transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

   Operating profit (loss) per segment represents total revenues less costs and expenses attributable thereto. Costs and expenses allocated to
segments include interest, provision for possible losses and depreciation, depletion and amortization.

     The Company markets its gas and oil production on a competitive basis. Gas is sold under various types of contracts ranging from
life-of-the-well to short-term contracts. The Company is party to a ten-year agreement which expires in March 2009 to sell the majority of its
existing and future production to an affiliate of First Energy Corporation, (―FEC‖) a publicly-traded company (NYSE:FE). Pricing under the
contract is tied to index-based formulas which the Company negotiates annually. Approximately 57% of the Company’s current production
was dedicated to the performance of this agreement for the three months ended December 31, 2003. Payments to the Company under the
agreement are guaranteed by FEC.

    The Company anticipates that it will negotiate mutually agreeable pricing terms for subsequent 12-month periods pursuant to the
aforementioned agreement. Management believes that the loss of any one customer would not have a material adverse effect as it believes that,
under current market conditions, the Company’s production could readily be absorbed by other purchasers.

                                                                       F-47


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 6 - PENDING ACQUISITION

   In September 2003, Atlas Pipeline entered into a purchase and sale agreement with SEMCO Energy, Inc. (―SEMCO‖) pursuant to which
Atlas Pipeline or its designee will purchase all of the outstanding equity of SEMCO’s wholly-owned subsidiary, Alaska Pipeline Company,
which owns an intrastate natural gas transmission pipeline that delivers gas to metropolitan Anchorage (the ―Acquisition‖). The total
consideration, payable in cash at closing, will be approximately $95.0 million, subject to an adjustment based on the amount of working capital
that Alaska Pipeline has at closing.

    Consummation of the Acquisition is subject to a number of conditions, including receipt of governmental and non-governmental consents
and approvals and the absence of a material adverse change in Alaska Pipeline’s business. Among the required governmental authorizations are
approval of the Regulatory Commission of Alaska and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act (which has passed). The purchase and sale agreement may be terminated by either Atlas Pipeline or SEMCO if the transaction is not
consummated by June 16, 2004. The purchase and sale agreement contains customary representations, warranties and indemnifications.

     As part of the Acquisition, at closing, Alaska Pipeline and ENSTAR Natural Gas Company (―ENSTAR‖), a division of SEMCO which
conducts its gas distribution business in Alaska, will enter into a Special Contract for Gas Transportation pursuant to which ENSTAR will pay
a reservation fee of $943,000 per month for the use of all of the pipeline’s transportation capacity plus $.075 per thousand cubic feet, or mcf, of
gas transported, for 10 years. During 2002, total gas volumes transported on the Alaska Pipeline system averaged 130,000 mcf per day.
SEMCO will execute a gas transmission agreement with Alaska Pipeline pursuant to which SEMCO will be obligated to make up any
difference if the Regulatory Commission of Alaska reduces the transportation rates payable by ENSTAR pursuant to the Special Contract.

   Additionally, Alaska Pipeline will enter into an Operation and Maintenance and Administrative Services Agreement with ENSTAR under
which ENSTAR will continue to operate and maintain the pipeline for at least 5 years for a fee of $334,000 per month for the first three years.
Thereafter, ENSTAR’s fee will be adjusted for inflation.

   Atlas Pipeline has received a commitment from Friedman, Billings, Ramsey Group, Inc. (―FBR‖) to make a $25.0 million preferred equity
investment in a special purpose vehicle (the ―SPV‖), to be jointly owned and controlled by FBR and Atlas Pipeline, the SPV will be the
acquirer of Alaska Pipeline. Under the terms of the FBR commitment, Atlas Pipeline will have the right, during the 18 months following the
closing of the Acquisition, to purchase FBR’s preferred equity interest in the SPV at FBR’s original cost plus accrued and unpaid preferred
distributions and a specified premium. If Atlas Pipeline does not purchase FBR’s interest, FBR has the right to require the Company to
purchase this interest. The Company will then have the right to require Atlas Pipeline to purchase the equity interest from it. The Company,
through Atlas Pipeline intends to make a $24.0 million common equity investment in the SPV which Atlas Pipeline will fund in part through its
existing $20.0 million credit facility. The SPV has received a commitment from Wachovia Bank, National Association and Wachovia Capital
Markets, LLC for a $50 million credit facility to partially finance the Acquisition. Up to $25 million of borrowings under the facility will be
secured by a lien on and security interest in all of the SPV’s property. In addition, upon the earlier to occur of the termination of Atlas
Pipeline’s subordination period or the amendment of the restrictions in the partnership agreement on Atlas Pipeline’s incurrence of debt, Atlas
Pipeline will guarantee all borrowings under the facility, securing the guarantee with a pledge of its interest in the SPV.

                                                                       F-48


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                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 7 - SUBSEQUENT EVENTS

     On February 10, 2004, the Company filed a registration statement on Form S-1 with respect to a proposed public offering of up to 19.8% of
its common stock. On February 27, 2004 the Company effectuated a 106,833 for 1 stock split. Income per share reflecting the retroactive effect
of the stock split is presented on the face of the consolidated statements of income for the three months ended December 31, 2003 and 2002.
                                                                       F-49


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                                                     Dealer Prospectus Delivery Obligation

   Until ______________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
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                                  2,300,000 Common Shares


                                  ATLAS AMERICA, INC.

                    _____________________________________________________

                                      PROSPECTUS
                   _____________________________________________________

                             FRIEDMAN BILLINGS RAMSEY

                              KEYBANC CAPITAL MARKETS
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                                                                     PART II

                                           INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

   The following is a list of estimated expenses in connection with the issuance and distribution of the securities being registered, with the
exception of underwriting discounts and commissions:

              SEC registration fee                                                                           $              5,362
              NASD filing fee                                                                                               4,732
              Nasdaq listing fee                                                                                          100,000
              Printing costs                                                                                               45,000
              Legal fees and expenses                                                                                     150,000
              Accounting fees and expenses                                                                                200,000
              Transfer agent fees                                                                                           5,000
              Blue sky fees and expenses                                                                                       —
              Miscellaneous                                                                                                44,638

                   Total                                                                                     $            555,362

All of the above expenses except the SEC registration fee, NASD filing fee and the Nasdaq listing fee are estimates.

Item 14. Indemnification of Directors and Officers.

    Under the provisions of Section 145 of the Delaware General Corporation Law, the registrant is required to indemnify any present or former
officer or director against expenses arising out of legal proceedings in which the director or officer becomes involved by reason of being a
director or officer if the director or officer is successful in the defense of such proceedings. Section 145 also provides that the registrant may
indemnify a director or officer in connection with a proceeding in which he is not successful in defending if it is determined that he acted in
good faith and in a manner reasonably believed to be in or not opposed to the best interests of the registrant or, in the case of a criminal action,
if it is determined that he had no reasonable cause to believe his conduct was unlawful. Liabilities for which a director or officer may be
indemnified include amounts paid in satisfaction of settlements, judgments, fines and other expenses (including attorneys’ fees incurred in
connection with such proceedings). In a stockholder derivative action, no indemnification may be paid in respect of any claim, issue or matter
as to which the director or officer has been adjudged to be liable to the registrant (except for expenses allowed by a court).

                                                                        II-1
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   The registrant’s Amended and Restated Certificate of Incorporation provides for indemnification of directors and officers of the registrant to
the full extent permitted by applicable law. Under the provisions of the registrant’s Amended and Restated Bylaws, the registrant is required to
indemnify officers or directors to a greater extent than under the current provisions of Section 145 of the Delaware General Corporation Law.
Except with respect to stockholder derivative actions, the Bylaw provisions generally state that the director or officer will be indemnified
against expenses, amounts paid in settlement and judgments, fines, penalties and/or other amounts incurred with respect to any threatened,
pending or completed proceeding, provided that (i) such person acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the registrant, and (ii) with respect to any criminal action or proceeding, such person had no reasonable
cause to believe his or her conduct was unlawful.

   The foregoing standards also apply with respect to the indemnification of expenses incurred in a stockholder derivative suit. However, a
director or officer may only be indemnified for settlement amounts or judgments incurred in a derivative suit to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

    In accordance with the Delaware General Corporation Law, the registrant’s Amended and Restated Certificate of Incorporation contains a
provision to limit the personal liability of the directors of the registrant for violations of their fiduciary duty. This provision eliminates each
director’s liability to the registrant or its stockholders, for monetary damages except (i) for breach of the director’s duty of loyalty to the
registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions or (iv) for any transaction from which a director derived an improper personal benefit. The effect of
this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of
are, including any such actions involving gross negligence.

   Resource America, the corporate parent of the registrant, maintains directors’ and officers’ liability insurance against any actual or alleged
error, misstatement, misleading statement, act, omission, neglect or breach of duty by any director or officer of itself or any direct or indirect
subsidiary, excluding certain matters including fraudulent, dishonest or criminal acts or self-dealing.

Item 15. Recent Sales of Unregistered Securities.

      None.

Item 16. Exhibits and Financial Statement Schedules.

(a)       Exhibits.

         Exhibit No.                                                             Description

                   1.1     Form of Underwriting Agreement. (1)
                   3.1     Form of Amended and Restated Certificate of Incorporation.
                   3.2     Form of Amended and Restated Bylaws.
                   4.1     Form of stock certificate.
                   5.1     Opinion re: legality. (1)
                  10.1     Gas Purchase Agreement, dated March 31, 1999, among FirstEnergy Solutions Corp.
                           (f/k/a Northeast Ohio Gas Marketing, Inc.), Atlas Energy Group, Inc., Atlas
                           Resources, Inc. and Resource Energy, Inc., as amended by Amendment to Gas
                           Purchase Agreement dated February 1, 2001 and Second Amendment to Base Gas
                           Purchase Agreement dated July 15, 2003. (1)
                  10.2     Master Natural Gas Gathering Agreement, dated February 2, 2000, among Atlas
                           Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America,
                           Inc., Resource Energy, Inc. and Viking Resources Corporation. (1)


                                                                        II-2



                10.3     Omnibus Agreement, dated February 2, 2000, among Atlas Pipeline Partners, L.P.,
                         Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc., Resource Energy,
                         Inc. and Viking Resources Corporation. (1)
              10.4       Credit Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
                         Bank, National Association, and other banks party thereto, dated March 12, 2004. (1)
              10.5       Credit Agreement among Atlas Pipeline Partners, L.P., Wachovia Bank, National
                         Association, and the other parties thereto, dated December 27, 2002. (2)
              10.5 (a)   Second Amendment to Credit Agreement dated March 28, 2003. (2)
              10.5 (b)   Third Amendment to Credit Agreement dated September 15, 2003. (2)
              10.6       Purchase and Sale Agreement between Atlas Pipeline Partners, L.P. and SEMCO
                         Energy, Inc. dated September 16, 2003. (2)
              10.7       Form of Master Separation and Distribution Agreement between Atlas America, Inc.
                         and Resource America, Inc. (1)
              10.8       Form of Registration Rights Agreement between Atlas America, Inc. and Resource
                         America, Inc. (1)
              10.9       Form of Tax Matters Agreement between Atlas America, Inc. and Resource
                         America, Inc. (1)
             10.10       Form of Transition Services Agreement between Atlas America, Inc. and Resource
                         America, Inc. (1)
             10.11       Natural Gas Gathering Agreement among Atlas Pipeline Partners, L.P., Atlas
                         Pipeline Operating Partnership, L.P., Atlas Resources, Inc., Atlas Energy Group,
                         Inc., Atlas Noble Corp., Resource Energy, Inc. and Viking Resources Corporation
                         dated January 1, 2002. (1)
             10.12       Form of Employment Agreement for Edward E. Cohen.
              21.1       Subsidiaries of Atlas America. (2)
              23.1       Consent of Grant Thornton LLP.
              23.2       Consent of Wright & Company. (2)
              23.3       Consent of Ledgewood Law Firm, P.C. (included in Exhibit 5.1) (1)
              24.1       Power of Attorney (included on signature pages). (2)


(1) Previously filed as an exhibit to this registration statement on March 17, 2004.
(2) Previously filed as an exhibit to this registration statement on February 10, 2004.
(b) Financial Statement Schedules.

    All schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated financial statements and notes thereto.

Item 17. Undertakings.

     (a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

     (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director,

                                                                        II-3




officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

                          (c)                        The undersigned registrant hereby undertakes that:

    (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.
    (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

                                                                        II-4




                                                                  SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Philadelphia, Pennsylvania, on April 8, 2004.

                                                                      ATLAS AMERICA, INC.
                                                                  By: /s/ Edward E. Cohen

                                                                       Edward E. Cohen
                                                                       Chairman, Chief Executive Officer and President

   Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on April 8, 2004.

                                                                       /s/ Edward E. Cohen

                                                                       Edward E. Cohen, for himself as Chairman and Chief Executive
                                                                       Officer and President and as attorney-in-fact for:
                                                                         Freddie M. Kotek, Executive Vice President and Chief Financial
                                                                            Officer
                                                                         Nancy J. McGurk, Senior Vice President and Chief Accounting
                                                                            Officer
                                                                         Jonathan Z. Cohen, Vice Chairman
                                                                         Carlton M. Arrendell, Director
                                                                         William R. Bagnell, Director
                                                                         Donald W. Delson, Director
                                                                         Nicholas DiNubile, Director
                                                                         Dennis A. Holtz, Director

                                                                        II-5
                                                           AMENDED AND RESTATED

                                                     CERTIFICATE OF INCORPORATION
                                                                  OF
                                                          ATLAS AMERICA, INC.

Atlas America, Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware (the
"GCL"), does hereby certify as follows:

(1) The name of the Corporation is Atlas America, Inc. The original certificate of incorporation of the Corporation was filed with the office of
the Secretary of State of the State of Delaware on September 27, 2000.

(2) This Amended and Restated Certificate of Incorporation was duly adopted by the Board of Directors and sole stockholder of the
Corporation in accordance with Sections 242 and 245 of the GCL.

(3) This Amended and Restated Certificate of Incorporation restates and integrates and amends the Certificate of Incorporation of the
Corporation, as heretofore amended or supplemented.

(4) The text of the Certificate of Incorporation is restated in its entirety as follows:

FIRST: Name. The name of the Corporation is Atlas America, Inc.

SECOND: Agent for Service. The address of the registered office of the Corporation in the State of Delaware shall be at 110 S. Poplar Street,
Suite 101, City of Wilmington, County of New Castle; and the name of its registered agent at such address shall be Andrew Lubin.

THIRD: Purpose. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware (the "GCL").

FOURTH: Capital Stock.

(a) Authorized Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is 50,000,000 shares of
capital stock, consisting of (i) 49,000,000 shares of common stock, each having a par value of $0.01 per share (the "Common Stock"), and (ii)
1,000,000 shares of preferred stock, each having a par value of $0.01 per share (the "Preferred Stock").

(b) Preferred Stock. The Board of Directors is hereby expressly authorized to provide for the issuance of all or any shares of the Preferred
Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or
series, including, without limitation, the authority to provide that any such class or series may be (i)

                                                                            1
subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates (which may be fixed or variable), on such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon
any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or
of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and
with such adjustments; all as may be stated in such resolution or resolutions.

FIFTH: Directors. The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

(a) Business and Affairs of the Corporation. The business and affairs of the Corporation shall be managed by or under the direction of the
Board of Directors.

(b) Number of Directors; No Ballot Required for Election. The number of directors of the Corporation shall be as from time to time fixed by, or
in the manner provided in, the Bylaws of the Corporation (the "Bylaws"). The election of the directors need not be by ballot unless the Bylaws
shall so provide.

(c) Vacancies; Removal. Subject to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board of Directors
may be filled by the affirmative vote or consent of the holders of at least a majority of the voting power of the Corporation's then outstanding
capital stock entitled to vote generally in the election of directors and, if such vacancy shall not have been so filled within 30 days, by a
majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Subject to the
rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from
office at any time, with or without cause, and any vacancies thereby created may be filled by the affirmative vote or consent of the holders of at
least a majority of the voting power of the Corporation's then outstanding capital stock entitled to vote generally in the election of directors.

SIXTH: Director Liability. No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the GCL as the
same exists or may hereafter be amended. If the GCL is amended hereafter to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the GCL, as so
amended. Any repeal or modification of this Article SIXTH shall not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

                                                                          2
SEVENTH: Indemnification. The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as
now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except
for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her
heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article
SEVENTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any
proceeding in advance of its final disposition. The Corporation may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in
this Article SEVENTH to directors and officers of the Corporation. The rights to indemnification and to the advance of expenses conferred in
this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of
Incorporation, the Bylaws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise. Any repeal or
modification of this Article SEVENTH shall not adversely affect any rights to indemnification and to the advancement of expenses of a
director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to
such repeal or modification.

EIGHTH: Amendment of Bylaws. In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the
Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation's Bylaws.

NINTH: Amendment of Certificate of Incorporation. The Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter prescribed in this Certificate of Incorporation, the Corporation's
Bylaws or the GCL, and all rights herein conferred upon stockholders are granted subject to such reservation.

                                            [SIGNATURE APPEARS ON FOLLOWING PAGE]

                                                                         3
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf this
___ day of ________, 2004.

By:_________________________ Name:


                                                                  Its:

                                                                   4
                                                   AMENDED AND RESTATED BYLAWS
                                                                OF
                                                       ATLAS AMERICA, INC.

                                                                     Article I
                                                                     OFFICES

Section 1. Registered Office. The registered office of the Corporation shall be fixed in the certificate of incorporation of the Corporation, as
amended and restated from time to time (the "Certificate of Incorporation").

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine.

                                                                Article II
                                                       MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors. The Board of
Directors may, in its sole discretion, determine that a meeting of the stockholders shall not be held at any place, but may instead be held solely
by means of remote communication in the manner authorized by the General Corporation Law of the State of Delaware (the "GCL").

Section 2. Annual Meetings. The annual meeting of the stockholders for the election of directors shall be held on such date and at such time as
shall be designated from time to time by the Board of Directors. Any other proper business brought in accordance with this Article II may be
transacted at the annual meeting.

Section 3. Special Meetings. Unless otherwise required by law or by the Certificate of Incorporation, a special meeting of the stockholders, for
any purpose or purposes, may be called by (a) the Chairman of the Board or the Vice Chairman of the Board, if there be either, (b) the Chief
Executive Officer, (c) the President, (d) a majority of the entire Board of Directors or (e) the holders of at least one third of the voting power of
the Corporation's then outstanding capital stock entitled to vote generally in the election of directors.

Section 4. Notice. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be
given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and
proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Unless otherwise required by law, the written notice of any meeting shall be given not less than 10 nor more
than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.

                                                                          1
Section 5. Adjournments. Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place,
and notice need not be given of any such adjourned meeting if the time and place thereof and the means of remote communications, if any, by
which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting
at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at
the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting in accordance with the requirements of this Article II shall be given to each stockholder of record
entitled to vote at the meeting.

Section 6. Quorum. Unless otherwise required by applicable law or the Certificate of Incorporation, the holders of one-third of the
Corporation's capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal
of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time,
in the manner provided in this Article II, until a quorum shall be present or represented.

Section 7. Voting. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, (i) in all matters other than the election
of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders; (ii) directors shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of directors; and (iii) where a separate vote by a class or classes or
series is required, the affirmative vote of the majority of shares of such class or classes or series present in person or represented by proxy at the
meeting shall be the act of such class or classes or series. Unless otherwise provided in the Certificate of Incorporation, each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy as provided in this Article II. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in such officer's discretion, may require that any votes cast at such meeting shall be
cast by written ballot.

Section 8. Proxies. Each stockholder entitled to vote at a meeting of the stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for such stockholder as proxy, but no such proxy shall be voted upon
after 3 years from its date, unless such proxy provides for a longer period. A stockholder may authorize another person or persons to act for
such stockholder as proxy by any means permitted by the GCL.

                                                                          2
Section 9. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting (a) on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of
business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation
may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a
place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present. If the meeting is to be held solely by means of remote communication then the list shall also be
open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the
information required to access such list shall be provided with the notice of the meeting.

Section 10. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the
stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of the stockholders shall be at the close of business on the day next preceding the date on which notice is
given, or, if notice is waived, at the close of business on the next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 11. Conduct of Meetings. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of
the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or
procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the
following: (a) the establishment of an agenda or order of business for the meeting; (b) the determination of when the polls shall open and close
for any given matter to be voted on at the meeting; (c) rules and procedures for maintaining order at the meeting and the safety of those present;
(d) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall determine; (e) restrictions on entry to the meeting after the time
fixed for the commencement thereof; and
(f) limitations on the time allotted to questions or comments by participants.

                                                                        3
Section 12. Advance Notice of Stockholder Nominees and Stockholder Business. A stockholder may bring a matter of business or nominations
for the election of directors before a meeting of stockholders only if: (a) such business may otherwise be properly be brought before the
meeting, (b) such stockholder shall have given, and the Corporation shall have received at its principal executive offices addressed to the
Secretary, written notice in proper form of such matter not less than 90 days prior to the first anniversary date of the mailing date of the
Corporation's proxy solicitation materials for the previous year's annual meeting of stockholders, and (c) in the case of a special meeting of
stockholders, such business is within the purpose or purposes specified in the notice of the meeting and such stockholder shall have given, and
the Corporation shall have received at its principal executive offices addressed to the Secretary, written notice in proper form of such matter not
less than 90 days prior to the date of the special meeting. To be in proper form, a stockholder's notice to the secretary shall set forth:

(i) the name and address of the stockholder who intends to make the nominations, propose the business, and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the business to be proposed;

(ii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business
specified in the notice;

(iii) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;

(iv) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and

(v) if applicable, the consent of each nominee to serve as director of the corporation if so elected.

The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance
with the foregoing procedure.

Section 13. Stockholder Action by Written Consent without a Meeting. Unless otherwise provided in the Certificate of Incorporation, and
notwithstanding Sections 2 and 3 of this Article II, any action required to be taken at any annual or special meeting of stockholders of the
Corporation (including, without limitation, the election of directors) or any action that may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation in
accordance with the procedures prescribed by the GCL.

                                                                          4
                                                                    Article III
                                                                   DIRECTORS

Section 1. Number and Election of Directors. The entire Board of Directors shall consist of not less than one nor more than 12 members, the
exact number of which shall be determined from time to time by resolution adopted by the Board of Directors. Except as provided in these
Bylaws or the Certificate of Incorporation, directors shall be elected by the stockholders at the annual meetings, and each director so elected
shall hold office until such director's successor is duly elected and qualified, or until such director's death, or until such director's earlier
resignation or removal. Directors need not be stockholders.

Section 2. Vacancies; Removal. Unless otherwise required by law or the Certificate of Incorporation, any vacancy on the Board of Directors
may be filled by the affirmative vote or consent of the holders of at least a majority of the voting power of the Corporation's then outstanding
capital stock entitled to vote generally in the election of directors and, if such vacancy shall not have been so filled within 30 days, by a
majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Any or all of
the directors of the Corporation may be removed from office at any time, with or without cause, and any vacancies thereby created may be
filled, in each instance, by the affirmative vote or consent of the holders of at least a majority of the voting power of the Corporation's then
outstanding capital stock entitled to vote generally in the election of directors.

Section 3. Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board or the Vice Chairman of the
Board, if there be either, the Chief Executive Officer, the President or a majority of the directors then in office. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not less than 48 hours before the date of the meeting, by telephone or
telegram or electronic means on 24 hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.

Section 4. Quorum. Except as otherwise required by law or the Certificate of Incorporation, at all meetings of the Board of Directors a majority
of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of
the time and place of the adjourned meeting, until a quorum shall be present.

                                                                          5
Section 5. Actions of the Board by Written Consent. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all
the members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the
writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.
Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in
electronic form.

Section 6. Meetings by Means of Conference Telephone. Unless otherwise provided in the Certificate of Incorporation or these Bylaws,
members of the Board of Directors of the Corporation, or any committee thereof, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting.

Section 7. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each
committee shall keep regular minutes and report to the Board of Directors when required.

Section 8. Compensation. The Board of Directors shall have authority to fix the compensation of the directors.

                                                                   Article IV
                                                                   OFFICERS

Section 1. General. The officers of the Corporation shall be a Chairman of the Board, a Vice Chairman of the Board, a President, a Secretary, a
Chief Financial Officer and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, a chief executive officer, a
chief operating officer, one or more executive, senior or other vice presidents, one or more assistant vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of these
Bylaws. Any number of offices may be held by the same person. The officers of the Corporation need not be stockholders of the Corporation
nor, except in the case of the Chairman of the Board and the Vice Chairman of the Board, need such officers be directors of the Corporation.

                                                                        6
Section 2. Appointment of Officers. The officers of the Corporation, except such officers as may be appointed in accordance with Section 3
below, shall be appointed by the Board of Directors, subject to the rights, if any, of an officer under any contract of employment.

Section 3. Subordinate Officers. The Board of Directors may appoint, or empower the Chief Executive Officer to appoint, such other officers
and agents as the business of the Corporation may require, each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these Bylaws or as the Board of Directors or, if so authorized by the Board of Directors, the Chief Executive
Officer may from time to time determine.

Section 4. Removal and Resignation of Officers. Subject to the rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of
the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the
acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.

Section 5. Vacancies in Offices. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

Section 6. Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board
of Directors and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the Board of
Directors or as may be prescribed by these Bylaws. The Chairman of the Board shall be, ex officio, a member of all standing committees. If
there is no Chief Executive Officer and no President, then the Chairman of the Board shall also be the chief executive officer of the
Corporation and shall have the powers and duties prescribed in these Bylaws.

Section 7. Vice Chairman of the Board. The Vice Chairman of the Board, if such an officer be elected, shall preside at all meetings of the
stockholders and of the Board of Directors in the absence of the Chairman of the Board. In the absence or disability of the Chairman of the
Board, or in the event that it is impractical for the Chairman of the Board to act personally, the Vice Chairman of the Board shall have the
powers and duties of the Chairman of the Board. The Vice Chairman of the board shall also have such other powers or duties as shall be
assigned to him by the Board of Directors.

                                                                         7
Section 8. Chief Executive Officer. Subject to the supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, the Chief Executive Officer shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the
business and the officers of the Corporation. In the absence or nonexistence of a Chairman of the Board or Vice Chairman of the Board, the
Chief Executive Officer shall preside at meetings of the Board of Directors and stockholders. The Chief Executive Officer shall have such other
powers and duties as may be prescribed by the Board of Directors or these Bylaws.

Section 9. President. In the absence of the Chairman of the Board, Vice Chairman of the Board or a Chief Executive Officer, the President shall
preside at all meetings of the Board of Directors. If there be no Chief Executive Officer, the President shall be the chief executive officer of the
Corporation.

Section 10. Vice Presidents. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board
of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President and when so
acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers
and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the
Chairman of the Board, the Chief Executive Officer or the President.

Section 11. Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capitol retained earnings, and shares. The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the
Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.

Section 12. Secretary. The Secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as
the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The
minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the
names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and
the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation, at the office of the
Corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, or such other place as the Board of

                                                                          8
Directors may direct, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every
certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the
Board of Directors required to be given by law or by these Bylaws. The Secretary shall keep the seal of the Corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these
Bylaws.

Section 13. Treasurer. The Treasurer shall, in the absence of the Chief Financial Officer or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Chief Financial Officer and shall perform such other duties and have such other powers as
may be prescribed by the Board of Directors or these Bylaws.

Section 14. Assistant Secretary. The Assistant Secretary, or, if there is more than one, the Assistant Secretaries shall, in the absence of the
Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as may be prescribed by the Board of Directors or these Bylaws.

Section 15. Representation of Shares of Other Corporations. The Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or the Assistant Secretary of this Corporation, or any other
person authorized by the Board of Directors or the President or a Vice President, is authorized to vote, represent, and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The
authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.

                                                                      Article V
                                                                       STOCK

Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the
Corporation certifying the number of shares owned by such stockholder in the Corporation.

Section 2. Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.

                                                                          9
Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or the owner's legal representative, to
advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.

Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these Bylaws. Transfers
of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer
taxes; provided however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the
Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be
marked "cancelled" with the date of cancellation, by the Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be
valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing
from and to whom transferred.

Section 5. Dividend Record Date. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If
no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.

Section 6. Record Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as otherwise required by law.

Section 7. Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to time by the Board of Directors.

                                                                         10
                                                                    Article VI
                                                                    NOTICES

Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder,
at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail. Without limiting the manner by which notice otherwise may be
given effectively to stockholders, any notice to stockholders given by the Corporation under applicable law, the Certificate of Incorporation or
these Bylaws shall be effective if given by a form of electronic transmission if consented to by the stockholder to whom the notice is given.
Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed to be revoked
if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices by the Corporation in accordance with such
consent and (b) such inability becomes known to the Secretary or Assistant Secretary of the Corporation or to the transfer agent, or other person
responsible for the giving of notice; provided, however, that the inadvertent failure to treat such inability as a revocation shall not invalidate
any meeting or other action. Notice given by electronic transmission, as described above, shall be deemed given: (a) if by facsimile
telecommunication, when directed to a number at which the stockholder has consented to receive notice; (b) if by electronic mail, when
directed to an electronic mail address at which the stockholder has consented to receive notice; (c) if by a posting on an electronic network,
together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate
notice; and (d) if by any other form of electronic transmission, when directed to the stockholder. Notice to directors or committee members
may also be given personally by telegram, telex or cable or by means of electronic transmission.

Section 2. Waivers of Notice. Whenever any notice is required by applicable law, the Certificate of Incorporation or these Bylaws to be given
to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, or a
waiver by electronic transmission, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of
such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of,
any annual or special meeting of stockholders or any regular or special meeting of the directors or members of a committee of directors need be
specified in any written waiver of notice unless so required by law, the Certificate of Incorporation or these Bylaws.

                                                               Article VII
                                                           GENERAL PROVISIONS

Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 2. Corporate Seal. The Corporation shall not be required to have a corporate seal.

                                                                        11
                                                                  Article VIII
                                                               INDEMNIFICATION

Section 1. Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right
of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of
the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct
was unlawful.

Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII,
the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall
deem proper.

Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is
proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or

                                                                         12
Section 2 of this Article VIII, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the
time of such determination, (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a
quorum, or (b) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (c) if there
are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or
(d) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the
authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the
Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith, without the necessity of authorization in the specific case.

Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted
in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect
to any criminal action or proceeding, to have had no reasonable cause to believe such person's conduct was unlawful, if such person's action is
based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of
the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or
on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this Section 4 shall not be
deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of
conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be.

Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of
the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor
the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall
be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking
indemnification shall also be entitled to be paid the expense of prosecuting such application.

                                                                        13
Section 6. Expenses Payable in Advance. Expenses incurred by a director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys' fees) incurred
by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation
deems appropriate.

Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by
or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Certificate of Incorporation, any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being
the policy of the Corporation that indemnification of the persons specified in Section 1 and Section 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not
specified in Section 1 or Section 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions
of the GCL, or otherwise.

Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII.

Section 9. Certain Definitions. For purposes of this Article VIII, references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director
or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such
constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving
corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term "another
enterprise" as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries;
and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.

                                                                         14
Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be
a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 of this Article VIII), the Corporation shall not be obligated to
indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a
proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.

Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those
conferred in this Article VIII to directors and officers of the Corporation.

                                                                  Article IX
                                                                AMENDMENTS

Section 1. Amendments. In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of
Directors shall have the power to adopt, amend, alter or repeal the Corporation's Bylaws.

Section 2. Entire Board of Directors. As used in this Article IX and in these Bylaws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no vacancies.

***

Last amended as of _______________, 2004

                                                                        15
     NUMBER                                                                SHARES
AA                          Atlas America, Inc.

       COMMON STOCK                A DELAWARE CORPORATION         SEE REVERSE FOR CERTAIN DEFINITIONS
(Par Value $.01 Per Share                                                   CUSIP 049167 10 9

     THIS CERTIFIES THAT




     is the registered holder of

                       FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
                                                         Atlas America, Inc.
                                                        CERTIFICATE OF STOCK
(the "Corporation"). The shares evidenced by this Certificate are transferable in person or by a duly authorized attorney or legal
representative, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are subject
to all the provisions of the Articles of Incorporation and Bylaws of the Corporation and any and all amendments thereto. This
Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by the facsimile signatures of its duly authorized
officers and has caused its facsimile seal to be affixed hereto.


Dated:



               -----------------------                          ----------------                 ---------------------
              | /s/ Michael C. Staines|                     |          SEAL     |               | /s/ Edward E. Cohen |
               -----------------------                          ----------------                 ---------------------
                   SECRETARY                                                            PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
     AMERICAN STOCK TRANSFER & TRUST COMPANY
BY                      TRANSFER AGENT AND REGISTRAR

                                   AUTHORIZED SIGNATURE
   The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:

  TEN COM -- as tenants in common                                              UNIF GIFT MIN ACT -- ..........Custodian..............
  TEN ENT -- as tenants by the entireties                                                              (Cust)             (Minor)
  JT TEN -- as joint tenants with right of                                                           under Uniform Gifts to Minors
             survivorship and not as tenants                                                         Act.............................
             in common                                                                                           (State)
                                                                               UNIF TRF MIN ACT -- ........Custodian (until age....)
                                                                                                       (Cust)
                                                                                                    ..........under Uniform Transfers
                                                                                                       (Minor)
                                                                                                    to Minors Act....................
                                                                                                                       (State)
                               Additional abbreviations may also be used though not in the above list.



  FOR VALUE RECEIVED, _____________________________                                            hereby sell, assign and transfer unto


  PLEASE INSERT SOCIAL SECURITY OR OTHER
      IDENTIFYING NUMBER OF ASSIGNEE

  |-----------------------------------|
  |                                   |
  |                                   |
  |-----------------------------------|


                             _____________________________________________________________________________
                             (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________

____________________________________________________________________________________________________ Shares of the common stock
represented by the within Certificate, and do hereby irrevocably constitute and appoint


____________________________________________________________________________________________________ Attorney to transfer the said
stock on the books of the within named Corporation with full power of substitution in the premises.


Dated ____________________

                                           __________________________________________________________________________________________
                                           THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
                                   NOTICE: THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
Signature(s) Guaranteed                    WHATEVER.



By______________________________________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C.
RULE 17Ad-15.




KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL
REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
                                                        EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") executed on _________, 2004 and effective as of the Effective Date (as later
defined herein) is by and between Atlas America, Inc., a Delaware corporation having its principal place of business at 311 Rouser Road, Moon
Township, PA 15108 (the "Company") and Edward E. Cohen ("Executive").

WHEREAS, the Company and Executive wish to set forth in this Agreement the terms and conditions under which the Employee will be
employed by the Company;

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Employment. The Company agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executive's
duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

1.1. Employment Term. This Agreement shall be effective as of the date on which Executive shall retire from his position as Chief Executive
Officer of Resource America, Inc. (the "Effective Date"), and shall continue for three years, thereafter, unless the Agreement is terminated
sooner in accordance with Section 2 or 3 below. The term of the Agreement shall automatically renew daily so that, at all times, it shall be for a
three-year term. The period commencing on the Effective Date and ending on the date on which the term of Executive's employment under this
Agreement shall terminate is hereinafter referred to as the "Employment Term."

1.2. Duties and Responsibilities. Commencing on the Effective Date, Executive shall serve as the Chairman of the Board of Directors of the
Company (the "Board") and Chief Executive Officer of the Company. Until such time as the Board shall fill the office of President, Executive
shall also serve as President of the Company. Executive shall perform all duties and accept all responsibilities incident to such position as may
be reasonably assigned to him by the Board.

1.3. Extent of Service. Executive agrees to use Executive's best efforts to carry out Executive's duties and responsibilities under Section 1.2
hereof and, consistent with the other provisions of this Agreement, to devote such business time, attention and energy thereto as is reasonably
necessary to carry out those duties and responsibilities. It is recognized that Executive in the past has invested and participated, and it is agreed
that Executive in the future may invest and participate, in business endeavors separate and apart from the Company, in his discretion.
1.4. Base Salary. For all the services rendered by Executive hereunder, the Company shall pay Executive an annual base salary ("Base Salary"),
commencing on the Effective Date, at the annual rate of $350,000, payable in accordance with the Company's customary payroll practices.
Executive's Base Salary shall be reviewed annually for appropriate increases by the compensation committee of the Board pursuant to the its
normal performance review policies for senior level executives, but shall not be decreased at any time.

1.5. Bonus. Executive shall be eligible to receive bonuses in such amounts as the Board may approve in its sole discretion or under the terms of
any incentive plan of the Company maintained for other senior level executives.

1.6. Welfare Plans and Perquisites. Executive shall be entitled to participate in all employee welfare benefit plans and programs or executive
perquisites made available to the Company's senior level executives as a group or to its employees generally, as such welfare plans or
perquisites may be in effect from time to time and subject to the eligibility requirements of the plans. Nothing in this Agreement shall prevent
the Company from amending or terminating any welfare or other employee benefit plans or programs from time to time as the Company deems
appropriate.

1.7. Reimbursement of Expenses; Vacation. Executive shall be provided with reimbursement of reasonable expenses related to Executive's
employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a
group, and shall be entitled to vacation and sick leave in accordance with the Company's vacation, holiday and other pay for time not worked
policies.

1.8. Incentive Compensation. Executive shall be entitled to participate in any short-term and long-term incentive programs (including without
limitation any stock option plans) established by the Company for its senior level executives generally, at levels commensurate with the
benefits provided to other senior executives and with adjustments appropriate for his position as Chairman of the Board, Chief Executive
Officer and/or President.

1.9. Supplemental Executive Retirement Plan.

(a) The Company shall provide and maintain on Executive's behalf a supplemental executive retirement plan (the "SERP"). The SERP will
provide Executive with an annual benefit ("SERP Retirement Benefit") equal to the product of (A) six and one-half percent (6 1/2%),
multiplied by (B) Executive's Base Salary at the time of his retirement, death or other termination of employment with the Company ("Final
Base Salary"), multiplied by (C) the amount of years (or portions thereof) that Executive shall have been employed by Company commencing
on the Effective Date. Notwithstanding anything herein to the contrary, the maximum number used in subclause (C) of the immediately
preceding sentence shall be ten (10) and the minimum number used in subclause (c) of the immediately preceding sentence shall be four (4), so
that the maximum SERP Retirement Benefit shall be 65% of Final Base Salary and the minimum SERP Retirement Benefit shall be 26%.

                                                                       2
(b) Notwithstanding anything herein to the contrary, upon the occurrence of a Change of Control (as later defined) or in the event the Executive
is terminated without Cause (as later defined) or resigns for Good Reason (as later defined), Executive shall be vested in a SERP Retirement
Benefit equal to the greater of (x) the SERP Retirement Benefit as accrued under the formula set forth above, or (y) 40% of the Final Base
Salary.

(c) Retirement Benefit will be paid to Executive commencing upon the later of (i) his retirement, or (ii) his reaching the age of seventy (70)
years old (the "Retirement Age"). The SERP Retirement Benefit will be payable as long as the Executive shall live, with ten
(10) years guaranteed, so that if Executive shall die prior to his retirement or within ten (10) years of his retirement, his estate shall receive the
payment of the SERP Retirement Benefit until a total of ten
(10) years of such SERP Retirement Benefit shall have been paid. Executive shall be fully vested in the SERP Retirement Benefit as such
benefits accrue, except that Executive shall be fully vested in the minimum SERP Retirement Benefit of 26% as of the Effective Date.

(d) The Company shall establish a "rabbi" trust to serve as the funding vehicle for the SERP Retirement Benefit, and shall not less than
annually make contributions to the trust in amounts sufficient to provide the present value, discounted at the ten (10) year U.S. Treasury rate
then in effect (which discount rate may differ from the discount rate used by the Company in accruing the SERP Retirement Benefit on its
books), of the SERP Retirement Benefit accrued as of the most recent reporting date for the Company prior to such contribution. Upon the
occurrence of a Change of Control (whether during or after the Employment Term), the Company shall immediately contribute to the trust an
amount sufficient to permit the full payment of the benefit due to Executive. Notwithstanding the establishment of a rabbi trust, the Company's
obligation to pay the SERP Retirement Benefit shall constitute a general, unsecured obligation, payable out of its general assets, and the
Executive shall not have any rights to any specific asset of the Company. The Executive or his beneficiary shall have only the rights of a
general, unsecured creditor against the Company for any distributions due under this paragraph, and the assets of the rabbi trust shall be
available to pay the claims of the Company's creditors.

2. Termination. Executive's employment shall terminate upon the occurrence of any of the following events:

2.1. Termination Without Cause; Resignation for Good Reason

(a) The Company may remove Executive at any time without Cause (as defined in Section 4) from the position in which Executive is employed
hereunder upon not less than thirty days' prior written notice to Executive; provided, however, that, in the event that such notice is given,
Executive shall be under no obligation to render any additional services to the Company. In addition, Executive may initiate a termination of
employment by resigning under this Section 2.1 for Good Reason (as defined in Section 4); provided, however,

                                                                           3
that the Company shall be given the opportunity to cure any condition susceptible to cure. Executive shall give the Company not less than thirty
days' prior written notice of such resignation.

(b) Subject to the provisions of Section 2.1(c) hereof, upon any removal or resignation described in Section 2.1(a) above, Executive shall be
entitled to receive only the amount due to Executive under the Company's then current severance pay plan for employees, if any. No other
payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued and earned in
accordance with the terms of any applicable benefit plans and programs of the Company.

(c) Notwithstanding the provisions of Section 2.1(b), in the event that Executive executes a written mutual release (which the Company shall be
obligated to execute and if it refuses to execute for purposes of this section 2.1(c) will be deemed to have been executed by the Company as
long as Executive executes the release) upon such removal, resignation or Non-Renewal, substantially in the form attached hereto as Exhibit A
(the "Release"), of claims against the Company and related parties with respect to all matters arising out of Executive's employment by the
Company, or the termination thereof (other than claims for any entitlements under the terms of this Agreement or under any plans or programs
of the Company under which Executive has accrued and is due a benefit), and any claims against Executive for actions within the scope of his
employment by the Company, Executive shall be entitled to receive, in lieu of the payment described in Section 2.1(b), the following:

(i) Executive shall receive a lump sum cash severance payment, without discount, in an amount equal to the sum of the total amount payable to
Executive under this Agreement until expiration of the term then in effect (i.e. three (3) years), assuming that Executive's total compensation
for each year would be equal to the Average Compensation. Payment shall be made within fifteen days after the effective date of the
termination.

(ii) For a period of thirty-six (36) months following the date of termination, Executive shall continue to receive the group term life and health
insurance in effect at the date of his termination (or generally comparable coverage) for himself and, where applicable, his spouse and
dependents (without giving effect to any reduction in such benefits subsequent to a Change in Control), as the same may be changed from time
to time for employees generally, as if Executive had continued in employment during such period; or, as an alternative, the Company may elect
to pay Executive cash in lieu of such coverage in an amount equal to Executive's after-tax cost of continuing such coverage, where such
coverage may not be continued (or where such continuation would adversely affect the tax status of the plan pursuant to which the coverage is
provided). The COBRA health care continuation coverage period under section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), shall run concurrently with the foregoing thirty-six month benefit period.

(iii) Executive shall also receive any other amounts earned, accrued and owing but not yet paid under
Section 1 above.

2.2. Voluntary Termination.

                                                                        4
(a) Executive may voluntarily terminate his employment for any reason upon sixty days' prior written notice. If Executive terminates his
employment on or after January 1, 2006 for any reason not specified in Section 2.1(a) or 2.2(b), Executive shall be entitled to the benefits set
forth in
Section 2.1(b) hereof, but if he executes the Releases he shall receive a benefit equal to one-half (1/2) of Final Base Salary, which benefit shall
be paid in a lump sum within sixty (60) days after Executive's termination date. In addition, after Executive reaches the Retirement Age,
Executive shall also receive the vested SERP Retirement Benefit pursuant to the SERP.

(b) If Executive terminates his employment under this Section 2.2, he shall be entitled to any benefits accrued and earned in accordance with
the terms of any applicable benefit plans and programs of the Company.

2.3. Disability. The Company may terminate Executive's employment if Executive has been unable to perform the material duties of his
employment for a period of one hundred eighty days in any twelve month period because of physical or mental injury or illness ("Disability");
provided, however, that the Company shall continue to pay Executive's Base Salary until the Company acts to terminate Executive's
employment. Executive agrees, in the event of a dispute under this Section 2.3 relating to Executive's Disability, to submit to a physical
examination by a licensed physician jointly selected by the Board and Executive. If the Company terminates Executive's employment for
Disability, the Company shall continue to pay to Executive his Base Salary, as in effect on the date of his Disability, for three (3) years and
such three (3) year period shall be included as a portion of the Employment Term for the purpose of determining vesting of SERP benefits. In
addition, upon such a termination, Executive shall received the benefits described in Section 2.1(ii) hereof. Thereafter, Executive shall receive
any amounts payable to him under the Company's long-term disability plan. Payments paid under this Section shall not be reduced by any
payments made directly to Executive by an insurance company. Executive shall also be entitled to any other amounts earned, accrued and
owing but not yet paid under Section 1 above and any benefits accrued and earned in accordance with the terms of any applicable benefit plans
and programs of the Company.

2.4. Death. If Executive dies while employed by the Company, the Company shall pay to Executive's executor, legal representative,
administrator or designated beneficiary, as applicable, any amounts earned, accrued and owing but not yet paid under Section 1 above and any
benefits accrued and earned under the Company's benefit plans and programs. The Company shall also pay to Executive's executor, legal
representative, administrator or designated beneficiary, as applicable, a death benefit equal to the Final Base Salary for a period equal to the
lesser of (i) three years or (ii) the period of time from the Effective Date until the date of Executive's death (but not less than one (1) year). The
death benefit described in the preceding sentence shall be paid in a lump sum within sixty days following the day on which Executive shall
have died. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive's executors, legal
representatives, administrators, heirs or assigns or any other person claiming under or through Executive. In addition to the forgoing, the SERP
provides that Executive or his

                                                                          5
beneficiary shall receive at least ten (10) years of the vested SERP Retirement Benefit, as set forth in more particularity in Paragraph 1.9
hereof.

2.5. Cause. The Company may terminate Executive's employment at any time for Cause upon written notice to Executive, in which event all
payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits
accrued and earned before his termination in accordance with the terms of any applicable benefit plans and programs of the Company.

2.6. Vesting of Options. Upon any termination of this Agreement for any reason other than Cause, the vesting of all options to purchase
securities of the Company granted to Executive during his employment with the Company shall be accelerated to the later of the effective date
of termination of this Agreement or six months after the date such option was granted, and any provision contained in the agreements under
which such options were granted that is inconsistent with such acceleration is hereby modified to the extent necessary to provide for such
acceleration; such acceleration shall not apply to any option that by its terms would vest prior to the date provided for in this paragraph.

2.7. Gross-Up Payment.

(a) Notwithstanding any provision in the Agreement to the contrary, in the event that it shall be determined that any payment or distribution by
the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of section 280G of the Code, the Company
shall pay Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive after deduction of any
excise tax imposed under section 4999 of the Code, and any federal, state and local income tax, FICA and Medicare withholding taxes and
excise tax imposed upon the Gross-Up Payment, shall be equal to the Payment. For purposes of determining the amount of the Gross-Up
Payment, unless Executive specifies that other rates apply, Executive shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on Executive's termination date,
net of the reduction in federal income taxes that may be obtained from the deduction of such state and local taxes (calculated by assuming that
any reduction under section 68 of the Code in the amount of itemized deductions allocable to Executive applies first to reduce that amount of
such state and local income taxes that would otherwise be deductible by Executive).

(b) In the event that the excise tax imposed by section 4999 of the Code is subsequently determined to be less than the amount taken into
account hereunder at the time of Executive's termination of employment, Executive shall repay to the Company, at the time that the amount of
such reduction in excise tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the excise tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on
the Gross-Up Payment being

                                                                         6
repaid by Executive to the extent that such repayment results in a reduction in excise tax, FICA and Medicare withholding taxes and/or a
federal, state or local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the excise tax is determined to exceed the amount taken into account hereunder at the time of Executive's termination of
employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment to Executive in respect to such excess (plus any interest, penalties or
additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined.

(c) Except as otherwise provided herein, all determinations to be made under this Section 2.7 shall be made by the tax counsel selected by
Executive, at the Company's expense and reasonably acceptable to the Company.

(d) Notwithstanding anything in this Section 2.7 to the contrary, no Gross Up payment shall be due at any time for any Payment to Executive
resulting from termination of this Agreement due to Executive's death or disability.

2.8. Notice of Termination. Any termination of Executive's employment shall be communicated by a written notice of termination to the other
party hereto given in accordance with Section 10. The notice of termination shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment and the
applicable provision hereof, and
(iii) specify the termination date in accordance with the requirements of this Agreement.

3. Change of Control.

3.1. Effect of Change of Control. If a Change of Control occurs and Executive's employment terminates under the circumstances described
below, the provisions of Section 2.1 shall apply.

3.2. Termination Without Cause Upon or After a Change of Control. Upon or after a Change of Control, the Company (by action of the Board)
may remove Executive at any time upon thirty (30) days' notice from the position in which Executive is employed hereunder or Executive may
initiate termination of employment by resigning under this Section 3 for Good Reason (as defined in
Section 4) (in either case, the Employment Term shall be deemed to have ended) upon not less than thirty days' prior written notice to
Executive (or in the case of resignation for Good Reason, Executive shall give the Company not less than thirty days' prior written notice of
such resignation); provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any
additional services to the Company. In any such event, the provisions of Section 2.1(b) or (c), as applicable, shall then apply.

4. Definitions.

(a) "Average Compensation" shall mean the average of the three highest amounts of annual total compensation received by Executive
hereunder during the Employment Term, or if the Employment Term shall be less than three
years, the Average Compensation shall be the highest total compensation reserved by executive in any year (or an annualized amount for a
portion of a year if this Employment Term is not one (1) year old).

(b) "Cause" shall mean any of the following grounds for termination of Executive's employment:

(i) Executive shall have been convicted of a felony, or any crime involving fraud, embezzlement or moral turpitude;

(ii) Executive intentionally and continually fails, in the absence of good reason, to substantially perform his reasonably assigned material duties
to the Company (other than a failure resulting from Executive's incapacity due to physical or mental illness), which failure has been materially
and demonstrably detrimental to the Company and has continued for a period of at least thirty (30) days after a written notice of demand for
substantial performance, signed by a majority of the members of the Board, has been delivered to Executive specifying the manner in which
Executive has failed substantially to perform;

(iii) Executive breaches Section 5 of this Agreement.

(c) "Good Reason" shall mean the occurrence of any of the following events or conditions, unless Executive has expressly consented in writing
thereto or unless the event is remedied by the Company within thirty days after receipt of notice thereof given by Executive:

(i) a reduction in Executive's Base Salary (which shall be in violation of this Agreement);

(ii) a demotion of Executive from the position of chief executive officer;

(iii) a material reduction of Executive's duties hereunder;

(iv) the Company's requiring Executive to be based at a location other than the Company's current chief executive offices;

(v) the failure of the Executive to be elected to the Board; or

(vi) any material breach of this Agreement by the Company.

(d) Change of Control. As used herein, "Change of Control" shall mean the occurrence of any of the following:

(i) The acquisition of the beneficial ownership, as defined under the Securities Exchange Act of 1934, of twenty-five percent (25%) or more of
the Company's

                                                                         8
voting securities or all or substantially all of the assets of the Company by a single person or entity or group of affiliated persons or entities
other than by a Related Entity (as defined below); or

(ii) The Company consummates, a merger, consolidation, combination, share exchange, division or other reorganization or transaction of the
Company (a "Corporate Transaction") with an unaffiliated entity, other than a Related Entity (as defined below), in which either (A) the
directors of the Company as applicable immediately prior to the Corporate Transaction constitute less than a majority of the board of directors
of the surviving, new or combined entity unless one-half of the board of directors of the surviving, new or combined entity, were directors of
the Company immediately prior to such Corporate Transaction and the Company's chief executive officer immediately prior to such Corporate
Transaction continues as the chief executive officer of the surviving, new or combined entity, or (B) the voting securities of the Company
immediately before the Corporate Transaction represent less than sixty percent of the combined voting power immediately after the Corporate
Transaction of the outstanding securities of (I) the Company, (II) the surviving entity or (III) in the case of a division, each entity resulting from
the division; or

(iii) During any period of twenty-four consecutive calendar months, individuals who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof, unless the election or nomination for the election by the Company's stockholders of each
new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period;
or

(iv) The shareholders of the Company approve a plan of complete liquidation, or winding-up of the Company or an agreement of sale or
disposition (in one transaction or a series of transactions) of all or substantially all of the Company's assets or all or substantially all of the
assets of its primary subsidiaries to an unaffiliated entity, other than to a Related Entity (as defined below).

For purposes of the definition of "Change of Control" as set forth herein, the term "Related Entity" shall mean an entity that is an "affiliate" of
the Executive or any member of the Executive's immediate family including his spouse or children, as determined in accordance with Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended. Neither the Company's initial public
offering nor the Company's possible spin-off from Resource America, Inc. shall be deemed a "Change of Control" in the Agreement.

5. Intellectual Property and Confidentiality. Executive hereby acknowledges that, during and solely as a result of his employment by the
Company, Executive will receive special training and education with respect to the operation of the Company's business and other related
matters, and access to confidential information and business and professional contacts. In

                                                                            9
consideration of Executive's employment and in consideration of the special and unique opportunities afforded by the Company to Executive as
a result of Executive's employment, Executive hereby agrees to abide by the terms of the intellectual property and confidentiality provisions
below. Executive agrees and acknowledges that his employment is full, adequate and sufficient consideration for the restrictions and
obligations set forth in those provisions.

5.1. Developments. Executive shall disclose fully, promptly and in writing to the Company any and all inventions, discoveries, improvements,
modifications and other intellectual property rights, whether patentable or not, which Executive has conceived, made or developed, solely or
jointly with others, while employed by the Company and which (i) relate to the business, work or activities of the Company or (ii) result from
or are suggested by the carrying out of Executive's duties hereunder or from or by any information that Executive may receive as an employee
of the Company. Executive hereby assigns, transfers and conveys to the Company all of Executive's right, title and interest in and to any and all
such inventions, discoveries, improvements, modifications and other intellectual property rights and agrees to take all such actions as may be
requested by the Company at any time and with respect to any such invention, discovery, improvement, modification or other intellectual
property rights to confirm or evidence such assignment, transfer and conveyance. Furthermore, at any time and from time to time, upon the
request of the Company, Executive shall execute and deliver to the Company, any and all instruments, documents and papers, give evidence
and do any and all other acts that, in the opinion of counsel for the Company, are or may be necessary or desirable to document such
assignment, transfer and conveyance or to enable the Company to file and prosecute applications for and to acquire, maintain and enforce any
and all patents, trademark registrations or copyrights under United States or foreign law with respect to any such inventions, discoveries,
improvements, modifications or other intellectual property rights or to obtain any extension, validation, reissue, continuance or renewal of any
such patent, trademark or copyright. The Company shall be responsible for the preparation of any such instruments, documents and papers and
for the prosecution of any such proceedings and shall reimburse Executive for all reasonable expenses incurred by Executive in compliance
with the provisions of this Section 5.1.

5.2. Confidentiality.

(a) Executive acknowledges that, by reason of Executive's employment by the Company, Executive will have access to confidential
information of the Company, including, without limitation, information and knowledge pertaining to products, inventions, discoveries,
improvements, innovations, designs, ideas, trade secrets, proprietary information, manufacturing, packaging, advertising, distribution and sales
methods, sales and profit figures, customer and client lists and relationships between the Company and dealers, distributors, sales
representatives, wholesalers, customers, clients, suppliers and others who have business dealings with them ("Confidential Information").
Executive acknowledges that such Confidential Information is a valuable and unique asset of the Company and covenants that, both during and
after the Employment Term, Executive will not disclose any Confidential Information to any person (except as Executive's duties as an officer
of the Company may require or as required by law or in a judicial or administrative proceeding) without the prior written authorization of the
Board. The obligation of confidentiality imposed by this Section 5.3 shall not apply to

                                                                       10
information that becomes generally known to the public through no act of Executive in breach of this Agreement.

(b) Executive acknowledges that all documents, files and other materials received from the Company during the Employment Term (with the
exception of documents relating to Executive's compensation or benefits to which Executive is entitled following the Employment Term) are
for use of Executive solely in discharging Executive's duties and responsibilities hereunder and that Executive has no claim or right to the
continued use or possession of such documents, files or other materials following termination of Executive's employment by the Company.
Executive agrees that, upon termination of employment, Executive will not retain any such documents, files or other materials and will
promptly return to the Company any documents, files or other materials in Executive's possession or custody.

5.3. Equitable Relief. Executive acknowledges that the restrictions contained in Sections 5.1 and 5.2 hereof are, in view of the nature of the
business of the Company, reasonable and necessary to protect the legitimate interests of the Company, and that any violation of any provision
of those Sections will result in irreparable injury to the Company. Executive also acknowledges that in the event of any such violation, the
Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages or posting a bond,
and to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and
in addition to any other rights or remedies to which the Company may be entitled. Executive agrees that in the event of any such violation, an
action may be commenced for any such preliminary and permanent injunctive relief and other equitable relief in any federal or state court of
competent jurisdiction sitting in Pennsylvania or in any other court of competent jurisdiction. Executive hereby waives, to the fullest extent
permitted by law, any objection that Executive may now or hereafter have to such jurisdiction or to the laying of the venue of any such suit,
action or proceeding brought in such a court and any claim that such suit, action or proceeding has been brought in an inconvenient forum.
Executive agrees that effective service of process may be made upon Executive by mail under the notice provisions contained in Section 10
hereof.

6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that
if Executive becomes entitled to and receives the payments provided for in Section 2.1(b) or (c) of this Agreement, Executive hereby waives
Executive's right to receive payments under any severance plan or similar program applicable to all employees of the Company.

7. Survivorship. The respective rights and obligations of the parties under this Agreement shall survive any termination of Executive's
employment to the extent necessary to the intended preservation of such rights and obligations.

8. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other

                                                                       11
employment or otherwise and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.

9. Arbitration; Expenses; Damages. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the
primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled
by arbitration in Philadelphia, Pennsylvania in accordance with the National Rules for the Resolution of Employment Disputes then in effect of
the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and Executive,
respectively, and the third of whom shall be selected by the other two arbitrators. Any award entered by the arbitrators shall be final, binding
and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent
jurisdiction. This arbitration provision shall be specifically enforceable. The parties hereby agree that upon any termination of Executive's
employment hereunder (i) by Company without cause; (ii) by Executive with good Reason; or
(iii) by either Company or Executive after a Change in Control, as long as Executive has executed the Release, if required, then the Company
shall pay all amounts due to Executive hereunder on or prior to the deadline for such payments (it being agree that TIME IS OF THE
ESSENCE) without offset or reduction, and failure to do so shall result in two hundred percent (200%) of the withheld amount (in addition to
the actual amount owed to Executive) being due to Executive as liquidated damages, regardless of any determination that the Company had a
basis for offset or reduction. The Company hereby agrees that it shall be estopped from asserting that such damages are excessive of constitute
a penalty, and that Executive has reasonably relied upon such estoppel. If Company determines it has such an offset or basis for reduction, it
shall notify Executive of such determination, in writing, as soon as reasonably possible and in any event on or prior to the deadline for making
such payment. Company shall make the full payment, but Executive shall be obligated to return any portion of such payment that is
determined, pursuant to the arbitration set forth in this section 9, to have been subject to legitimate offset or deduction.

10. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection
herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows
(provided that notice of change of address shall be deemed given only when received):

                                                             If to the Company, to:

                                                              Atlas America, Inc.
                                                               311 Rouser Road
                                                           Moon Township, PA 15108

                                                               If to Executive, to:

                                                                Edward E. Cohen
                                                           1240 North Casey Key Road
                                                               Osprey, FL 34229

                                                                        12
or to such other names or addresses as the Company or Executive, as the case may be, shall designate by notice to each other person entitled to
receive notices in the manner specified in this Section.

11. Contents of Agreement; Amendment and Assignment.

(a) This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be
changed, modified, extended or terminated except upon written amendment approved by the Board and executed on its behalf by a duly
authorized officer and by Executive.

(b) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of
Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The
Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, within fifteen days of such succession, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

12. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement
which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

13. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or
hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or
existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from
time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

14. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable under this Agreement following Executive's death by giving the Company written
notice thereof. In the event of Executive's death or a judicial determination of

                                                                         13
Executive's incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executive's beneficiary,
estate or other legal representative.

15. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts,
each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for
any of the other counterparts.

16. Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold
from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or
governmental rule or regulation. Except as specifically provided otherwise in this Agreement, Executive shall bear all expense of, and be solely
responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

17. Indemnification.

(a) If Executive is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he is or was an employee (which term includes officer, director,
agent and any other capacity) of the Company or is or was serving at the request of the Company as an employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the
basis of such proceeding is alleged action in an official capacity as an employee or agent or in any other capacity while serving as an employee
or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law, against all
expense, liability and loss (including, but not limited to, attorneys' fees, judgments, fines, ERISA excise taxes and penalties and amount paid or
to be paid in settlement) incurred or suffered by Executive in connection therewith and such indemnification shall continue as to the Executive
after he has ceased to be a director, officer, employee or agent and shall inure to the benefit of Executive's heir, executors and administrators;
provided, however, that the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by Executive (other than a proceeding to enforce this Section 17) only if such proceeding (or part thereof) was authorized
directly or indirectly by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include the right to
be, promptly upon request, paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition;
provided, however, that if the Business Corporation Law of the Commonwealth of Pennsylvania requires the payment of such expenses
incurred by an employee in his capacity as an employee (and not in any other capacity in which service was or is rendered by such person while
a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding,
payment shall be made only upon delivery to the Company of an undertaking, by or on behalf of Executive, to repay all amounts so advanced if
it shall ultimately be determined that such employee is not entitled to be indemnified under this Section or otherwise.

                                                                        14
(b) The indemnification provided by this Section shall not be limited or exclude any rights, indemnities or limitations of liability to which
Executive may be entitled, whether as a matter of law, under the Certificate of Incorporation, By-laws of the Company, by agreement, vote of
the stockholders or disinterested directors of the Company or otherwise.

(c) Executive, in seeking indemnification under this Agreement (an "Indemnitee"), shall give the other party or parties (the "Indemnitor")
prompt written notice of any claim, suit or demand that the Indemnitee believes will give rise to indemnification under this Agreement;
provided, however, that the failure to give such notice shall not affect the liability of the Indemnitor under this Agreement unless the failure to
give such notice materially and adversely affects the ability of the Indemnitor to defend itself against or to cure or mitigate the damages. Except
as hereinafter provided, the Indemnitor shall have the right (without prejudice to the right of the Indemnitee to participate at its expense through
counsel of its own choosing) to defend and to direct the defense against any such claim, suit or demand, at the Indemnitor's expense and with
counsel chosen jointly by Indemnitor and Indemnitee, and the right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, with the Indemnitee's written consent, which shall not be unreasonably withheld, settle or compromise any claim
or consent to any entry of judgment. The Indemnitee shall, at the Indemnitor's expense, cooperate in the defense of any such claim, suit or
demand. If the Indemnitor, within a reasonable time after notice of a claim fails to defend the Indemnitee, the Indemnitee shall be entitled to
undertake the defense, compromise or settlement or such claim at the expense of and for the account and risk of the Indemnitor.

(d) Executive shall be covered during the entire term of this Agreement and thereafter by Officer and Director liability insurance in amounts
and on terms similar to that afforded to other executive and/or directors of the Company or its affiliates, which such insurance shall be paid by
the Company.

18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of Delaware without giving effect to any
conflict of laws provisions.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

                                                            ATLAS AMERICA, INC.

                                                     By: ------------------------------------------

                                                    Name: ------------------------------------------

                                                    Title: ------------------------------------------


                                                                      Executive

                                                                           15
                                                                    Exhibit A

                                         Separation of Employment Agreement and General Release

THIS SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE (the "Agreement") is made as of this ___ day of
__________, ____, by and between ATLAS AMERICA, INC. (the "Company") and _______________ ("Executive").

WHEREAS, Executive formerly was employed by the Company as _______________________pursuant to the terms of the Employment
Agreement, dated _______ __, 2004, (the "Employment Agreement");

WHEREAS, the Employment Agreement provides for certain benefits in the event that Executive's employment is terminated on account of a
reason set forth in the Employment Agreement;

WHEREAS, Executive and the Company mutually desire to terminate Executive's employment on an amicable basis, such termination to be
effective _________ ____, ____ ("Date of Resignation"); and

WHEREAS, in connection with the termination of Executive's employment, the parties have agreed to a separation package and the resolution
of any and all disputes between them.

NOW, THEREFORE, IT IS HEREBY AGREED by and between Executive and the Company as follows:

1. (a) Executive, for and in consideration of the commitments of the Company as set forth in the Employment Agreement, and intending to be
legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company, its affiliates, subsidiaries and parents, and its
officers, directors, employees, and agents, and its and their respective successors and assigns, heirs, executors, and administrators (collectively,
"Releasees") from all causes of action, suits, debts, claims and demands whatsoever in law or in equity ("Claims"), which Claims related to
Executive's employment with the Company and which Claims Executive ever had, now has, or hereafter may have, whether known or
unknown, or which his heirs, executors, or administrators may have, by reason of any matter, cause or thing whatsoever, from the beginning of
his employment to the date of this Agreement. Company, for itself and its successors and assigns, and any party claiming by, through or under
the Company, its successors and assigns, does hereby REMISE, RELEASE AND FOREVER DISCHARGE Executive for any and all Claims
that Company ever had, now has, or hereafter may have against Executive, whether known or unknown, by reason of any matter, cause or thing
whatsoever, from the beginning of Executive's employment to the date of this Agreement. This Agreement is effective without regard to the
legal nature of the claims raised and without regard to whether any such claims are based upon tort, equity, implied or express contract or
discrimination of any sort. The forgoing

                                                                        16
releases do not apply to Executive's and Company's obligations under this Agreement and any continuing obligations under the Employment
Agreements.

(b) To the fullest extent permitted by law, Executive represents and affirms that (i) [other than _______,] he has not filed or caused to be filed
on his behalf any claim for relief against the Company or any Releasee and, to the best of his knowledge and belief, no outstanding claims for
relief have been filed or asserted against the Company or any Releasee on his behalf; and (ii) [other than _______,] he has not reported any
improper, unethical or illegal conduct or activities to any supervisor, manager, department head, human resources representative, agent or other
representative of the Company, to any member of the Company's legal or compliance departments, or to the ethics hotline, and has no
knowledge of any such improper, unethical or illegal conduct or activities; and (iii) he will not file, commence, prosecute or participate in any
judicial or arbitral action or proceeding against the Company or any Releasee based upon or arising out of any act, omission, transaction,
occurrence, contract, claim or event existing or occurring on or before the date of this Agreement.

2. Executive agrees that he will not file, charge, claim, sue or cause or permit to be filed, charged or claimed, any civil action, suit or legal
proceeding seeking equitable or monetary relief (including damages, injunctive, declaratory, monetary or other relief) for himself involving any
matter released in paragraph 1. In the event that suit is filed in breach of this covenant not to sue, it is expressly understood and agreed that this
covenant shall constitute a complete defense to any such suit. In the event any Releasee is required to institute litigation to enforce the terms of
this paragraph, Releasees shall be entitled to recover reasonable costs and attorneys' fees incurred in such enforcement. Executive further
agrees and covenants that should any person organization, or other entity file, charge, claim, sue, or cause or permit to be filed any civil action,
suit or legal proceeding involving any matter occurring at any time in the past, Executive will not seek or accept personal equitable or monetary
relief in such civil action, suit or legal proceeding.

3. Executive further agrees and recognizes that he has permanently and irrevocably severed his employment relationship with the Company and
that the Company has no obligation to employ him in the future.

4. Executive further agrees that he will not disparage or subvert the Company, or make any statement reflecting negatively on the Company, its
affiliated corporations or entities, or any of their officers, directors, employees, agents or representatives, including, but not limited to, any
matters relating to the operation or management of the Company, Executive's employment and the termination of his employment, irrespective
of the truthfulness or falsity of such statement.

5. Executive understands and agrees that the payments, benefits and agreements provided in this Agreement and in the Employment Agreement
are being provided to him in consideration for his acceptance and execution of, and in reliance upon his representations in, this Agreement.
Executive acknowledges that if he had not executed this Agreement containing a release of all claims

                                                                         17
against the Company, he would only have been entitled to the payments provided in the Company's standard severance pay plan for employees.

6. Executive represents that, to the best of his knowledge, he does not presently have in his possession any records and business documents,
whether on computer or hard copy, and other materials (including but not limited to computer disks and tapes, computer programs and
software, office keys, correspondence, files, customer lists, technical information, customer information, pricing information, business
strategies and plans, sales records and all copies thereof) (collectively, the "Corporate Records") provided by the Company and/or its
predecessors, subsidiaries or affiliates or obtained as a result of his prior employment with the Company and/or its predecessors, subsidiaries or
affiliates, or created by Executive while employed by or rendering services to the Company and/or its predecessors, subsidiaries or affiliates.
Executive acknowledges that all such Corporate Records are the property of the Company.

7. Nothing in this Agreement shall prohibit or restrict Executive from:
(i) making any disclosure of information required by law; (ii) providing information to, or testifying or otherwise assisting in any investigation
or proceeding brought by, any federal regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the
Company's; or (iii) filing, testifying, participating in or otherwise assisting in a proceeding relating to an alleged violation of any federal, state
or municipal law relating to fraud, or any rule or regulation of the Securities and Exchange Commission or any self-regulatory organization.

8. The parties agree and acknowledge that the agreement by the Company described herein, and the settlement and termination of any asserted
or unasserted claims against the Releasees, are not and shall not be construed to be an admission of any violation of any federal, state or local
statute or regulation, or of any duty owed by any of the Releasees to Executive.

9. This Agreement and the obligations of the parties hereunder shall be construed, interpreted and enforced in accordance with the laws of the
State of Delaware.

10. Executive certifies and acknowledges as follows:

(a) That he has read the terms of this Agreement, and that he understands its terms and effects, including the fact that he has agreed to
RELEASE AND FOREVER DISCHARGE the Company and each and everyone of its affiliated entities from any legal action arising out of
his employment relationship with the Company and the termination of that employment relationship;

(b) That he has signed this Agreement voluntarily and knowingly in exchange for the consideration described herein, which he acknowledges is
adequate and satisfactory to him and which he acknowledges is in addition to any other benefits to which he is otherwise entitled;

                                                                          18
(c) That he has been and is hereby advised in writing to consult with an attorney prior to signing this Agreement;

(d) That he does not waive rights or claims that may arise after the date this Agreement is executed;

(e) That the Company has provided him with a period of fifteen days within which to consider this Agreement, and that Executive has signed
on the date indicated below after concluding that this Agreement is satisfactory to him; and

(f) Executive acknowledges that this Agreement may be revoked by him within seven days after execution, and it shall not become effective
until the expiration of such seven day revocation period. In the event of a timely revocation by Executive, this Agreement will be deemed null
and void and the Company will have no obligations hereunder.

Intending to be legally bound hereby, Executive and the Company executed the foregoing Confidential Separation Agreement and General
Release this ______ day of _______, ____.

_____________________________ Witness:________________________
[Executive]

ATLAS AMERICA, INC.

By:___________________________ Witness:________________________

Name:________________________

Title:_________________________

                                                                       19
                                                                Exhibit 23.1

                               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated December 5, 2003, except for note 16, for which the date is February 27, 2004, accompanying the financial
statements of Atlas America, Inc. contained in the Registration Statement on Form S-1. We consent to the use of the aforementioned report in
the Registration Statement, and to the use of our name as it appears under the caption "Experts."
                                                         /s/ GRANT THORNTON LLP

                                                         Cleveland, Ohio
                                                         April 8, 2004

								
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