Prepared and filed by St Ives Burrups

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VRiGkfEG6GgWKzLYoWzicbvNd5t3Ik1AqKRYkybTthMnnpuPy67Jcoyc8Hh1YiUx Cx3Y6uTN/oVD8160urvDqg== 0000950116-04-003736.txt : 20041210 0000950116-04-003736.hdr.sgml : 20041210 20041210165204 ACCESSION NUMBER: 0000950116-04-003736 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040716 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041210 DATE AS OF CHANGE: 20041210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 720654145 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-04408 FILM NUMBER: 041196921 BUSINESS ADDRESS: STREET 1: 1845 WALNUT STREET STREET 2: SUITE 1000 CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 215-546-5005 MAIL ADDRESS: STREET 1: 1845 WALNUT STREET STREET 2: SUITE 1000 CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCE EXPLORATION INC DATE OF NAME CHANGE: 19890214 FORMER COMPANY: FORMER CONFORMED NAME: SMTR CORP DATE OF NAME CHANGE: 19700522 8-K/A 1 eight-ka.htm 8-K/A Prepared and filed by St Ives Burrups

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 16, 2004

Resource America, Inc.
(Exact name of registrant as specified in its chapter)

Delaware
(State or other jurisdiction
of incorporation)

0-4408
(Commission
File Number)

72-0654145
(IRS Employer
Identification No.)

1845 Walnut Street, Suite 1000, Philadelphia, PA			19103
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: 215-546-5005

__________________________________________________________

(Former name or former address, if changed since last report)

Item 9.01.	Financial Statements, Pro Forma Financial Information and Exhibits

	(a)	Financial Statements of Businesses Acquired
		The balance sheets of Spectrum Field Services, Inc. as of December 31, 2003 and 2002, the related statements of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003 and the related notes, together with the report of the independent registered public accounting firm are attached to this report as Exhibit 99.1.

	(b)	Pro Forma Financial Information

		The unaudited pro forma balance sheet of Resource America, Inc. as of March 31, 2004, the related statements of operations for the year ended September 30, 2003 and the six months ended March 31, 2004 and the related notes are attached to this report as Exhibit 99.2.

	(c)	Exhibits

		2.1	Securities Purchase Agreement dated June 10, 2004.⁽¹⁾
		99.1	Financial Statements of Spectrum Field Services, Inc.
		99.2	Pro Forma Financial Statements.

______________________

(1) Previously filed as an exhibit to this Form 8-K on August 2, 2004.

SIGNATURES

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

Dated: December 10, 2004	Resource America, Inc.


	By: /s/ Steven J. Kessler
	Senior Vice President and CFO

EX-99 2 ex99-1.txt EXHIBIT 99.1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Spectrum Field Services, Inc. We have audited the accompanying balance sheets of Spectrum Field Services, Inc. (a Delaware corporation) as of December 31, 2003 and 2002, and the related statements of operations, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 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 the standards of the Public Company Accounting Oversight Board (United States). 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 financial position of Spectrum Field Services, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. /s/ Grant Thornton LLP Tulsa, Oklahoma May 17, 2004 (except with respect to the matters discussed in Note J, as to which the date is June 30, 2004) SPECTRUM FIELD SERVICES, INC. Balance sheets December 31, 2003 and 2002 (in thousands, except share data)

The accompanying notes are an integral part of these balance sheets. SPECTRUM FIELD SERVICES, INC. Statements of operations For the years ended December 31, 2003, 2002 and 2001 (In thousands)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Statements of comprehensive income (loss) For the years ended December 31, 2003, 2002 and 2001 (In thousands)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Statements of changes in shareholders' equity For the years ended December 31, 2003, 2002 and 2001 (in thousands, except share data)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Statements of cash flows For the years ended December 31, 2003, 2002 and 2001 (In thousands)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Notes to financial statements December 31, 2003, 2002 and 2001 (in thousands, except share data) A - OPERATIONS AND ORGANIZATION Spectrum Field Services, Inc. (the Company), was incorporated in Delaware on May 8, 2000. The Company was formed to acquire and operate natural gas processing plants and gathering systems in Velma, Oklahoma and Kingman, Kansas. On February 28, 2001, the Company entered into an agreement to repurchase the interest of one of the Company's equity investors, which was also a major customer of the Company. The agreement resulted in the Company forgiving $13,000 in accounts receivable owed by the shareholder at February 28, 2001, in exchange for the retirement of the outstanding subordinated debt owed to the shareholder, the repurchase of all of the shareholder's common and Series A preferred stock, and the retirement of the shareholder's outstanding stock warrant. This transaction was treated as a noncash transaction for presentation in the statement of cash flows. The Company refinanced the subordinated debt with additional borrowings of long-term debt. On August 1, 2003, the Company sold all of the assets of the Company's natural gas processing plant located in Kingman, Kansas for $1,200. The value of the plant was written down by $1,889 as of December 31, 2002, in contemplation of the transaction in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). In 2003, an additional loss of $215 was recorded which related to the sale of the plant. The additional loss was recorded as other expense in the Company's statement of operations. On December 30, 2003, the Company engaged Lehman Brothers to explore strategic alternatives for the Company including a merger, sale or other transactions involving the stock or assets of the Company. B - SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL 1. Accounts Receivable The Company grants credit to its customers for the purchase of natural gas and natural gas liquids. Accounts receivable consist of amounts billed to customers and an accrual for sales not yet billed. The Company writes off accounts receivable when management believes the receivables to be uncollectible. A summary of accounts receivable at December 31 is as follows: 2003 2002 ------- ------- Customer receivables $ 119 $ 44 Accrued sales 8,354 7,510 ------- ------- $ 8,473 $ 7,554 ======= ======= SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) 2. Inventories The Company's inventories are primarily comprised of replacement pipe, natural gas and natural gas liquids and are stated at the lower of cost or market. A summary of inventories at December 31 is as follows: 2003 2002 ---- ---- Replacement pipe $ 76 $ 110 Natural gas 65 179 Natural gas liquids - 232 Other 38 32 ----- ----- $ 179 $ 553 ===== ===== 3. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: Buildings and improvements 7 to 39 years Plant, machinery and equipment 10 to 20 years Rights of way 20 years Office furniture and equipment 5 to 7 years Autos 5 years Maintenance, repairs and betterments, including replacement of minor items of physical properties, are charged to expense. Major additions to physical properties are capitalized. The cost of the assets retired or sold is credited to the asset accounts and the related accumulated depreciation is charged to the accumulated depreciation accounts. The gain or loss from sale or retirement of property, if any, is included in the statement of operations. A summary of property, plant and equipment at December 31 is as follows: 2003 2002 --------- --------- Land $ 181 $ 181 Buildings and improvements 486 287 Plant, machinery and equipment 48,415 48,797 Rights of way 6,313 5,079 Office furniture and equipment 1,329 1,515 Autos 275 242 Construction in process 445 - --------- --------- 57,444 56,101 Less- accumulated depreciation (10,394) (8,327) --------- --------- $ 47,050 $ 47,774 ========= ========= 2 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) 4. Security Deposits Security deposits primarily represent amounts paid by the Company to the Velma Gas Plant's electricity provider to finance the upgrade of the electricity provider's facilities to accommodate the Company's additional electricity requirements resulting from the addition of several new electric compressors at the Velma Gas Plant. The electricity provider is required to repay the amount paid by the Company over time based on the Company's electric power consumption. Management projects such payments to occur over a six-year period. The Company has classified the amount expected to be received from the electricity provider within one year as a current asset. No interest is charged on the outstanding balance. 5. Other Long-Term Assets Other long-term assets consist primarily of loan origination fees and deposits made for the purchase of equipment. Loan origination fees are capitalized at cost and amortized over the term of the associated notes using the straight-line method. The following is a summary of the Company's other assets at December 31:

6. Long-Lived Assets The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related operation's undiscounted cash flows over the remaining life of the assets in measuring whether the assets are recoverable. When undiscounted cash flows are less than book value of the assets, the required impairment is calculated as the excess of the book value of the assets over the discounted cash flows. Impairment charges of $0, $1,889 and $0 were recorded for the years ended December 31, 2003, 2002 and 2001, respectively. 3 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) 7. Revenue and Cost Recognition Revenues and costs are recognized at the time the natural gas is processed and the natural gas and natural gas liquids are delivered at the tailgate of the plant to market. For 2003 and 2002, approximately 20% of the Company's natural gas supply comes from one supplier. 8. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using currently enacted tax laws and future rates that will apply to the periods in which they are expected to affect taxable income. At December 31, 2003 and 2002, the Company had net noncurrent deferred tax assets and net noncurrent deferred tax liabilities of approximately $1,644 and $2,063, respectively. The deferred tax liabilities are primarily generated due to the difference between depreciation calculated for financial reporting and income tax purposes. The deferred tax assets relate primarily to net operating loss carryforwards and recognition of an impairment loss for financial reporting purposes in 2002. At December 31, 2003, the Company has net operating loss carryforwards of approximately $14,700, which will begin to expire in 2022. No valuation allowance has been recorded against the Company's deferred tax asset as management expects future taxable income will be sufficient to utilize the Company's net operating loss carryforwards. The Company's 2003 income tax benefit consists of a current income tax benefit of $614 and a deferred income tax benefit of $3,689. The Company's 2002 income tax benefit consists of a current income tax benefit of $696 and a deferred income tax expense of $196. The Company's 2001 income tax provision consists of a current income tax benefit of $193 and a deferred income tax expense of $1,870. The effective tax rate differs from the enacted federal income tax rate primarily due to state income taxes and tax credits. 9. Use of Estimates in the Preparation of Financial Statements The preparation of 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, estimating accrued revenue and producer payments, evaluating the realizability of long-lived assets, and estimating the fair value of derivatives. Actual results could differ from those estimates. 4 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) 10. Reclassifications Certain reclassifications of previously reported amounts for 2002 and 2001 have been made to conform with the 2003 presentation format. These reclassifications had no impact on net loss. 11. Concentration of Credit Risk The Company extends trade credit to various companies in the natural gas and natural gas liquids market in the normal course of business. In 2003 and 2002, respectively, the Company had two primary customers that accounted for approximately 87% and 96% of the Company's sales and 80% and 83% of the Company's accounts receivable at December 31, 2003 and 2002. During 2001, the Company had three primary customers (one of which was a shareholder of the Company through February 28, 2001). In 2001, sales to three customers accounted for approximately 97% of the Company's sales. Management believes the credit worthiness of its customers mitigates the concentration risk. 12. Derivative Instruments The Company applies the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 requires each derivative instrument to be recorded in the balance sheet as either an asset or liability measured at fair value. Changes in a derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of operations. Companies must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. 13. Restricted Common Stock The Company has granted restricted common stock to certain key employees. The Company applies fixed plan accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, the Company records the issuance of restricted stock as an increase to equity with a corresponding offset to deferred compensation (presented as a reduction in equity on the balance sheet). The deferred compensation is reduced by recording compensation expense over the vesting period. 14. Recently Issued Accounting Pronouncements The Company accounts for expected future costs associated with its obligation to perform site reclamation and dismantle facilities of abandoned plants and pipelines under Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. If a reasonable estimate of the fair value of an abandonment obligation can be made, SFAS 143 requires the Company to record a liability (an asset 5 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) retirement obligation or ARO) on the balance sheets in other noncurrent liabilities and to capitalize the asset retirement cost in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the associated costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices after discounting the future cost back to the date that the abandonment obligation was incurred using the credit-adjusted risk-free rate for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the credit-adjusted risk-free rate and the additional capitalized costs will be depreciated on a straight-line basis over the productive life of the related assets. The Company has not recorded an asset retirement obligation as of December 31, 2003, as management believes the amount to be immaterial to the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Under the provisions of SFAS No. 145, gains and losses from the extinguishment of debt generally will no longer be classified as extraordinary items in the statement of operations. The provisions of SFAS No. 145 related to the extinguishment of debt become effective for the Company beginning in 2003. The adoption did not have a material impact on the Company's financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS 146 is effective for fiscal years beginning after December 31, 2002, with early application encouraged. The Company adopted this standard January 1, 2003. The adoption did not have a material impact on the Company's financial position or results of operations. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FAS 123. The standard provides additional transition guidance for companies that elect to voluntarily adopt the accounting provisions of SFAS No. 123, Accounting For Stock-Based Compensation. SFAS No. 148 does not change the provisions of SFAS No. 123 that permit entities to continue to apply the intrinsic value method of APB 25, Accounting for Stock Issued to Employees. The adoption of SFAS No. 148 did not have a material impact on the Company's financial position or results of operations. In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon the issuance of guarantees, the guarantor must recognize a liability for the fair value of the obligations it assumes under the guarantee. Liability recognition is required on a prospective basis for 6 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) that are made or modified after December 31, 2002. The adoption of FIN 45 had no impact on the Company's financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an interpretation of ARB 51. The primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to an entity which either (1) the equity investors, if any, do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. The adoption of this standard did not have any impact on the Company's financial position or results of operations. In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS 133. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company adopted SFAS 149 as of July 1, 2003. The adoption of SFAS 149 did not have a material impact on the Company's financial position or results of operations. C - DERIVATIVE INSTRUMENTS The Company entered into certain financial swap instruments, some of which settled during the years ended December 31, 2003 and 2002, that are designated as cash flow hedging instruments in accordance with SFAS 133. The maturities of the instruments outstanding at December 31, 2003, are less than one year. The swap instruments are contractual agreements to exchange obligations of money between the buyer and seller of the instruments as natural gas volumes during the pricing period are sold. The swaps are tied to a set fixed price for the seller and floating price determinants for the buyer priced on certain indices at the end of the relevant trading period. The Company entered into these instruments to hedge the forecasted gas plant residue sales to variability in expected future cash flows attributable to changes in natural gas prices. For the swaps that were settled during the year ended December 31, 2003, the Company reclassified into earnings a before-tax loss of $2,086, that was previously reported in accumulated other comprehensive loss. For the swaps that were settled during the year ended December 31, 2002, the Company reclassified into earnings a before-tax gain of $12, that was previously reported in accumulated other comprehensive income (loss). The Company entered into several swaps that were designed to hedge natural gas liquids prices during 2003 and 2002 that did not meet specific hedge accounting criteria. The Company recognized a before-tax loss of $254 and $189 related to these swaps during the years ending December 31, 2003 and 2002, respectively. 7 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) D - LONG-TERM DEBT A summary of long-term debt at December 31 is as follows:

Substantially all of the Company's assets are pledged under these loan agreements. The terms of these agreements place certain financial and operating covenants on the Company, the most restrictive being a debt-to-capitalization ratio and a fixed charge ratio. The Company was in compliance with all covenants at December 31, 2003. At December 31, 2003, the Company entered into an agreement to modify the terms of the revolving line of credit. Per this agreement, the amount available to the Company under the line of credit is increased to $12,000. However, if the Company does not consummate a sale of all or substantially all of the Company's assets by June 30, 2004, the total amount available under the line of credit is reduced to $6,000 and any amount owed by the Company at June 30, 2004, over $6,000 must be repaid to the bank in an amount not to exceed $1,800. The remaining balance will be due in July 2005. 8 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) On July 23, 2002, the Company borrowed an additional $3,515 and issued subordinated notes to shareholders. In 2003 and 2002, the Company issued additional subordinated notes to its shareholders in lieu of making cash interest payments. Such notes totaled $1,188 and $946 during 2003 and 2002, respectively. The transactions are reflected as noncash financing activities on the Company's statement of cash flows. The future maturities of long-term debt at December 31, 2003, are as follows: 2004 $ 4,995 2005 23,394 2006 81 2007 15,642 --------- $ 44,112 ========= E - COMMITMENTS AND CONTINGENCIES 1. Leases The Company's corporate activities are conducted from leased office facilities located in Tulsa, Oklahoma. The Company also leases certain machinery, equipment and automobiles used in its operations. Future minimum rental payments required under noncancelable operating leases for each of the years ended December 31 are as follows: 2004 $ 80 2005 3 2006 1 --------- $ 84 ========= Rental expense was approximately $399, $444 and $496 for the years ended December 31, 2003, 2002 and 2001, respectively. 2. Letters of Credit At December 31, 2003, the Company has four outstanding letters of credit in favor of various parties totaling $1,792. The letters of credit expire at various times in 2004 and 2005. 3. Legal Proceedings At December 31, 2003, the Company is party to various legal proceedings incidental to its business. Certain claims have been filed or are pending against the Company. In one matter, the Company has been named as a 9 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) co-defendant in a lawsuit in which certain royalty owners of the Company's co-defendant allege that the Company has been purchasing gas at below market prices. The gas involved in this legal proceeding represents a very small portion of the gas purchased by the Company. The Company plans on defending itself vigorously. If the plaintiffs are ultimately successful, the Company believes it has the ability to seek indemnification from its co-defendant. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company's balance sheet as of December 31, 2003. In the opinion of management, the resolution of various legal proceedings will not have a material effect on the financial position or results of operations of the Company. On November 10, 2003, the Company settled a lawsuit filed against the Company by a former shareholder. The settlement agreement requires the Company to pay the former shareholder $1,820. At December 31, 2003, the Company has recorded an accrual of $1,820, which is included in accounts payable in the balance sheet and other expense in the statement of operations. The amount was paid in January 2004. On March 9, 2004, the Oklahoma Tax Commission (OTC) filed a petition against the Company alleging that the Company underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5,000 plus interest and penalties. The Company plans on defending itself vigorously. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company's balance sheet as of December 31, 2003. 4. Employment Agreements The Company had outstanding agreements with two key employees to provide severance payments to those employees upon the occurrence of certain triggering events, including the sale of the Company's assets, a merger, or liquidation of the Company. Termination of both employees will result in a liability of between $142 and $229. F - COMMON AND PREFERRED STOCK Each share of Series A preferred stock is due quarterly dividends payable in arrears at a rate of 8% per Series A share beginning September 30, 2000. During 2001, the Company paid $322 of dividends to preferred stockholders representing dividends for the first two quarters of the year. Dividends for the last two quarters of 2001 and all of 2002 and 2003 have been declared but not paid and are recorded as dividends payable in the balance sheet. Additionally, each share is redeemable for cash at the option of the shareholder upon a change of control at a price equal to the original price paid for the shares plus any accrued and unpaid dividends. The shares of Series A preferred stock shall, with respect to dividend rights and rights upon liquidation, receive preference over any common stock. 10 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) 1. Incentive Stock Plan and Stock Option Plan The Company adopted the Spectrum Field Services, Inc. 2000 Incentive Stock Plan (the Plan) in order to attract, motivate and retain quality employees and to encourage valued employees to have a proprietary interest in the Company. Under the Plan, the Company may issue to selected employees Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Units or Performance Shares, or Phantom Stock Rights. The Company has reserved 222,222 shares of common stock for issuance under the Plan. During 2000, the Company granted key employees 211,110 shares of restricted common stock valued at $665 when issued ($3.15 per share), as determined by management. The employees vest in the restricted stock ratably over a four-year period beginning in 2001. As vesting occurs, the Company will reverse the deferred compensation and charge compensation expense equal to the estimated fair value of the vested shares at the time of the grant. During 2002, the Company entered into agreements with three officers holding unvested restricted common shares. According to the agreements, the Company accelerated the vesting of some shares and repurchased all of the officers' vested shares for $320. In addition, all remaining unvested shares were cancelled for those officers. The Company reversed $140 of deferred compensation related to the cancellation of the unvested shares in 2002 as a result. During January 2003, the Company granted 10,000 shares of restricted common stock to an employee. The stock at the time of grant was valued at $3.15, which represented management's estimate of the fair value of the restricted stock on the grant date. This grant vests 75% in 2003 and the remaining 25% in 2004. The Company recorded $59, $289 and $166 of expense in 2003, 2002 and 2001, respectively, related to the vesting of restricted common stock. As of December 31, 2003, 54,444 shares of restricted common stock are outstanding. In 2002, the Company granted certain stock options to two key employees of the Company. The options will vest if a qualified triggering event occurs. A triggering event is determined to be the earlier occurrence of (i) the date of an initial public offering of the Company's common stock, (ii) the sale of all or substantially all of the assets of the Company or (iii) immediately before (a) the sale of all the outstanding common stock of the Company by the holders thereof or (b) the merger of the Company or similar business combination with another entity in which the Company is not the survivor. The number of options granted under the two agreements was 111,110. At December 31, 2003 and 2002, no options were vested as a triggering event had not occurred. The exercise price of the options is $1.00 per share. The options granted are accounted for using fixed plan accounting in accordance 11 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) with APB No. 25 as management determined that both the exercise price and the number of shares under option that will eventually vest were known at the grant date. The intrinsic value of the options was determined to be $239 at the grant date based on management's best estimate of the fair value of the Company's shares at the grant date. The Company records compensation expense over the expected service period. As of December 31, 2003, the Company has recorded cumulative compensation expense of $74. The remaining $165 of compensation expense will be recorded over the remaining service period or when a triggering event occurs which causes the options to immediately vest. The effect of Statement of Financial Standards No. 123, Accounting for Stock Based Compensation (SFAS 123) is not material. Therefore, the Company has made no disclosure of the pro forma net income as if SFAS 123 had been adopted. All options granted under the agreements expire after ten years. Transactions in stock options are summarized as follows:

The following is a summary of stock options outstanding as of December 31, 2003:

2. Phantom Unit Plan In August 2001, the Company adopted the Employee Participation Unit Plan (the EPU Plan). Under the EPU Plan, the Company was authorized to issue 167,190 phantom units to employees from time to time at the discretion 12 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) of the Board of Directors. Phantom units are designed to allow holders of the phantom units to share in the value of the Company with the common shareholders. Holders of phantom units had no voting or other privileges typically available to common shareholders. During 2002 and 2001, the Company granted 151,800 phantom units to employees. All units granted vested ratably over a five-year period. The participants of the EPU Plan receive benefits equal to the estimated fair value of their vested units only upon normal retirement, disability or a change of control. The form of the benefits to be paid under the EPU Plan was at the discretion of the Board of Directors. The EPU Plan met the criteria for variable plan accounting under the provisions of APB 25. Accordingly, at each reporting period, compensation cost was measured based on the estimated fair value of the vested phantom units. Compensation expense (benefit) was recorded to the extent that the fair value of vested units increased (decreased) from the previous reporting period. The Company recorded $112 of compensation expense related to the outstanding phantom units during 2001. During 2002, the Company cancelled the EPU Plan and paid $54 to the participants of the EPU Plan, which was recorded as expense. Additionally, the Company reversed the previously recognized compensation expense of $112. 3. Shareholders' Commitment On March 23, 2001, two shareholders of the Company signed an agreement committing to purchase up to $6,500 of additional debt or equity securities if requested to do so by the holders of the senior debt. The agreements were amended in 2003 and 2002 to $5,500 and $3,000, respectively. Such request can only occur if an event of default (as defined in the credit agreement) has occurred and is continuing. As of December 31, 2003, this commitment was $4,500 and expires on June 30, 2004. On July 23, 2002, the Company received additional capitalization from the equity owners. The Company issued 545,529 shares of common stock ($.01 par value) and 2,969,471 shares of Series A preferred stock ($.01 par value) in exchange for $3,514 of cash. The Company also issued additional subordinated notes to certain shareholders of $3,515. The Company pays a commitment fee to the shareholders related to the agreements. Fees paid to the shareholders totaled approximately $110, $60 and $130 in 2003, 2002 and 2001. G - BENEFIT PLANS The Company sponsors a defined contribution retirement plan. The Company makes discretionary matching contributions to the plan. The Company expensed contributions of approximately $84, $151 and $181 for the years ended December 31, 2003, 2002 and 2001, respectively. 13 SPECTRUM FIELD SERVICES, INC. Notes to financial statements - continued December 31, 2003, 2002 and 2001 (in thousands, except share data) H - CHANGE IN ACCOUNTING ESTIMATE In December 2002, the Company began a project to replace certain gas-powered compressors with electric-powered compressors at its natural gas processing plant in Velma, Oklahoma. The project was completed in October 2003. In 2002, management revised the estimated useful lives of the previous gas-powered compressors to reflect usage of those assets through July 2003. The Company treated the change in useful life as a change in accounting estimate. Accordingly, the Company revised its depreciation calculation on a prospective basis from the date the project was probable, which was November 30, 2002. As a result, the Company recorded additional depreciation expense of $1,342 during 2002 and depreciated the remaining net book value of $9,868 in 2003. Additionally, the Company accelerated depreciation in 2003 on certain other compressors that were not originally part of this project. This resulted in additional depreciation of $497. In April 2003, the Company began a project to replace the Sulphur Recovery Unit (SRU) at its natural gas processing plant in Velma, Oklahoma. Management revised the estimated useful life of the SRU to reflect usage of the asset through October 2003. The Company treated the change in useful life as a change in accounting estimate. As a result, the Company depreciated the remaining net book value of $3,287 in 2003. The project was completed in March 2004. I - RELATED PARTY TRANSACTIONS During 2003, the Company had sales to an affiliate of approximately $687, which is recorded as accrued sales at December 31, 2003. During 2002, there were no sales to affiliates. During part of 2001, one of the Company's primary customers was a shareholder. All transactions between the Company and the shareholder were at prevailing market rates. During 2001, the Company had sales to the shareholder of approximately $15,000. At December 31, 2001, no amounts were due from the shareholder. During 2003, 2002 and 2001, the Company had sales of condensate to an affiliate of approximately $453, $1,663 and $2,100, respectively. J - SUBSEQUENT EVENTS On June 10, 2004, the Company, along with Energy Spectrum Partners II LP, Energy Spectrum Partners III LP and other various sellers, entered into a Securities Purchase Agreement with Atlas Pipeline Operating Partnership, L.P. to sell the outstanding capital stock of the Company for a total purchase price of $140,000 adjusted for changes in net working capital, less amounts owed for long-term debt and adjusted for other transaction costs. At June 30, 2004, the Company entered into an agreement to modify the terms of the revolving line of credit agreement. However, if the Company does not consummate a sale of all or substantially all of the Company's assets by August 31, 2004, the total amount available shall be automatically and permanently reduced to $6,000 effective September 1, 2004. The remaining balance will be due in July 2005. 14 UNAUDITED FINANCIAL STATEMENTS These unaudited interim financial statements as of March 31, 2004 and for the three month periods ended March 31, 2004 and 2003 were prepared by Spectrum Field Services, Inc. (Spectrum) and should be read in conjunction with the audited financial statements contained in this Form 8-K, which include Spectrum's audited balance sheets as of December 31, 2003 and 2002 and the related statements of operations, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2003. SPECTRUM FIELD SERVICES, INC. Unaudited Interim Balance Sheet March 31, 2004 (in thousands, except share data)

The accompanying notes are an integral part of this balance sheet SPECTRUM FIELD SERVICES, INC. Unaudited Interim Statements of Operations and Accumulated Deficit For the three months ended March 31, 2004 and 2003 (In thousands) 2004 2003 -------- -------- SALES OF NATURAL GAS AND LIQUIDS $ 27,785 $ 28,378 COST OF NATURAL GAS AND LIQUIDS 21,951 22,944 -------- -------- Gross profit 5,834 5,434 OPERATING EXPENSE 1,115 1,434 GENERAL AND ADMINISTRATIVE EXPENSE 673 489 DEPRECIATION 740 4,772 -------- -------- INCOME (LOSS) FROM OPERATIONS 3,306 (1,261) INTEREST EXPENSE 778 619 OTHER EXPENSE, net 378 87 -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 2,150 (1,967) INCOME TAX PROVISION (BENEFIT) 816 (757) -------- -------- NET INCOME (LOSS) 1,334 (1,210) PREFERRED STOCK DIVIDENDS 264 221 -------- -------- NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS 1,070 (1,431) RETAINED EARNINGS (ACCUMULATED DEFICIT), BEGINNING OF PERIOD (5,279) 1,729 -------- -------- RETAINED EARNINGS (ACCUMULATED DEFICIT), END OF PERIOD $ (4,209) $ 298 ======== ======== The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Unaudited Interim Statements of Comprehensive Income (Loss) For the three months ended March 31, 2004 and 2003 (In thousands)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. Unaudited Interim Statements of Cash Flows For the three months ended March 31, 2004 and 2003 (In thousands)

The accompanying notes are an integral part of these financial statements. SPECTRUM FIELD SERVICES, INC. NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS For the three months Ended March, 31, 2004 and 2003 (in thousands, except share data) A - BASIS OF PRESENTATION The interim financial statements of Spectrum Field Services, Inc. (the Company) as of March 31, 2004 and for the three month periods ended March 31, 2004 and 2003 have been prepared in accordance with accounting principles generally accepted in the United States of America and on the same basis as the audited financial statements for the year ended December 31, 2003. 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 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 month period ended March 31, 2004 may not necessarily be indicative of the results of operations for the full year ending December 31, 2004. The preparation of 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, estimating accrued revenue and producer payments, evaluating the realizability of long-lived assets, and estimating the fair value of derivatives. Actual results could differ from those estimates. B - OPERATIONS AND ORGANIZATION The Company was incorporated in Delaware on May 8, 2000. The Company was formed to acquire and operate natural gas processing plants and gathering systems in Velma, Oklahoma and Kingman, Kansas. On August 1, 2003, the Company sold all of the assets of the Company's natural gas processing plant located in Kingman, Kansas for $1,200. The value of the plant was written down by $1,889 as of December 31, 2002, in contemplation of the transaction in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). C- SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL 1. ACCOUNTS RECEIVABLE The Company grants credit to its customers for the purchase of natural gas and natural gas liquids. Accounts receivable consist of amounts billed to customers and an accrual for sales not yet billed. The Company writes off accounts receivable when management believes the receivables to be uncollectible. A summary of accounts receivable at March 31, 2004 is as follows: Customer receivables $ 73 Accrued sales 9,357 -------- $ 9,430 ======== 2. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: Buildings and improvements 7 to 39 years Plant, machinery and equipment 10 to 20 years Rights of way 20 years Office furniture and equipment 5 to 7 years Autos 5 years Maintenance, repairs and betterments, including replacement of minor items of physical properties, are charged to expense. Major additions to physical properties are capitalized. The cost of the assets retired or sold is credited to the asset accounts and the related accumulated depreciation is charged to the accumulated depreciation accounts. The gain or loss from sale or retirement of property, if any, is included in the statement of operations. A summary of property, plant and equipment at March 31, 2004, is as follows: Land $ 181 Buildings and improvements 486 Plant, machinery and equipment 47,728 Rights of way 6,441 Office furniture and equipment 1,321 Autos 300 Construction in process 445 --------- 56,902 Less- accumulated depreciation (7,306) --------- $ 49,596 ========= 3. Security Deposits Security deposits primarily represent amounts paid by the Company to the Velma Gas Plant's electricity provider to finance the upgrade of the electricity provider's facilities to accommodate the Company's additional electricity requirements resulting from the addition of several new electric compressors at the Velma Gas Plant. The electricity provider is required to repay the amount paid by the Company over time based on the Company's electric power consumption. Management projects such payments to occur over a six-year period. The Company has classified the amount expected to be received from the electricity provider within one year as a current asset. No interest is charged on the outstanding balance. 4. Other Long-Term Assets Other long-term assets consist of loan origination fees. Loan origination fees are capitalized at cost and amortized over the term of the associated notes using the straight-line method. The following is a summary of the Company's other assets at March 31, 2004: Gross Carrying Accumulated Amount Amortization -------------- ------------ Loan origination fees (3-5 years) $ 1,122 $ (926) ======= ======= 5. Long-Lived Assets The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related operation's undiscounted cash flows over the remaining life of the assets in measuring whether the assets are recoverable. When undiscounted cash flows are less than book value of the assets, the required impairment is calculated as the excess of the book value of the assets over the discounted cash flows. 6. Concentration of Credit Risk The Company extends trade credit to various companies in the natural gas and natural gas liquids market in the normal course of business. For the three month periods ended March 31, 2004 and 2003, the Company had two primary customers that accounted for approximately 79% and 92% of the Company's sales and 73% and 83% of the Company's accounts receivable. Management believes the credit worthiness of its customers mitigates the concentration risk. 7. Derivative Instruments The Company applies the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 requires each derivative instrument to be recorded in the balance sheet as either an asset or liability measured at fair value. Changes in a derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of operations. Companies must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. 8. Restricted Common Stock The Company has granted restricted common stock to certain key employees. The Company applies fixed plan accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, the Company records the issuance of restricted stock as an increase to equity with a corresponding offset to deferred compensation (presented as a reduction in equity on the balance sheet). The deferred compensation is reduced by recording compensation expense over the vesting period. D - DERIVATIVE INSTRUMENTS The Company entered into certain financial swap instruments, some of which settled during the three months ended March 31, 2004 and 2003 that are designated as cash flow hedging instruments in accordance with SFAS 133. The maturities of the instruments outstanding at March 31, 2004, are less than one year. The swap instruments are contractual agreements to exchange obligations of money between the buyer and seller of the instruments as natural gas volumes during the pricing period are sold. The swaps are tied to a set fixed price for the seller and floating price determinants for the buyer priced on certain indices at the end of the relevant trading period. The Company entered into these instruments to hedge the forecasted gas plant residue sales to variability in expected future cash flows attributable to changes in natural gas prices. For the swaps that were settled during the three months ended March 31, 2004, the Company reclassified into earnings a before-tax loss of $13, that was previously reported in accumulated other comprehensive loss. For the swaps that were settled during the three months ended March 31, 2003, the Company reclassified into earnings a before-tax loss of $985, that was previously reported in accumulated other comprehensive income (loss). The Company entered into several swaps that were designed to hedge natural gas liquids prices during the three months ended March 31, 2004 and 2003 that did not meet specific hedge accounting criteria. The Company recognized a before-tax loss of $378 and $87 related to these swaps during the three months ended March 31, 2004 and 2003, respectively. E - LONG-TERM DEBT A summary of long-term debt at March 31, 2004 is as follows:

See notes to pro forma consolidated financial statements

See notes to pro forma consolidated financial statements

See notes to pro forma consolidated financial statements RESOURCE AMERICA, INC. NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) a. Reflects the net proceeds from the issuance of 750,000 common units by APL in April 2004. b. Reflects the purchase of 100% of the equity of Spectrum for $148.1 million, including estimated transaction costs. The acquisition was financed by $25 million of the net proceeds from APL's April 2004 common unit offering, a $100 million term loan, a $5.3 million revolving loan under APL's new credit facility and $17.9 million of cash from the Company and Atlas America, Inc. As part of the purchase price, $47.4 million of Spectrum's long-term debt (including the $4.99 million current portion of that long-term debt) was repaid by APL. Adjustments include the payment of $3.3 million of estimated financing costs which appear in the pro forma balance sheet as other assets, elimination of a liability for $2.4 million of dividends related to Spectrum's preferred stock which was not assumed by APL and the write-off of $197,000 of Spectrum's deferred financing costs. c. Reflects the adjustment to interest expense resulting from $105.3 million of borrowing under APL's new credit facility bearing interest at the London Interbank Offered Rate, or LIBOR, plus 375 basis points, assumed to be 5.51% for the six months ended March 31, 2003, 5.00% for the six months ended September 30, 2003 and 4.90% for the six months ended March 31, 2004. Holding all other variables constant, a 1/8% change in interest rates would have an impact of $132,000 and $66,000 for the year ended September 30, 2003 and the six months ended March 31, 2004, respectively. d. Reflects the adjustment to depreciation expense based upon the cost of the acquired gas gathering and transmission facilities using depreciable lives ranging from 3 to 26.5 years and using the straight-line method. e. Reflects the amortization of deferred financing costs related to APL's new credit facility to finance the acquisition. f. Reflects the adjustment to minority interest to eliminate income attributed to the public unitholders of APL. g. Reflects the elimination of federal and state income taxes following the conversion of Spectrum, currently a C-Corporation, to a limited liability company concurrent with its acquisition by APL and the adjustment to the Company's taxes. Although Spectrum and APL do not incur a federal income tax liability, the Company pays federal income taxes on its share of APL's earnings. The tax rates assumed for the year ended September 30, 2003 and the six months ended March 31, 2004 are 32% and 34%, respectively. h. Reflects net proceeds of $69.2 million after offering costs of $3.8 million from APL's July 2004 common unit offering, used to repay $45.3 million of borrowings under APL's $100 million credit facility. i. Reflects the adjustment to interest expense resulting from the issuance of common units and the repayment of debt incurred to finance the Spectrum acquisition. j. Reflects a pro-rata write-off of deferred financing costs in connection with a permanent $40 million repayment of the $100 million term loan. k. Reflects the adjustment to amortization as a result of the write-off of deferred financing costs as noted in (j) above. l. Reflects the adjustment to minority interest as a result of the offering of common units of APL. m. Reflects the adjustment to the Company's taxes. -----END PRIVACY-ENHANCED MESSAGE-----