##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-24394
 Penn Octane Corporation
  Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    52-1790357
(I.R.S. Employer Identification No.)77-530 Enfield Lane, Bldg. D, Palm Desert, California
(Address of Principal Executive Offices)
    
    92211
(Zip Code)
 (760) 772-9080
  þ o
  o o þ
  o þ




---



##### 



PENN OCTANE CORPORATION
TABLE OF CONTENTS
 ITEM
    
    
    

    PAGE NO.Part I1.
    
    Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    3Consolidated Balance Sheets as of December 31, 2006 and March 31, 2007 (unaudited)
    
    
    4-5Unaudited Consolidated Statements of Operations for the three months ended March 31, 2006 and 2007
    
    
    6Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2007
    
    
    7Notes to Consolidated Financial Statements (Unaudited)
    
    
    8-262.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27-433.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    444T.
    
    Controls and Procedures
    
    
    44Part II1.
    
    Legal Proceedings
    
    
    451A.
    
    Risk Factors
    
    
    45 - 462.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    473.
    
    Defaults Upon Senior Securities
    
    
    474.
    
    Submission of Matters to a Vote of Security Holders
    
    
    475.
    
    Other Information
    
    
    476.
    
    Exhibits
    
    
    48-52Signatures
    
    
    53Exhibit 15Exhibit 31.1Exhibit 31.2Exhibit 32
   2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  3




---



##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1.
 Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,
    
    
    March 31,2006
    
    
    2007(unaudited)Current AssetsCash
    
    $
    8,765,747
    
    
    $
    7,305,119Restricted cash
    
    
    1,862,199
    
    
    
    2,180,319Trade accounts receivable (less
allowance for doubtful accounts of
$254,729 at December 31, 2006 and March
31, 2007)
    
    
    3,504,866
    
    
    
    9,897,200Inventories
    
    
    1,603,355
    
    
    
    1,507,216Deferred tax asset
    
    
    647,000
    
    
    
    689,438Prepaid expenses and other current assets
    
    
    310,577
    
    
    
    329,607Total current assets
    
    
    16,693,744
    
    
    
    21,908,899Property, plant and equipment  net
    
    
    10,910,572
    
    
    
    10,908,345Other non-current assets
    
    
    16,183
    
    
    
    118,195Total assets
    
    $
    27,620,499
    
    
    $
    32,935,439
   4




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 CONSOLIDATED BALANCE SHEETS  CONTINUED
 LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,
    
    
    March 31,2006
    
    
    2007(unaudited)Current LiabilitiesCurrent maturities of long-term debt
    
    $
    1,137,500
    
    
    $
    1,137,500Revolving line of credit
    
    
    804,300
    
    
    
    3,922,906Fuel Products trade accounts payable
    
    
    3,102,029
    
    
    
    5,626,075Other accounts payable
    
    
    792,311
    
    
    
    1,027,294U.S. and foreign taxes payable
    
    
    119,086
    
    
    
    58,142Accrued liabilities
    
    
    1,339,982
    
    
    
    1,762,133Total current liabilities
    
    
    7,295,208
    
    
    
    13,534,050Minority interest in Rio Vista Energy Partners L.P.
    
    
    14,946,071
    
    
    
    14,037,816Commitments and contingencies
    
    
    
    
    
    
    Stockholders EquitySeries A  Preferred stock-$.01 par value,
5,000,000 shares authorized; No shares issued and
outstanding at December 31, 2006 and March 31, 2007
    
    
    
    
    
    
    Series B  Senior preferred stock-$.01 par value,
$10 liquidation value, 5,000,000 shares authorized;
No shares issued and outstanding at December 31,
2006 and March 31, 2007
    
    
    
    
    
    
    Common stock
 $.01 par value, 25,000,000 shares
authorized; 15,386,187 shares issued and
outstanding at December 31, 2006 and March 31, 2007
    
    
    153,862
    
    
    
    153,862Additional paid-in capital
    
    
    29,105,611
    
    
    
    29,160,792Note receivable from a former officer of the
Company for exercise of warrants, net of reserves
of $1,500,000 at December 31, 2006 and March 31, 2007
    
    
    (1,687,693
    )
    
    
    (1,646,693
    )Accumulated deficit
    
    
    (22,192,560
    )
    
    
    (22,304,388
    )Total stockholders equity
    
    
    5,379,220
    
    
    
    5,363,573Total liabilities and stockholders equity
    
    $
    27,620,499
    
    
    $
    32,935,439
   5




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2007Revenues
    
    $
    30,091,162
    
    
    $
    39,381,996Cost of goods sold
    
    
    30,105,200
    
    
    
    38,438,058Gross profit (loss)
    
    
    (14,038
    )
    
    
    943,938Selling, general and administrative expensesLegal and professional fees
    
    
    308,433
    
    
    
    476,190Salaries and payroll related expenses
    
    
    554,206
    
    
    
    406,657Other
    
    
    498,023
    
    
    
    521,6171,360,662
    
    
    
    1,404,464Operating income (loss) from continuing
operations
    
    
    (1,374,700
    )
    
    
    (460,526
    )Other income (expense)Interest and Fuel Products financing expense
    
    
    (176,195
    )
    
    
    (151,830
    )Interest income
    
    
    9,461
    
    
    
    12,713Minority interest in loss of Rio Vista
Energy Partners L.P.
    
    
    1,311,918
    
    
    
    460,377Other
    
    
    
    
    
    
    Income (loss) from continuing operations
before taxes
    
    
    (229,516
    )
    
    
    (139,266
    )Provision (benefit) for income taxes
    
    
    13,925
    
    
    
    (27,438
    )Net income (loss) from continuing operations
    
    
    (243,441
    )
    
    
    (111,828
    )Discontinued operations:Net income (loss) from operations of the LPG
Assets Sold, net of minority interest of
$1,065,591 for March 31, 2006
    
    
    (39,637
    )
    
    
    Net income (loss)
    
    $
    (283,078
    )
    
    $
    (111,828
    )Basic and Diluted EPS:Net loss from continuing operations per common share
    
    $
    (0.02
    )
    
    $
    (0.01
    )Net income (loss) from discontinued operations per
common share
    
    
    0.00
    
    
    
    0.00Net income (loss) per common share
    
    $
    (0.02
    )
    
    $
    (0.01
    )Weighted average common shares outstanding
    
    
    15,522,745
    
    
    
    15,386,187
   6




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three months endedMarch 31,
    
    
    March 31,2006
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (283,078
    )
    
    $
    (111,828
    )Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    250,666
    
    
    
    166,752Amortization of lease rights
    
    
    11,449
    
    
    
    Amortization of loan discount related to detachable
warrants
    
    
    22,104
    
    
    
    Share-based payment expense
    
    
    132,459
    
    
    
    94,715Minority interest in Rio Vista Energy Partners L.P.
    
    
    (246,328
    )
    
    
    (460,377
    )Changes in current assets and liabilities:Trade accounts receivable
    
    
    1,787,982
    
    
    
    (6,392,334
    )Inventories
    
    
    141,643
    
    
    
    96,139Prepaid expenses and other current assets
    
    
    133,488
    
    
    
    (19,030
    )Deferred tax asset
    
    
    
    
    
    
    (42,438
    )LPG and Fuel Products trade accounts payable
    
    
    (7,913,112
    )
    
    
    2,524,046Other accounts payable and accrued liabilities
    
    
    136,674
    
    
    
    657,134U.S. and Foreign taxes payable
    
    
    (21,045
    )
    
    
    (60,944
    )Net cash used in operating activities
    
    
    (5,847,098
    )
    
    
    (3,548,165
    )Cash flows from investing activities:Capital expenditures
    
    
    (6,377
    )
    
    
    (164,525
    )(Increase) decrease in other non-current assets
    
    
    (1,093
    )
    
    
    (102,012
    )Net cash (used in) provided by investing activities
    
    
    (7,470
    )
    
    
    (266,537
    )Cash flows from financing activities:Decrease (increase) in restricted cash
    
    
    2,130,041
    
    
    
    (318,120
    )Revolving credit facilities
    
    
    4,155,506
    
    
    
    3,118,606Distributions paid to limited partners
    
    
    
    
    
    
    (477,664
    )Distributions paid to the minority owners of the
general partner
    
    
    
    
    
    
    (9,748
    )Stockholders note
    
    
    
    
    
    
    41,000Reduction in debt
    
    
    (466,298
    )
    
    
    Net cash used in financing activities
    
    
    5,819,249
    
    
    
    2,354,074Net (decrease) increase in cash
    
    
    (35,319
    )
    
    
    (1,460,628
    )Cash at beginning of period
    
    
    299,597
    
    
    
    8,765,747Cash at end of period
    
    $
    264,278
    
    
    $
    7,305,119Supplemental disclosures of cash flow information:Cash paid for:Interest
    
    $
    457,109
    
    
    $
    181,981Taxes
    
    $
    
    
    
    $
    110,000Supplemental disclosures of noncash transactions:Equity  common stock and warrants issued and other
    
    $
    132,459
    
    
    $
    94,715
   7




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE A  ORGANIZATION
       8




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE A  ORGANIZATION  Continued
   Basis of Presentation
      9




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE B  INCOME (LOSS) PER COMMON SHARE
   For the three months ended March 31, 2006Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing
operations
    
    $
    (283,078
    )Basic EPSNet income (loss) available to
common stockholders
    
    
    (283,078
    )
    
    
    15,522,745
    
    
    $
    (0.02
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to
common stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the three months ended March 31, 2007Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing
operations
    
    $
    (111,828
    )Basic EPSNet income (loss) available to
common stockholders
    
    
    (111,828
    )
    
    
    15,386,187
    
    
    $
    (0.01
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to
common stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  10




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE C  SHARE-BASED PAYMENT
    11




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS
       12




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  SALE OF LPG ASSETS/DISCONTINUED OPERATIONS  Continued
   Leases Assigned
   2006 PMI Agreement
   13




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  SALE OF LPG ASSETS/DISCONTINUED OPERATIONS  Continued
    Actual VolumesMonth
    
    Sold/Transported(gallons)January 2006
    
    
    14,757,646February 2006
    
    
    11,940,257March 2006
    
    
    11,606,435April 2006
    
    
    6,035,733May 2006
    
    
    5,733,193June 2006
    
    
    7,130,666July 2006
    
    
    4,937,441August 2006
    
    
    5,408,563September 2006
    
    
    6,402,253October 2006
    
    
    8,908,931November 2006
    
    
    9,906,874December 2006
    
    
    10,448,614January 2007
    
    
    10,362,590February 2007
    
    
    8,590,460March 2007
    
    
    8,772,010April 2007
    
    
    6,492,361
   14




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  SALE OF LPG ASSETS/DISCONTINUED OPERATIONS  Continued
 Exxon Supply Contract
   LPG Supply Agreement with Rio Vista
    15




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE E  PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    March 31,2006
    
    
    2007LPG:US  Mexico Pipelines and Matamoros Terminal
Facility: (a)(c)U.S. Pipelines and Rights of Way
    
    $
    6,851,667
    
    
    $
    6,851,667Mexico Pipelines and Rights of Way
    
    
    1,045,300
    
    
    
    1,045,300Matamoros Terminal Facility
    
    
    5,564,330
    
    
    
    5,564,330Land
    
    
    705,358
    
    
    
    705,358Total LPG
    
    
    14,166,655
    
    
    
    14,166,655Other:Office equipment (b)
    
    
    117,802
    
    
    
    124,703Software (b)
    
    
    198,841
    
    
    
    356,465316,643
    
    
    
    481,16814,483,298
    
    
    
    14,647,823Less: accumulated depreciation and amortization
    
    
    (3,572,726
    )
    
    
    (3,739,478
    )$
    10,910,572
    
    
    $
    10,908,345
 (a)
    
    Rio Vista assets(b)
    
    Penn Octane and Subsidiaries other than Rio
Vista(c)
    
    Rio Vista owns, leases, or is in the process of
obtaining the land or rights of way used related to
the US-Mexico Pipelines
    16




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE F  INVENTORIES
 December 31, 2006
    
    
    March 31, 2007Gallons
    
    
    LCM
    
    
    Gallons
    
    
    LCMFuel Products
    
    
    938,458
    
    
    $
    1,603,355
    
    
    
    737,840
    
    
    $
    1,507,216
 NOTE G  DEBT OBLIGATIONS
  December 31,
    
    
    March 31,2006
    
    
    2007Noninterest-bearing debt
obligation, discounted at 7%, for
legal services; due in February 2001
    
    $
    137,500
    
    
    $
    137,500TransMontaigne Note
    
    
    1,000,000
    
    
    
    1,000,000Total debt
    
    
    1,137,500
    
    
    
    1,137,500Less: Current maturities
    
    
    1,137,500
    
    
    
    1,137,500Long-term debt
    
    $
    
    
    
    $
    
 TransMontaigne Note
  Other
   17




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE H  STOCK WARRANTS
 2001 Warrant Plan
  NOTE I  OPTIONS AND WARRANTS OF RIO VISTA
 General Partner Options
   Common Unit Warrants
   18




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  OPTIONS AND WARRANTS OF RIO VISTA  Continued
 Common Unit Warrants  Continued
  NOTE J  COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
   Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn Octane
International LLC th
  19




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES  Continued
 Legal Proceedings  Continued
 Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation, et
al. th
  Rio Vista
Operating Partnership L.P. vs. Guajardo, Jr. Farms, Inc.
  Credit Facility and Letters of Credit
    20




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES  Continued
 Credit Facility and Letters of Credit  Continued
       Consulting Agreements
   21




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Consulting Agreements  Continued
  Distributions of Available Cash
      22




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Partnership Tax Treatment
        23




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Concentrations of Credit Risk
  NOTE K  INTERCOMPANY AGREEMENT AND GUARANTEES
 Omnibus Agreement.
   Guarantees
 Debt Guarantee
 Tax Guarantee.
  24




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE L  SEGMENT INFORMATION
    LPG Transportation
    
    
    Fuel Sales
    
    
    TotalsRevenues from external customers
    
    $
    679,264
    
    
    $
    38,702,732
    
    
    $
    39,381,996Interest expense
    
    
    25,744
    
    
    
    123,003
    
    
    
    148,747Interest income
    
    
    247
    
    
    
    
    
    
    
    247Depreciation and amortization
    
    
    164,832
    
    
    
    199
    
    
    
    165,031Segment gross profit (loss)
    
    
    285,574
    
    
    
    658,364
    
    
    
    943,938Segment assets
    
    
    16,316,522
    
    
    
    13,247,361
    
    
    
    29,563,883Segment liabilities
    
    
    2,093,804
    
    
    
    12,162,000
    
    
    
    14,255,804Expenditure for segment assets
    
    
    
    
    
    
    1,875
    
    
    
    1,875Reconciliation to Consolidated Amounts:RevenuesTotal revenues for reportable segments
    
    
    
    
    
    $
    39,381,996Elimination of intersegment revenues
    
    
    
    
    
    
    Total consolidated revenues
    
    
    
    
    
    $
    39,381,996Profit (loss)Total gross profit (loss) for reportable
segments
    
    
    
    
    
    $
    943,938Selling, general and administrative expense
    
    
    
    
    
    
    (1,404,464
    )Interest and Fuel Products financing expense
    
    
    
    
    
    
    (151,830
    )Interest income
    
    
    
    
    
    
    12,713Minority interest in loss of Rio Vista Energy
Partners L.P.
    
    
    
    
    
    
    460,377Elimination of intersegment profits
    
    
    
    
    
    
    Unallocated amountsCorporate headquarters expense
    
    
    
    
    
    
    Other expenses
    
    
    
    
    
    
    Consolidated income from continuing
operations before income tax
    
    
    
    
    
    $
    (139,266
    )AssetsTotal assets for reportable segments
    
    
    
    
    
    $
    29,563,883Other assets
    
    
    
    
    
    
    3,371,556Corporate headquarters
    
    
    
    
    
    
    Other unallocated amounts
    
    
    
    
    
    
    Total consolidated assets
    
    
    
    
    
    $
    32,935,439
  25




---



##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  INCOME TAXES
    26




---



##### Table of Contents



Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Penn Octane Corporation (Penn Octane) and its consolidated subsidiaries which includes Rio
Vista Energy Partners L.P. (Rio Vista) and its subsidiaries are collectively hereinafter referred
to as the Company.
 The following discussion of the Companys results of operations and liquidity and capital
resources should be read in conjunction with the unaudited consolidated financial statements of the
Company and related notes thereto appearing elsewhere herein. References to specific years
preceded by fiscal (e.g. fiscal 2007) refer to the Companys fiscal year ended December 31.
 Forward-Looking Statements
 The statements contained in this Quarterly Report that are not historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements may be identified by the use of
forward-looking terms such as believes, expects, may, will, should, estimates,
projects or anticipates or by discussions of strategy that inherently involve risks and
uncertainties. From time to time, the Company has made or may make forward-looking statements,
orally or in writing. These forward-looking statements include statements regarding anticipated
future revenues, sales, LPG supply, LPG Transportation Business, LPG pricing, operations, demand,
competition, capital expenditures, future acquisitions, additional financing, the deregulation of
the LPG market in Mexico, the operations of the US  Mexico Pipelines, the Matamoros Terminal
Facility, other upgrades to facilities, foreign ownership of LPG operations, short-term obligations
and credit arrangements, Fuel Sales Business, TransMontaigne Note, cash distributions,
Qualifying Income, partnership tax treatment, risk factors and other statements regarding matters
that are not historical facts, and involve predictions which are based upon a number of future
conditions that ultimately may prove to be inaccurate. Actual results, performance or achievements
could differ materially from the results expressed in, or implied by, these forward-looking
statements. Factors that may cause or contribute to such differences include those discussed under
Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of
Operations, as well as those discussed elsewhere in this Report on Form 10-Q . We caution you,
however, that the following list of factors may not include all material risks facing the Company.
 Overview
     27




---



##### Table of Contents



28




---



##### Table of Contents



LPG Transportation Agreement
   Actual VolumesMonth
    
    Sold/Transported(gallons)January 2006
    
    
    14,757,646February 2006
    
    
    11,940,257March 2006
    
    
    11,606,435April 2006
    
    
    6,035,733May 2006
    
    
    5,733,193June 2006
    
    
    7,130,666July 2006
    
    
    4,937,441August 2006
    
    
    5,408,563September 2006
    
    
    6,402,253October 2006
    
    
    8,908,931November 2006
    
    
    9,906,874December 2006
    
    
    10,448,614January 2007
    
    
    10,362,590February 2007
    
    
    8,590,460March 2007
    
    
    8,772,010April 2007
    
    
    6,492,361
  29




---



##### Table of Contents



Potential Factors Affecting Future Demand For The Retained Assets:
 Trends.
    Dependence on TransMontaigne.
  30




---



##### Table of Contents



Fuel Sales Business
       Three Months ended
    
    Three Months endedMarch 31, 2006
    
    March 31, 2007Volume Sold
Fuel Products (millions of gallons)
    
    
    15.2
    
    
    
    19.5Average sales price
Fuel Products (per gallon)
    
    $
    1.98
    
    
    $
    1.99
  31




---



##### Table of Contents



Results of Operations
  For the three months ended March 31, 2006
 Continuing OperationsLPG
    
    
    FuelTransportation
    
    
    Sales
    
    
    TotalRevenues
    
    $
    
    (a)
    
    $
    30,091
    
    
    $
    30,091Cost Of Sales
    
    
    540
    (b)
    
    
    29,565
    
    
    
    30,105Gross Profit (Loss)
    
    $
    (540
    )
    
    $
    526
    
    
    $
    (14
    )
 For the three months ended March 31, 2007
 Continuing OperationsLPG
    
    
    FuelTransportation
    
    
    Sales
    
    
    TotalRevenues
    
    $
    679
    
    
    $
    38,703
    
    
    $
    39,382Cost Of Sales
    
    
    394
    
    
    
    38,044
    
    
    
    38,438Gross Profit (Loss)
    
    $
    285
    
    
    $
    659
    
    
    $
    944
 (a)
    
    LPG Transportation revenue began August 22, 2006.(b)
    
    Consists of depreciation on Retained Assets and expenses related to the US-Mexico
Pipelines and the Matamoros Terminal Facility.
  32




---



##### Table of Contents



Continuing Operations:
 The following discussion of the Companys results of operations from continuing operations for all
periods presented excludes the results of operations related to the Sold Assets, including
revenues, direct costs, associated interest expenses, minority interest and income taxes, which
have been reclassified as discontinued operations (see below). As a result, the results of
operations from continuing operations reflects only the results associated with the LPG
Transportation Business, including all costs associated with operation of the US-Mexico Pipelines
and Matamoros Terminal Facility, the Companys Fuel Sales business and all indirect income and
expenses of the Company. Revenues from the Companys LPG Transportation Business commenced on
August 22, 2006 although expenses associated with operation of the US-Mexico Pipelines and
Matamoros Terminal Facility were incurred during the entire period for each period presented.
 Three Months Ended March 31, 2007 Compared With Three Months Ended March 31, 2006
 Revenues.
 Cost of goods sold.
 Selling, general and administrative expenses.
  33




---



##### Table of Contents



Other income (expense).
 Discontinued Operations:
  Three Months ended
    
    
    Three Months endedMarch 31, 2006
    
    
    March 31, 2007Volume SoldLPG
(millions of gallons)  PMI
    
    
    38.3
    
    
    
    LPG
(millions of gallons)  Other
    
    
    
    
    
    
    38.3
    
    
    
    Average sales priceLPG (per gallon)  PMI
    
    $
    1.02
    
    
    $
    LPG (per gallon)  Other
    
    
    
    
    
    
    
 (a)
    
    Sales of LPG ceased on August 21, 2006, immediately prior to the date of the Restated
LPG Asset Sale
 The Companys results of operations from discontinued operations of its LPG sales business
applies only for the three months ended March 31, 2006 since these operations were sold on August
21, 2006. As a result, there is no comparison of such operations presented for the three months
ended March 31, 2007 and March 31, 2006.
  34




---



##### Table of Contents



Liquidity and Capital Resources
 General.
 The Companys Consolidated Pro Forma
    
    
    Rio Vista Energy Partners L.P.Working Capital
    
    
    Consolidated Pro Forma Working CapitalMarch 31, 2007
    
    
    March 31, 2007As Reported
    
    
    
    
    
    
    Adjusted
    
    
    As Reported
    
    
    
    
    
    
    Adjusted3/31/2007
    
    
    Pro Forma
    
    
    3/31/2007
    
    
    3/31/2007
    
    
    Pro Forma
    
    
    3/31/2007Current AssetsCash
    
    $
    7,305,119
    
    
    $
    (487,412
    )(a)
    
    $
    6,817,707
    
    
    $
    3,675,144
    
    
    $
    (487,412
    )(a)
    
    $
    3,910,093722,361
    (b)Restricted Cash
    
    
    2,180,319
    
    
    
    
    
    
    
    2,180,319
    
    
    
    25,542
    
    
    
    
    
    
    
    25,542Trade Accounts Receivable
    
    
    9,897,200
    
    
    
    
    
    
    
    9,897,200
    
    
    
    998,165
    
    
    
    
    
    
    
    998,165Inventories
    
    
    1,507,216
    
    
    
    
    
    
    
    1,507,216
    
    
    
    
    
    
    
    
    
    
    
    Due From Affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    722,361
    
    
    
    ( 722,361
    )(b)
    
    
    Deferred Tax Asset
    
    
    689,438
    
    
    
    
    
    
    
    689,438
    
    
    
    
    
    
    
    
    
    
    
    Prepaid Expenses
    
    
    329,607
    
    
    
    
    
    
    
    329,607
    
    
    
    242,986
    
    
    
    
    
    
    
    242,986Total Current Assets
    
    
    21,908,899
    
    
    
    (487,412
    )
    
    
    21,421,487
    
    
    
    5,664,198
    
    
    
    ( 487,412
    )
    
    
    5,176,786Current LiabilitiesCurrent Maturities Of
Long-Term Debt
    
    $
    1,137,500
    
    
    
    
    
    
    $
    1,137,500
    
    
    $
    1,000,000
    
    
    
    
    
    
    $
    1,000,000Revolving Line Of Credit
    
    
    3,922,906
    
    
    
    
    
    
    
    3,922,906
    
    
    
    
    
    
    
    
    
    
    
    Fuel Products Payables
    
    
    5,626,075
    
    
    
    
    
    
    
    5,626,075
    
    
    
    
    
    
    
    
    
    
    
    US and Foreign Taxes Payable
    
    
    58,142
    
    
    
    
    
    
    
    58,142
    
    
    
    28,977
    
    
    
    
    
    
    
    28,977Accounts Payables
    
    
    1,027,294
    
    
    
    
    
    
    
    1,027,294
    
    
    
    499,599
    
    
    
    
    
    
    
    499,599Accrued Liabilities
    
    
    1,762,133
    
    
    
    
    
    
    
    1,762,133
    
    
    
    565,228
    
    
    
    
    
    
    
    565,228Total Current Liabilities
    
    
    13,534,050
    
    
    
    
    
    
    
    13,534,050
    
    
    
    2,093,804
    
    
    
    
    
    
    
    2,093,804Working Capital
    
    $
    8,374,849
    
    
    $
    (487,412
    )
    
    $
    7,887,437
    
    
    $
    3,570,394
    
    
    $
    (487,412
    )
    
    $
    3,082,982
 (a)
    
    distribution paid by Rio Vista during May 2007(b)
    
    payment of outstanding intercompany balances
   35




---



##### Table of Contents



36




---



##### Table of Contents



Credit Arrangements
         37




---



##### Table of Contents



Payments due by Period(Amounts in Millions)Less than
    
    
    1  3
    
    
    4  5
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-Term Debt
Obligations and Note Payable
    
    $
    1.0
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating Leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LPG Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Cash Obligations
    
    $
    1.0
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Amount of Commitment ExpirationPer Period(Amounts in Millions)Total Amounts
    
    
    Less than
    
    
    1  3
    
    
    4  5
    
    
    OverCommercial Commitments
    
    Committed
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLines of Credit
    
    $
    3.9
    
    
    $
    3.9
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby Letters of Credit
    
    
    8.1
    
    
    
    8.1
    
    
    
    
    
    
    
    
    
    
    
    Guarantees
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AStandby Repurchase Obligations
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AOther Commercial Commitments
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal Commercial Commitments
    
    $
    12.0
    
    
    $
    12.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Distributions of Available Cash.
   38




---



##### Table of Contents



Environmental Indemnification
  Information Systems
  Partnership Tax Treatment .
 Legal Proceedings .
 Consulting Agreement .
 Mexican Operations.
  39




---



##### Table of Contents



Deregulation of the LPG Industry in Mexico . Ley
Reglarmentaria del Artículo 27 Constitutional en el Ramo del Petróleo Ley Orgánica del Petróleos Mexicanos y
Organismos Subsidiarios
  Private Placements and Other Transactions.
    40




---



##### Table of Contents



Note Receivable from a Former Officer of the Company
  TransMontaigne Note
  Options and Warrants of Rio Vista
 General Partner Options.
   41




---



##### Table of Contents



Common Unit Warrants.
  Intercompany Agreement and Guarantees
 Omnibus Agreement .
   Guarantees
 Debt Guarantee .
 Tax Guarantee .
  42




---



##### Table of Contents



Impact of Inflation
   Environmental Matters
   Recently Issued Financial Accounting Standards
  Statement by Management Concerning Review of Interim Information by An Independent Registered
Public Accounting Firm.
   43




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
     
 Item 4T. Controls and Procedures.
    44




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Business Factors.
 Acquisition Factors.
 Market Listing
 Competitive Factors.
  45




---



##### Table of Contents



International Factors.
 Political Factors.
 Industry and Economic Factors.
 Market Risk Factors.
 Internal Control Factors.
 Projections
  46




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
   47




---



##### Table of Contents



Item 6 Exhibits
 The following exhibits are incorporated by reference to previously filed reports, as noted.
 Exhibit No.
 2.1
    
    Purchase and Sale Agreement dated August 15, 2005 as amended and restated on August
15, 2006 entered into by and between Penn Octane Corporation and TransMontaigne Product
Services, Inc. (Incorporated by reference to the Companys Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006 filed on August 14, 2006, SEC File No. 000-24394).2.2
    
    Purchase and Sale Agreement dated August 15, 2005 as amended and restated on August
15, 2006 entered into by and between Rio Vista Operating Partnership L.P. and
TransMontaigne Product Services, Inc. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed on August 14,
2006, SEC File No. 000-24394).3.1
    
    Restated Certificate of Incorporation, as amended. (Incorporated by reference to
the Companys Quarterly Report on Form 10-QSB for the quarterly period ended April 30,
1997 filed on June 16, 1997, SEC File No. 000-24394).3.2
    
    Amended and Restated By-Laws of the Company. (Incorporated by
reference to the Companys Quarterly Report on Form 10-QSB for the
quarterly period ended April 30, 1997 filed on June 16, 1997, SEC
File No. 000-24394).3.3
    
    Certificate of the Designation, Powers, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock, filed with the State
of Delaware. (Incorporated by reference to the Companys Annual
Report on Form 10-K for the year ended July 31, 1999 filed on
November 10, 1999, SEC File No. 000-24394).10.1
    
    General Security Agreement dated October 14, 1997 between RZB Finance
LLC and the Company. (Incorporated by reference to the Companys
Annual Report on Form 10-K for the year ended July 31, 1997 filed on
November 13, 1997, SEC File No. 000-24394).10.2
    
    Permit issued on July 26, 1999 by the United States Department of
State authorizing the Company to construct two pipelines crossing
the international boundary line between the United States and Mexico
for the transport of liquefied petroleum gas (LPG) and refined
product (motor gasoline and diesel fuel). (Incorporated by reference
to the Companys Annual
Report on Form 10-K for the year ended July 31, 1999 filed on
November 9, 1999, SEC File No. 000-24394).10.3
    
    Promissory Share Transfer Agreement to purchase shares of Termatsal,
S.A. de C.V. dated November 13, 2000, between Pedro Prado and the
Company (Translation from Spanish). (Incorporated by reference to the
Companys Annual Report on Form 10-K for the year ended July 31,
2000, filed on November 14, 2000, SEC File No. 000-24394).10.4
    
    Promissory Share Transfer Agreement to purchase shares of Termatsal,
S.A. de C.V. dated November 13, 2000, between Pedro Prado and Penn
Octane International, L.L.C. (Translation form Spanish).
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2000, filed on November 14, 2000,
SEC File No. 000-24394).10.5
    
    Contribution, Conveyance and Assumption Agreement entered into as of
September 16, 2004 by and among Penn Octane Corporation, Rio Vista GP
LLC, Rio Vista Energy Partners L.P., Rio Vista Operating GP LLC and
Rio Vista Operating Partnership L.P. (Incorporated by reference to
the Companys Annual Report on Form 10-K for the year ended July 31,
2004 filed on November 9, 2004, SEC File No. 000-24394).
  48




---



##### Table of Contents



10.6
    
    Conveyance Agreement effective September 30, 2004 from Penn Octane
Corporation in favor of Rio Vista Operating Partnership L.P.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.7
    
    Distribution Agreement dated September 16, 2004 by and among Penn
Octane Corporation, Rio Vista Energy Partners L.P. and Subsidiaries.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.8
    
    Omnibus Agreement entered into as of September 16, 2004 by and among
Penn Octane Corporation, Rio Vista GP LLC, Rio Vista Energy
Partners, L.P. and Rio Vista Operating Partnership L.P.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.9
    
    Amendment No. 1 to Omnibus Agreement entered into as of September
16, 2004 by and among Penn Octane Corporation, Rio Vista GP LLC, Rio
Vista Energy Partners L.P. and Rio Vista Operating Partnership L.P.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.10
    
    Purchase Contract made and entered into effective as of October 1,
2004 by and between Penn Octane Corporation and Rio Vista Operating
Partnership L.P. (Incorporated by reference to the Companys Annual
Report on Form 10-K for the year ended July 31, 2004 filed on
November 9, 2004, SEC File No. 000-24394).10.11
    
    Rio Vista GP LLC Unit Purchase Option dated July 10, 2003 granted by
Penn Octane Corporation to Shore Capital LLC. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.12
    
    Rio Vista GP LLC Unit Purchase Option dated July 10, 2003 granted by
Penn Octane Corporation to Jerome B. Richter. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.13
    
    First Amended and Restated Agreement of Limited Partnership of Rio
Vista Energy Partners L.P. dated as of September 16, 2004.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.14
    
    Rio Vista GP LLC Amended and Restated Limited Liability Company
Agreement dated as of September 16, 2004. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.15
    
    Form of RVGP Voting Agreement by and among Rio Vista GP LLC, Penn
Octane Corporation and the members of Rio Vista GP LLC.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.16
    
    First Amended and Restated Agreement of Limited Partnership of Rio
Vista Operating Partnership L.P. dated as of September 16, 2004.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).
  49




---



##### Table of Contents



10.17
    
    Amended and Restated Line Letter dated September 15, 2004 between
RZB Finance LLC and Penn Octane Corporation. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.18
    
    Replacement Promissory Note dated September 15, 2004 by Penn Octane
Corporation to RZB Finance LLC. (Incorporated by reference to the
Companys Annual Report on Form 10-K for the year ended July 31,
2004 filed on November 9, 2004, SEC File No. 000-24394).10.19
    
    Consent Letter dated September 15, 2004 between RZB Finance LLC and
Penn Octane Corporation. (Incorporated by reference to the
Companys Annual Report on Form 10-K for the year ended July 31,
2004 filed on November 9, 2004, SEC File No. 000-24394).10.20
    
    Assignment of Easements from Penn Octane to Rio Vista Operating
Partnership L.P. dated September 15, 2004. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.21
    
    Guaranty & Agreement between Rio Vista Energy Partners L.P. and RZB
Finance LLC dated as of September 15, 2004. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year
ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.22
    
    Guaranty & Agreement between Rio Vista Operating Partnership L.P.
and RZB Finance LLC dated as of September 15, 2004. (Incorporated
by reference to the Companys Annual Report on Form 10-K for the
year ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.23
    
    General Security Agreement between Rio Vista Energy Partners L.P.
and RZB Finance LLC dated as of September 15, 2004. (Incorporated
by reference to the Companys Annual Report on Form 10-K for the
year ended July 31, 2004 filed on November 9, 2004, SEC File No.
000-24394).10.24
    
    General Security Agreement between Rio Vista Operating Partnership
L.P. and RZB Finance LLC dated as of September 15, 2004.
(Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended July 31, 2004 filed on November 9, 2004, SEC
File No. 000-24394).10.25
    
    Penn Octane Corporation 2001 Warrant Plan (Incorporated by reference
to the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005 filed on May 20, 2006, SEC File No. 000-24394).10.26
    
    First Amendment to the First Amended and Restated Agreement of
Limited Partnership of Rio Vista Energy Partners L.P. dated as of
October 26, 2005. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
2005 filed on November 21, 2005, SEC File No. 000-24394).10.27
    
    First Amendment to the First Amended and Restated Agreement of
Limited Partnership of Rio Vista Operating Partnership L.P. dated as
of October 26, 2005. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
2005 filed on November 21, 2005, SEC File No. 000-24394).10.28
    
    Amended and Restated Consulting Agreement dated November 15, 2005
between Penn Octane Corporation, Rio Vista Energy Partners L.P. and
Jerome B. Richter. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
2005 filed on November 21, 2005, SEC File No. 000-24394).
  50




---



##### Table of Contents



10.29
    
    Amended and Restated Promissory Note by Jerome B. Richter to the
Company dated November 15, 2005. (Incorporated by reference to the
Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 filed on November 21, 2005, SEC File No.
000-24394).10.30
    
    Agreement dated as of November 15, 2005 by and between Penn Octane
Corporation and Jerome B. Richter. (Incorporated by reference to
the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 filed on November 21, 2005, SEC File No.
000-24394).10.31
    
    Ella-Brownsville Pipeline Lease Agreement effective as of August 1, 2006 between
Seadrift Pipeline Corporation and Penn Octane Corporation. (Incorporated by reference to
the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed on
August 14, 2006, SEC File No. 000-24394).10.32
    
    Matamoros LPG Mix Purchase and Sales Agreement made and entered into as of April
28, 2006, by and between Rio Vista Operating Partnership L.P. and P.M.I. Trading Limited.
(Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006 filed on August 14, 2006, SEC File No. 000-24394).10.33
    
    Amendment to Pledge and Security Agreement between the Penn Octane Corporation and
Jerome B. Richter dated October 13, 2006. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed on November
20, 2006, SEC File No. 000-24394).10.34
    
    First Amendment to Amended and Restated Limited Liability Company Agreement of Rio
Vista GP LLC dated October 6, 2006. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed on November
20, 2006, SEC File No. 000-24394).10.35
    
    Unit Purchase Option effective February 6, 2007 between Shore Trading LLC and Penn
Octane Corporation. (Incorporated by reference to the Companys Annual Report on Form
10-K for the year ended December 31, 2006 filed on April 17, 2007, SEC File No.
000-24394).10.36
    
    Consent to Transfer of Units, Acknowledgement of Representation, and Waiver of
Conflicts dated February 6, 2007 among Penn Octane Corporation, Rio Vista GP LLC, and
Shore Trading LLC. (Incorporated by reference to the Companys Annual Report on Form 10-K
for the year ended December 31, 2006 filed on April 17, 2007, SEC File No. 000-24394).10.37
    
    Consulting Agreement entered into March 5, 2007, with an effective date of
November 15, 2006 by and between Penn Octane Corporation, and Rio Vista Energy Partners
L.P., and JBR Capital Resources, Inc. (Incorporated by reference to the Companys Annual
Report on Form 10-K for the year ended December 31, 2006 filed on April 17, 2007, SEC
File No. 000-24394).10.38
    
    Letter agreement dated March 5, 2007 by and between Penn Octane Corporation, Rio
Vista Energy Partners L.P. and JBR Capital Resources, Inc. (Incorporated by reference to
the Companys Annual Report on Form 10-K for the year ended December 31, 2006 filed on
April 17, 2007, SEC File No. 000-24394).10.39
    
    Amended Form of Common Stock Purchase Warrant under the Penn Octane Corporation
2001 Warrant Plan. (Incorporated by reference to the Companys Annual Report on Form 10-K
for the year ended December 31, 2006 filed on April 17, 2007, SEC File No. 000-24394).10.40
    
    Form of Penn Octane Corporation Chairman Services Agreement. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year ended December 31,
2006 filed on April 17, 2007, SEC File No. 000-24394).
  51




---



##### Table of Contents



10.41
    
    Form of Penn Octane Corporation Director and Officer Indemnification Agreement.
(Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended
December 31, 2006 filed on April 17, 2007, SEC File No. 000-24394).10.42
    
    Form of Penn Octane Corporation Director Services Agreement. (Incorporated by
reference to the Companys Annual Report on Form 10-K for the year ended December 31,
2006 filed on April 17, 2007, SEC File No. 000-24394).10.43
    
    Form of Rio Vista GP LLC Chairman Services Agreement. (Incorporated by reference
to the Companys Annual Report on Form 10-K for the year ended December 31, 2006 filed on
April 17, 2007, SEC File No. 000-24394).10.44
    
    Form of Rio Vista GP LLC Manager Services Agreement. (Incorporated by reference to
the Companys Annual Report on Form 10-K for the year ended December 31, 2006 filed on
April 17, 2007, SEC File No. 000-24394).10.45
    
    Form of Rio Vista GP LLC Manager and Officer Indemnification Agreement.
(Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended
December 31, 2006 filed on April 17, 2007, SEC File No. 000-24394).10.46
    
    Form of Nonqualified Unit Option Agreement under the 2005 Rio Vista Energy
Partners L.P. Equity Incentive Plan. (Incorporated by reference to the Companys Annual
Report on Form 10-K for the year ended December 31, 2006 filed on April 17, 2007, SEC
File No. 000-24394).10.47
    
    Amended and Restated Line Letter dated December 7, 2006 between RZB Finance LLC
and Penn Octane Corporation. (Incorporated by reference to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006 filed on April 17, 2007, SEC File No.
000-24394).14.1
    
    Penn Octane Corporation Code of Business Conduct (2007) (Incorporated
by reference to the Companys Annual Report on Form 10-K for the year
ended December 31, 2006 filed on April 17, 2007, SEC File No.
000-24394).
 The following Exhibits are filed as part of this report:
 15
    
    Accountants Acknowledgment.31.1
    
    Certification Pursuant to Rule 13a  14(a) / 15d  14(a) of the Exchange Act.31.2
    
    Certification Pursuant to Rule 13a  14(a) / 15d  14(a) of the Exchange Act.32
    
    Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes Oxley Act of 2002.
 www.sec.gov
  52




---



##### Table of Contents



SIGNATURES
  PENN OCTANE CORPORATIONMay 21, 2007
    
    By:
    
    /s/Ian T. BothwellIan T. BothwellActing Chief Executive Officer, ActingPresident, Vice President, Chief FinancialOfficer, Treasurer and Assistant Secretary(Principal Executive, Financial andAccounting Officer)
  53




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description15
    
    Accountants Acknowledgment.31.1
    
    Certification Pursuant to Rule 13a  14(a) / 15d  14(a) of the Exchange Act.31.2
    
    Certification Pursuant to Rule 13a  14(a) / 15d  14(a) of the Exchange Act.32
    
    Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes Oxley Act of 2002.