##### 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 September 30, 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
    
    52-1790357(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)77-530 Enfield Lane, Bldg. D, Palm Desert, California
    
    92211(Address of Principal Executive Offices)
    
    (Zip Code)
 760) 772-9080
 þ o
  o o þ
 o þ




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##### 



PENN OCTANE CORPORATION
  
 TABLE OF CONTENTS
 PAGE NO.PART I
    
    FINANCIAL INFORMATIONITEM1.
    
    Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    3Consolidated Balance Sheets as of December 31, 2006 and
September 30, 2007 (unaudited)
    
    
    4-5Unaudited Consolidated Statements of Operations for the three
months and nine months ended September 30, 2006 and 2007
    
    
    6Unaudited Consolidated Statements of Cash Flows for the nine
months ended September 30, 2006 and 2007
    
    
    7Notes to Consolidated Financial Statements (Unaudited)
    
    
    8-402.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    41-653.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    654T.
    
    Controls and Procedures
    
    
    65PART II
    
    OTHER INFORMATION1.
    
    Legal Proceedings
    
    
    661A.
    
    Risk Factors
    
    
    66-682.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    693.
    
    Defaults Upon Senior Securities
    
    
    694.
    
    Submission of Matters to a Vote of Security Holders
    
    
    695.
    
    Other Information
    
    
    696.
    
    Exhibits
    
    
    70-76Signatures
    
    
    77Exhibit 10.63Exhibit 10.64Exhibit 10.65Exhibit 10.66Exhibit 10.67Exhibit 10.68Exhibit 15Exhibit 31.1Exhibit 31.2Exhibit 32
  2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1.
 
 Report of Independent Registered Public Accounting Firm
 
      
  3




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,
    
    
    September 30,2006
    
    
    2007(unaudited)Current AssetsCash
    
    $
    8,765,747
    
    
    $
    9,807,812Restricted cash
    
    
    1,862,199
    
    
    
    520,170Trade accounts receivable (less allowance
for doubtful accounts of $254,729 at
December 31, 2006 and September 30, 2007)
    
    
    3,504,866
    
    
    
    8,584,171Inventories
    
    
    1,603,355
    
    
    
    373,633Deferred tax asset
    
    
    647,000
    
    
    
    986,000Prepaid expenses and other current assets
    
    
    310,577
    
    
    
    744,333Total current assets
    
    
    16,693,744
    
    
    
    21,016,119Property, plant and equipment  net
    
    
    10,910,572
    
    
    
    16,907,513Other non-current assets
    
    
    16,183
    
    
    
    27,122Goodwill
    
    
    
    
    
    
    6,025,298Total assets
    
    $
    27,620,499
    
    
    $
    43,976,052
   4




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 CONSOLIDATED BALANCE SHEETS  CONTINUED
 LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,
    
    
    September 30,2006
    
    
    2007(unaudited)Current LiabilitiesCurrent maturities of long-term debt
    
    $
    1,137,500
    
    
    $
    1,579,662Short term debt
    
    
    
    
    
    
    5,000,000Revolving line of credit
    
    
    804,300
    
    
    
    640,725Fuel Products trade accounts payable
    
    
    3,102,029
    
    
    
    4,928,117Refundable deposit
    
    
    
    
    
    
    6,500,000Other accounts payable
    
    
    792,311
    
    
    
    2,351,923U.S. and foreign taxes payable
    
    
    119,086
    
    
    
    489,407Accrued liabilities
    
    
    1,339,982
    
    
    
    2,044,874Total current liabilities
    
    
    7,295,208
    
    
    
    23,534,708Long-term debt, less current maturities, net of discount
    
    
    
    
    
    
    451,801Deferred income taxes  noncurrent
    
    
    
    
    
    
    2,211,000Minority interest in Rio Vista Energy Partners L.P.
    
    
    14,946,071
    
    
    
    11,461,385Commitments 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 September 30, 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
September 30, 2007
    
    
    
    
    
    
    Common stock  $.01 par value, 25,000,000 shares
authorized; 15,386,187 shares issued and outstanding at
December 31, 2006 and September 30, 2007
    
    
    153,862
    
    
    
    153,862Additional paid-in capital
    
    
    29,105,611
    
    
    
    29,218,856Note receivable from a former officer of the Company
for exercise of warrants, net of reserves of
$1,500,000 and $0 at December 31, 2006 and September
30, 2007
    
    
    (1,687,693
    )
    
    
    Accumulated deficit
    
    
    (22,192,560
    )
    
    
    (23,055,560
    )Total stockholders equity
    
    
    5,379,220
    
    
    
    6,317,158Total liabilities and stockholders equity
    
    $
    27,620,499
    
    
    $
    43,976,052
   5




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    42,882,739
    
    
    $
    42,631,461
    
    
    $
    108,342,679
    
    
    $
    114,994,080Cost of goods sold
    
    
    43,436,559
    
    
    
    42,078,761
    
    
    
    109,037,944
    
    
    
    112,996,805Gross profit
    
    
    (553,820
    )
    
    
    552,700
    
    
    
    (695,265
    )
    
    
    1,997,275Selling, general and administrative expensesLegal and professional fees
    
    
    120,511
    
    
    
    1,027,902
    
    
    
    894,885
    
    
    
    1,987,045Salaries and payroll related expenses
    
    
    393,912
    
    
    
    205,804
    
    
    
    1,311,166
    
    
    
    1,350,496Other
    
    
    613,320
    
    
    
    635,357
    
    
    
    1,611,819
    
    
    
    1,643,9761,127,743
    
    
    
    1,869,063
    
    
    
    3,817,870
    
    
    
    4,981,517Operating (loss) from continuing Operations
    
    
    (1,681,563
    )
    
    
    (1,316,363
    )
    
    
    (4,513,135
    )
    
    
    (2,984,242
    )Other income (expense)Interest and Fuel Products financing expense
    
    
    (211,541
    )
    
    
    (312,188
    )
    
    
    (607,266
    )
    
    
    (610,988
    )Interest income
    
    
    22,683
    
    
    
    11,286
    
    
    
    45,668
    
    
    
    29,638Minority interest in loss of Rio Vista
Energy Partners L.P., net of income tax
of $35,000 in 2007
    
    
    789,250
    
    
    
    1,144,849
    
    
    
    3,210,081
    
    
    
    2,290,907Income (loss) from continuing operations
before taxes
    
    
    (1,081,171
    )
    
    
    (472,416
    )
    
    
    (1,864,652
    )
    
    
    (1,274,685
    )(Provision) benefit for income taxes
    
    
    (23,283
    )
    
    
    10,137
    
    
    
    (51,871
    )
    
    
    411,685Net (loss) from continuing operations
    
    
    (1,104,454
    )
    
    
    (462,279
    )
    
    
    (1,916,523
    )
    
    
    (863,000
    )Discontinued operations:Net income (loss) from operations of the
LPG Assets Sold, net of minority interest
of $277,352, 0, $2,026,436 and 0
    
    
    (66,409
    )
    
    
    
    
    
    
    108,765
    
    
    
    Net gain on sale of the LPG Assets Sold,
net of minority interest of $5,161,717 and
income tax expense of $576,687
    
    
    6,866,139
    
    
    
    
    
    
    
    6,866,139
    
    
    
    Net income from discontinued operations
    
    
    6,799,730
    
    
    
    
    
    
    
    6,974,904
    
    
    
    Net income (loss)
    
    $
    5,695,276
    
    
    $
    (462,279
    )
    
    $
    5,058,381
    
    
    $
    (863,000
    )Basic and Diluted EPS:Net loss from continuing operations per common
share
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    (0.12
    )
    
    $
    (0.06
    )Net income (loss) from discontinued operations
per common share
    
    
    0.44
    
    
    
    
    
    
    
    0.45
    
    
    
    Net income (loss) per common share
    
    $
    0.37
    
    
    $
    (0.03
    )
    
    $
    0.33
    
    
    $
    (0.06
    )Weighted average common shares outstanding
    
    
    15,386,187
    
    
    
    15,386,187
    
    
    
    15,476,725
    
    
    
    15,386,187
   6




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    5,058,381
    
    
    $
    (863,000
    )Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    733,728
    
    
    
    585,443Amortization of loan discount
    
    
    
    
    
    
    9,640Amortization of loan discount related to detachable warrants
    
    
    22,104
    
    
    
    Discount on Richter Note
    
    
    
    
    
    
    377,693Provision for doubtful accounts
    
    
    190,771
    
    
    
    Share-based payment expense
    
    
    295,925
    
    
    
    369,819Minority interest in Rio Vista Energy Partners L.P.
    
    
    3,896,820
    
    
    
    (2,290,907
    )(Gain) loss on sale of assets
    
    
    (12,511,882
    )
    
    
    Other
    
    
    
    
    
    
    3,638Changes in current assets and liabilities:Trade accounts receivable
    
    
    6,673,121
    
    
    
    (4,324,033
    )Inventories
    
    
    (455,431
    )
    
    
    1,229,722Prepaid expenses and other current assets
    
    
    (62,133
    )
    
    
    (349,252
    )Deferred tax asset
    
    
    (634,100
    )
    
    
    (446,000
    )LPG and Fuel Products trade accounts payable
    
    
    (10,652,212
    )
    
    
    1,826,088Other accounts payable and accrued liabilities
    
    
    (2,392,519
    )
    
    
    1,961,089U.S. and foreign taxes payable
    
    
    783,183
    
    
    
    (15,291
    )Net cash used in operating activities
    
    
    (9,054,244
    )
    
    
    (1,925,351
    )Cash flows from investing activities:Capital expenditures
    
    
    (81,208
    )
    
    
    (174,702
    )Proceeds from sale of assets
    
    
    130,776
    
    
    
    Proceeds from sale of discontinued operations
    
    
    17,109,072
    
    
    
    Costs to acquire Regional Enterprizes, Inc.
    
    
    
    
    
    
    (7,981,405
    )Acquisition
(sale) of GP interest
    
    
    81,252
    
    
    
    (1,400,000
    )(Increase) decrease in other non-current assets
    
    
    4,484
    
    
    
    (10,939
    )Net cash (used in) provided by investing activities
    
    
    17,244,376
    
    
    
    (9,567,046
    )Cash flows from financing activities:Decrease (increase) in restricted cash
    
    
    2,578,478
    
    
    
    1,342,029Revolving credit facilities
    
    
    726,046
    
    
    
    (163,575
    )Issuance of debt
    
    
    
    
    
    
    5,000,000Distributions paid to limited partners
    
    
    
    
    
    
    (1,439,242
    )Distributions paid
to the minority owners of the General Partner
    
    
    
    
    
    
    (14,750
    )Refundable deposit
    
    
    
    
    
    
    6,500,000Stockholders note
    
    
    
    
    
    
    1,310,000Reduction in debt
    
    
    (1,859,308
    )
    
    
    Net cash provided by financing activities
    
    
    1,445,216
    
    
    
    12,534,462Net change in cash
    
    
    9,635,348
    
    
    
    1,042,065Cash at beginning of period
    
    
    299,597
    
    
    
    8,765,747Cash at end of period
    
    $
    9,934,945
    
    
    $
    9,807,812Supplemental disclosures of cash flow information:Cash paid for:Interest and LPG and Fuel Products financing expense
    
    $
    1,337,942
    
    
    $
    479,514Taxes
    
    $
    
    
    
    $
    Supplemental disclosures of noncash transactions:Equity  common stock and warrants issued and other
    
    $
    369,694
    
    
    $
    369,819Sellers Note, net of discount
    
    $
    
    
    
    $
    884,323
   7




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
A  ORGANIZATION  Continued
 Basis of Presentation  Continued
   NOTE
B  INCOME (LOSS) PER COMMON SHARE
   For the three months ended September 30, 2006Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (1,104,454
    )Basic EPSNet income (loss) available to common
stockholders
    
    
    (1,104,454
    )
    
    
    15,386,187
    
    
    $
    (0.07
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to common
stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the three months ended September 30, 2007Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (462,279
    )Basic EPSNet income (loss) available to common
stockholders
    
    
    (462,279
    )
    
    
    15,386,187
    
    
    $
    (0.03
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to common
stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  10




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE B  INCOME (LOSS) PER COMMON SHARE  Continued
 For the nine months ended September 30, 2006Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (1,916,523
    )Basic EPSNet income (loss) available to common
stockholders
    
    
    (1,916,523
    )
    
    
    15,476,725
    
    
    $
    (0.12
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to common
stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the nine months ended September 30, 2007Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (863,000
    )Basic EPSNet income (loss) available to common
stockholders
    
    
    (863,000
    )
    
    
    15,386,187
    
    
    $
    (0.06
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet income (loss) available to common
stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  11




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 NOTE
C  SHARE-BASED PAYMENT
   NOTE
D  NOTE RECEIVABLE FROM A FORMER OFFICER OF THE COMPANY
   12




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE E  ACQUISITION OF REGIONAL ENTERPRIZES INC.
       13




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE E  ACQUISITION OF REGIONAL ENTERPRIZES INC.  Continued
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine Monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember 30,
    
    
    September
    
    
    September
    
    
    September2006
    
    
    30, 2007
    
    
    30, 2006
    
    
    30, 2007Revenues
    
    $
    44,709,721
    
    
    $
    42,631,963
    
    
    $
    113,823,626
    
    
    $
    118,685,011Net income (loss)
    
    $
    5,696,209
    
    
    $
    (462,279
    )
    
    $
    5,061,180
    
    
    $
    (856,234
    )Net income (loss) per share
    
    $
    0.37
    
    
    $
    (0.03
    )
    
    $
    0.33
    
    
    $
    (0.06
    )
 NOTE
F  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS
   Letter of
Intent for Retained Assets
  14




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
F  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS  Continued
     15




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
F  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS  Continued
  Leases Assigned
   2006 PMI Agreement
     16




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
F  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
    
    
    6,492,361May 2007
    
    
    5,818,669June 2007
    
    
    5,480,023July 2007
    
    
    5,552,780August 2007
    
    
    5,466,599September 2007
    
    
    6,892,100October 2007
    
    
    8,864,583
  17




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
F  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS  Continued
  Exxon Supply Contract
   LPG Supply Agreement with Rio Vista
   Letter of Intent for Retained Assets
   18




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
F  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS  Continued
 Letter of Intent for Retained Assets  Continued
  
    
    Restated and Amended Promissory Note (the Restated Promissory Note), in the
principal amount of $1,000,000, payable to TPSI by RVOP on or before December 31,
2007.
 
    
    Restated and Amended Security Agreement (the Restated Security Agreement),
granting TLP and TPSI a first priority security interest in the Assets in order to
secure the obligations of RVOP under the Letter of Intent and the Restated
Promissory Note.
 
    
    First Priority Equity Interest Pledge Agreement, granting TLP and TPSI a first
priority security interest in the corporate capital of POM.
 
    
    First Priority Equity Interest Pledge Agreement, granting TLP and TPSI a first
priority security interest in the corporate capital of Termatsal.
 
    
    Assignment Agreement, assigning TLP and TPSI the existing rights of RVOP in the
equity interests of Tergas in the event of a default by RVOP in its obligations
under the Letter of Intent or the Restated Promissory Note.
     19




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE G  PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    September 30,2006
    
    
    2007REGIONAL (a):Land
    
    $
    
    
    
    $
    237,100Terminal and improvements
    
    
    
    
    
    
    3,629,837Automotive equipment
    
    
    
    
    
    
    2,481,317Machinery & equipment
    
    
    
    
    
    
    37,186Office equipment
    
    
    
    
    
    
    32,484
    
    
    
    6,417,924US  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
    
    
    
    705,35814,166,655
    
    
    
    14,166,655Other:Office equipment (b)
    
    
    117,802
    
    
    
    130,392Software (b)
    
    
    198,841
    
    
    
    356,469316,643
    
    
    
    486,86114,483,298
    
    
    
    21,071,440Less: accumulated depreciation and
amortization
    
    
    (3,572,726
    )
    
    
    (4,163,927
    )$
    10,910,572
    
    
    $
    16,907,513
 
 (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    20




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
H  INVENTORIES
 December 31, 2006
    
    
    September 30, 2007Gallons
    
    
    LCM
    
    
    Gallons
    
    
    LCMFuel Products
    
    
    938,458
    
    
    $
    1,603,355
    
    
    
    166,890
    
    
    $
    373,633
 NOTE
I  DEBT OBLIGATIONS
  December 31,
    
    
    September 30,2006
    
    
    2007Non-interest bearing debt obligation, discounted at 7%, for legal
services; due in February 2001
    
    $
    137,500
    
    
    $
    137,500RZB Note (see note E)
    
    
    
    
    
    
    5,000,000Sellers Note
    
    
    
    
    
    
    893,963TransMontaigne Note
    
    
    1,000,000
    
    
    
    1,000,000Total debt
    
    
    1,137,500
    
    
    
    7,031,463Less: Current maturities
    
    
    1,137,500
    
    
    
    6,579,662Long-term debt
    
    $
    
    
    
    $
    451,801
 TransMontaigne Note
  Sellers Note
  NOTE
J  COMMON STOCK
   21




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
K  STOCK WARRANTS
 2001 Warrant Plan
    NOTE
L  COMMON UNITS AND OPTIONS OF RIO VISTA
 Common Units
   22




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
L  COMMON UNITS AND OPTIONS OF RIO VISTA  Continued
 General Partner Options
    Common Unit Options
    23




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
L  COMMON UNITS AND OPTIONS OF RIO VISTA  Continued
 Common Unit Options  Continued
     NOTE M  COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
   24




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Legal Proceedings  Continued
  Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn Octane
International LLC, et al th
 Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation, et
al. th
     25




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Credit Facility and Letters of Credit
        26




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Credit Facility and Letters of Credit  Continued
    Leases
 Norfolk Southern Leases
     27




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Leases  Continued
 Other
  Customer Contracts
 Asphalt Agreement
  Fuel Oil Agreement
   28




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Consulting Agreements
 JBR Capital
   Richard R. Canney
  CEOcast
   29




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Distributions of Available Cash
        30




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Partnership Tax Treatment and Regional Income Taxes
      31




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Partnership Tax Treatment and Regional Income Taxes  Continued
      From July 28, 2007toSeptember 30, 2007Current Tax ExpenseFederal
    
    $
    109,000Foreign
    
    
    State
    
    
    21,000130,000Deferred Tax ExpenseFederal
    
    
    (80,000
    )Foreign
    
    
    State
    
    
    (15,000
    )(95,000
    )Total
    
    $
    35,000
  32




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE M  COMMITMENTS AND CONTINGENCIES  Continued
 Partnership Tax Treatment and Regional Income Taxes  Continued
  From July 28, 2007 toSeptember 30, 2007Percent ofAmount
    
    
    Book IncomeFederal income tax
    
    $
    31,000
    
    
    
    34.00
    %State taxes (net of
federal benefit)
    
    
    4,000
    
    
    
    4.00
    %$
    35,000
    
    
    
    38.00
    %
  Deferred Tax Liabilities:CurrentPrepaids
    
    $
    15,000Cash to accrual adjustment
    
    
    92,000Noncurrent:Depreciation
    
    
    2,211,000Deferred Tax Liability
    
    $
    2,318,000
 Concentrations of Credit Risk
   33




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
N  INTERCOMPANY AGREEMENT AND INTERCOMPANY GUARANTEES
 Omnibus Agreement.
   Guarantees
 Debt Guarantee
 Tax Guarantee.
  34




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE O  SEGMENT INFORMATION
    TransportationandTerminaling
    
    
    Fuel Sales
    
    
    TotalsRevenues from external customers
    
    $
    1,649,934
    
    
    $
    40,981,527
    
    
    $
    42,631,461Interest expense
    
    
    204,956
    
    
    
    103,394
    
    
    
    308,350Interest income
    
    
    5,395
    
    
    
    
    
    
    
    5,395Depreciation and amortization
    
    
    288,389
    
    
    
    199
    
    
    
    288,588Segment gross profit (loss)
    
    
    379,245
    
    
    
    173,455
    
    
    
    552,700Segment assets
    
    
    30,334,230
    
    
    
    9,346,442
    
    
    
    39,680,672Segment liabilities
    
    
    18,095,940
    
    
    
    6,437,232
    
    
    
    24,533,172Expenditure for segment assets
    
    
    6,975
    
    
    
    
    
    
    
    6,975Reconciliation to Consolidated Amounts:RevenuesTotal revenues for reportable segments
    
    
    
    
    
    $
    42,631,461Elimination of intersegment revenues
    
    
    
    
    
    
    Total consolidated revenues
    
    
    
    
    
    $
    42,631,461Profit (loss)Total gross profit (loss) for reportable
Segments
    
    
    
    
    
    $
    552,700Selling, general and administrative expense
    
    
    
    
    
    
    (1,869,063
    )Interest and Fuel Products financing expense
    
    
    
    
    
    
    (312,188
    )Interest income
    
    
    
    
    
    
    11,286Minority interest in loss of Rio Vista Energy
Partners L.P.
    
    
    
    
    
    
    1,144,849Elimination of intersegment profits
    
    
    
    
    
    
    Unallocated amountsCorporate headquarters expense
    
    
    
    
    
    
    Other expenses
    
    
    
    
    
    
    Consolidated income from continuing
operations before income tax
    
    
    
    
    
    $
    (472,416
    )AssetsTotal assets for reportable segments
    
    
    
    
    
    $
    39,680,672Other assets
    
    
    
    
    
    
    4,295,380Corporate headquarters
    
    
    
    
    
    
    Other unallocated amounts
    
    
    
    
    
    
    Total consolidated assets
    
    
    
    
    
    $
    43,976,052
  35




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE O  SEGMENT INFORMATION  Continued
  TransportationandTerminaling
    
    
    Fuel Sales
    
    
    TotalsRevenues from external customers
    
    $
    2,765,079
    
    
    $
    112,229,001
    
    
    $
    114,994,080Interest expense
    
    
    256,610
    
    
    
    343,193
    
    
    
    599,803Interest income
    
    
    5,891
    
    
    
    
    
    
    
    5,891Depreciation and amortization
    
    
    576,020
    
    
    
    597
    
    
    
    576,617Segment gross profit (loss)
    
    
    698,575
    
    
    
    1,298,700
    
    
    
    1,997,275Segment assets
    
    
    30,334,230
    
    
    
    9,346,442
    
    
    
    39,680,672Segment liabilities
    
    
    18,095,940
    
    
    
    6,437,232
    
    
    
    24,533,172Expenditure for segment assets
    
    
    6,975
    
    
    
    1,875
    
    
    
    8,850Reconciliation to Consolidated Amounts:RevenuesTotal revenues for reportable segments
    
    
    
    
    
    $
    114,994,080Elimination of intersegment revenues
    
    
    
    
    
    
    Total consolidated revenues
    
    
    
    
    
    $
    114,994,080Profit (loss)Total gross profit (loss) for reportable Segments
    
    
    
    
    
    $
    1,997,275Selling, general and administrative expense
    
    
    
    
    
    
    (4,981,517
    )Interest and Fuel Products financing expense
    
    
    
    
    
    
    (610,988
    )Interest income
    
    
    
    
    
    
    29,638Minority interest in loss of Rio Vista Energy
Partners L.P.
    
    
    
    
    
    
    2,290,907Elimination of intersegment profits
    
    
    
    
    
    
    Unallocated amountsCorporate headquarters expense
    
    
    
    
    
    
    Other expenses
    
    
    
    
    
    
    Consolidated income from continuing
operations before income tax
    
    
    
    
    
    $
    (1,274,685
    )AssetsTotal assets for reportable segments
    
    
    
    
    
    $
    39,680,672Other assets
    
    
    
    
    
    
    4,295,380Corporate headquarters
    
    
    
    
    
    
    Other unallocated amounts
    
    
    
    
    
    
    Total consolidated assets
    
    
    
    
    
    $
    43,976,052
  36




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
P  INCOME TAXES
    Partnership Tax Treatment and Regional Income Taxes
 NOTE
Q  401K
   37




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
R SUBSEQUENT EVENT
 GM Oil Properties, Inc.
      38




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
R SUBSEQUENT EVENT  Continued
 Penny Petroleum Corporation
   39




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##### Table of Contents



Penn Octane Corporation and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
R SUBSEQUENT EVENT  Continued
 GO, LLC
     40




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##### 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. and its subsidiaries (Rio Vista) 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, working capital, LPG supply, 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, Transportation and Terminaling Business, Fuel
Sales Business, TransMontaigne Note, RZB Loan Agreement, TLP Transaction, Senior Secured Credit,
the Oklahoma asquisitions, cash distributions, Qualifying Income, Spin-Off, 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, however, that the following list of
factors may not include all material risks facing the Company.
 Overview
   41




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##### Table of Contents



42




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##### Table of Contents



Acquisition of Regional Enterprizes, Inc.
      43




---



##### Table of Contents



Pending Acquisition of Oklahoma Assets
 GM Oil Properties, Inc.
      44




---



##### Table of Contents



Penny Petroleum Corporation
  GO, LLC
   45




---



##### Table of Contents



LPG Transportation Agreement
   46




---



##### Table of Contents



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
    
    
    6,492,361May 2007
    
    
    5,818,669June 2007
    
    
    5,480,023July 2007
    
    
    5,552,780August 2007
    
    
    5,466,599September 2007
    
    
    6,892,100October 2007
    
    
    8,864,583
   47




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##### Table of Contents



Letter of Intent for Retained Assets
   
    
    Restated and Amended Promissory Note (the Restated Promissory Note), in the
principal amount of $1.0 million, payable to TPSI by RVOP on or before December 31,
2007.
    
    Restated and Amended Security Agreement (the Restated Security Agreement),
granting TLP and TPSI a first priority security interest in the Assets in order to
secure the obligations of RVOP under the Letter of Intent and the Restated
Promissory Note.
    
    First Priority Equity Interest Pledge Agreement, granting TLP and TPSI a first
priority security interest in the corporate capital of POM.
    
    First Priority Equity Interest Pledge Agreement, granting TLP and TPSI a first
priority security interest in the corporate capital of Termatsal.
    
    Assignment Agreement, assigning TLP and TPSI the existing rights of RVOP in the
equity interests of Tergas in the event of a default by RVOP in its obligations
under the Letter of Intent or the Restated Promissory Note.
     48




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##### Table of Contents



Potential Factors Affecting Future Demand For The Retained Assets:
 Trends.
     Dependence on TransMontaigne.
   49




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##### Table of Contents



Fuel Sales Business
       Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine Monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember 30,
    
    
    September
    
    
    September
    
    
    September2006
    
    
    30, 2007
    
    
    30, 2006
    
    
    30, 2007Volume SoldFuel Products (millions of gallons)
    
    
    18.9
    
    
    
    18.2
    
    
    
    49.2
    
    
    
    52.1Average sales priceFuel Products (per gallon)
    
    $
    2.24
    
    
    $
    2.26
    
    
    $
    2.20
    
    
    $
    2.14
  50




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##### Table of Contents



Results of Operations
  For the three months ended September 30, 2006
 Continuing OperationsTransportation
    
    
    Fueland Terminaling
    
    
    Sales
    
    
    TotalRevenues
    
    $
    380
    (a)
    
    $
    42,502
    
    
    $
    42,882Cost Of Sales
    
    
    397
    (b)
    
    
    43,039
    
    
    
    43,436Gross Profit (Loss)
    
    $
    (17
    )
    
    $
    (537
    )
    
    $
    (554
    )
 For
the three months ended September 30, 2007
 Continuing OperationsTransportation
    
    
    Fueland Terminaling
    
    
    Sales
    
    
    TotalRevenues
    
    $
    1,650
    
    
    $
    40,981
    
    
    $
    42,631Cost Of Sales
    
    
    1,271
    
    
    
    40,808
    
    
    
    42,079Gross Profit (Loss)
    
    $
    379
    
    
    $
    173
    
    
    $
    552
 For
the nine months ended September 30, 2006
 Continuing OperationsTransportation
    
    
    Fueland Terminaling
    
    
    Sales
    
    
    TotalRevenues
    
    $
    380
    (a)
    
    $
    107,963
    
    
    $
    108,343Cost Of Sales
    
    
    1,384
    (b)
    
    
    107,654
    
    
    
    109,038Gross Profit (Loss)
    
    $
    (1,004
    )
    
    $
    309
    
    
    $
    (       695
    )
 For
the nine months ended September 30, 2007
 Continuing OperationsTransportation
    
    
    Fueland Terminaling
    
    
    Sales
    
    
    TotalRevenues
    
    $
    2,765
    
    
    $
    112,229
    
    
    $
    114,994Cost Of Sales
    
    
    2,067
    
    
    
    110,930
    
    
    
    112,997Gross Profit (Loss)
    
    $
    698
    
    
    $
    1,299
    
    
    $
    1,997
 (a)
    
    LPG Transportation agreement 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.
  51




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##### 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 Transportation
and Terminaling Business associated with bulk and petroleum products associated with Regional
operations and LPG, 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 Transportation and Terminaling 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.
Regionals results of operations commenced on July 28, 2007.
 Three Months Ended September 30, 2007 Compared With Three Months Ended September 30, 2006
 Revenues.
 Cost of goods sold.
 Selling, general and administrative expenses.
 Other income (expense).
 Nine months ended September 30, 2007 Compared With Nine months ended September 30, 2006
 Revenues.
 Cost of goods sold.
  52




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##### Table of Contents



Selling, general and administrative expenses.
 Other income (expense).
 Discontinued Operations:
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine Monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Volume SoldLPG (millions of gallons)  PMI
    
    
    9.0
    
    
    
    
    
    
    
    66.2
    
    
    
    LPG (millions of gallons)  Other
    
    
    6.2
    
    
    
    
    
    
    
    16.2
    
    
    
    15.2
    
    
    
    
    
    
    
    82.4
    
    
    
    Average sales priceLPG (per
gallon)  PMI
    
    $
    1.23
    
    
    $
    
    
    
    $
    1.08
    
    
    $
    LPG (per
gallon)  Other
    
    
    1.13
    
    
    
    
    
    
    
    1.07
    
    
    
    
 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 and nine months ended September 30, 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 and nine months ended September 30, 2006 and September 30, 2007.
  53




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##### Table of Contents



Liquidity and Capital Resources
       54




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##### Table of Contents



Credit Arrangements
      55




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##### 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
    
    $
    7.0
    
    
    $
    6.6
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    Operating Leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LPG Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Cash Obligations
    
    $
    7.0
    
    
    $
    6.6
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    
 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
    
    $
    0.6
    
    
    $
    0.6
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby Letters of Credit
    
    
    6.6
    
    
    
    6.6
    
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    7.2
    
    
    $
    7.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
  56




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##### Table of Contents



Distributions of Available Cash.
      Leases
 Norfolk Southern Leases
    57




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##### Table of Contents



Other
  Information Systems
  Partnership Tax Treatment and Regional Income Taxes
  Legal Proceedings
  Consulting Agreements
  Customer Contracts
 Asphalt Agreement
   58




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##### Table of Contents



Fuel Oil Agreement
  Mexican Operations
   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
   59




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##### Table of Contents



Private Placements and Other Transactions.
  Penn Octane 2001 Warrant Pla
    Note Receivable from a Former Officer of the Company
   60




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##### Table of Contents



TransMontaigne Note
  Sellers Note
  Common Units and Options of Rio Vista
 Common Units.
  General Partner Options.
  61




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##### Table of Contents



Common Unit Options.
     62




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##### Table of Contents



Intercompany Agreement and Intercompany Guarantees
 Omnibus Agreement .
   Guarantees
 Debt Guarantee .
 Tax Guarantee .
  63




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##### Table of Contents



Impact of Inflation
   Environmental Matters
   Recently Issued Financial Accounting Standards
   64




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##### Table of Contents



Statement by Management Concerning Review of Interim Information by An Independent Registered
Public Accounting Firm.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
     
 Item 4T. Controls and Procedures.
    65




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Business Factors.
 Management Factors
 Acquisition Factors.
  66




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##### Table of Contents



Market Listing
 Competitive Factors.
 International Factors.
 Political Factors.
 Industry and Economic Factors.
 Market Risk Factors.
  67




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##### Table of Contents



Internal Control Factors.
 Management Factors
 Projections
  68




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##### 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
   69




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##### 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 September 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 September 30, 2006 filed on August
14, 2006, SEC File No. 000-24394).2.3
    
    Agreement And Plan Of Merger, Made As Of The 27th Day Of July, 2007, By And Among
Rio Vista Energy Partners L.P., (Buyer); Regional Enterprises, Inc., A Virginia
Corporation And Newly Formed, Wholly Owned Subsidiary Of Buyer (Merger Sub); Regional
Enterprizes, Inc. (Also Known As Regional Enterprises, Inc.), A Virginia Corporation
(Company); The Shareholders Of Company; And W. Gary Farrar, Jr. (Principal).
(Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2007 filed on August 20, 2007, SEC File No. 000-24394).2.4
    
    Articles Of Merger Of Regional Enterprises, Inc. A Virginia Corporation, And
Regional Enterprizes, Inc., A Virginia Corporation Dated July 27 2007. (Incorporated by
reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2007 filed on August 20, 2007, 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).
  70




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Exhibit No.
 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).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).
  71




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Exhibit No.
 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).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).
  72




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Exhibit No.
 10.28
    
    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).10.29
    
    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).10.30
    
    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 September 30, 2006
filed on August 14, 2006, SEC File No. 000-24394).10.31
    
    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).10.32
    
    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).10.33
    
    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).10.34
    
    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).10.35
    
    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).10.36
    
    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).10.37
    
    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).10.38
    
    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).10.39
    
    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).10.40
    
    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).
  73




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Exhibit No.
 10.41
    
    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).10.42
    
    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).10.43
    
    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).10.44
    
    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).10.45
    
    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).10.46
    
    Consulting Agreement with An Effective Date Of November 1, 2006 By And Between Penn
Octane Corporation And Rio Vista Energy Partners L.P. And Ricardo Rodriguez Canney.
(Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2007 filed on August 20, 2007, SEC File No. 000-24394).10.47
    
    Consulting Agreement Made And Entered Into As Of The 2nd Day Of July, 2007 Between
Rio Vista Energy Partners, L.P. And Ceocast, Inc. (Incorporated by reference to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on
August 20, 2007, SEC File No. 000-24394).10.48
    
    Employment And Non-Competition Agreement Effective As Of The 27th Day Of July, 2007
Made By And Between Regional Enterprises, Inc. And W. Gary Farrar, III. (Incorporated by
reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2007 filed on August 20, 2007, SEC File No. 000-24394).10.49
    
    Escrow Agreement Between Rio Vista Energy Partners L.P., Regional Enterprises, Inc.,
W. Gary Farrar, Jr., A Resident Of The Commonwealth Of Virginia, And First Capital Bank,
Effective As Of The 27th Day Of July, 2007. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20,
2007, SEC File No. 000-24394).10.50
    
    Loan Agreement Dated As Of July 26, 2007, And Entered Into Between Rio Vista Energy
Partners L.P. And RZB Finance LLC. (Incorporated by reference to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File
No. 000-24394).10.51
    
    Guaranty And Agreement Between Regional Enterprises, Inc. And RZB Finance LLC Dated
As Of July 26, 2007. (Incorporated by reference to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File No.
000-24394).10.52
    
    Guaranty And Agreement Between Penn Octane Corporation and RZB Finance LLC Dated As
Of July 26, 2007. (Incorporated by reference to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File No.
000-24394).
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Exhibit No.
 10.53
    
    Guaranty And Agreement Between Rio Vista Operating Partnership L.P. and RZB Finance
LLC Dated As Of July 26, 2007. (Incorporated by reference to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File
No. 000-24394).10.54
    
    $5,000,000 Promissory Note Dated July 26, 2007 Issued By Rio Vista Energy Partners
L.P., To RZB Finance LLC. (Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File No.
000-24394).10.55
    
    General Security Agreement dated July 26, 2007 between RZB Finance LLC and Regional
Enterprises, Inc. (Incorporated by reference to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File No.
000-24394).10.56
    
    Pledge Agreement, Made This 26th Day Of July, 2007, By And Between: Rio Vista Energy
Partners L.P. And RZB Finance LLC. (Incorporated by reference to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File
No. 000-24394).10.57
    
    First Amendment To Line Letter Dated As Of July 26, 2007, Between RZB Finance LLC
And Penn Octane Corporation. (Incorporated by reference to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File No.
000-24394).10.58
    
    Debt Assumption Agreement Made As Of The 26th Day Of July, 2007, By And Between Rio
Vista Energy Partners L.P. And Regional Enterprises, Inc., A Virginia Corporation.
(Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2007 filed on August 20, 2007, SEC File No. 000-24394).10.59
    
    $5,000,000 Debt Assumption Note Dated July 26, 2007 Issued By Regional Enterprises,
Inc., To Rio Vista Energy Partners L.P. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20,
2007, SEC File No. 000-24394).10.60
    
    $2,500.000 Promissory Note Dated July 26, 2007 Issued By Regional Enterprises, Inc.,
To Rio Vista Energy Partners L.P. (Incorporated by reference to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 2007, SEC File
No. 000-24394).10.61
    
    Environmental Indemnity Agreement Made As Of The 26th Day Of July, 2007 By Regional
Enterprises, Inc. And RZB Finance LLC. (Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 20,
2007, SEC File No. 000-24394).10.62
    
    Reaffirmation Of Security Agreements, Dated As Of July 26, 2007 By And Among Rio
Vista Energy Partners L.P., Penn Octane Corporation And Rio Vista Operating Partnership
L.P. And RZB Finance LLC. (Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2007 filed on August 20, 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).
  75




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10.63
    
    Binding Letter of Intent made and entered into by and between Transmontaigne
Partners L.P. and Rio Vista Operating Partnership L.P. effective and binding as of
September 12, 200710.64
    
    Restated and amended Promissory Note dated September 12, 2007 between Rio Vista
Operating Partnership L.P. and TransMontaigne Product Services Inc.10.65
    
    Restated and Amended Security Agreement made this 12th day of September 2007, among
Rio Vista Operating Partnership, L.P. and TransMontaigne Product Services, Inc. and
TransMontaigne Partners L.P.10.66
    
    First Priority Equity Interest Pledge Agreement entered into on this 12th day of
September, 2007 by and among Rio Vista Operating Partnership, L.P., Penn Octane
International, LLC, and TransMontaigne Product Services, Inc. and TransMontaigne Partners
L.P. with the acknowledgment of Penn Octane de Mexico, S. de R.L. de C.V.10.67
    
    First Priority Equity Interest Pledge Agreement entered into on this 12th day of
September, 2007 by and among Rio Vista Operating Partnership, L.P., Penn Octane
International, LLC , and TransMontaigne Product Services, Inc. and TransMontaigne Partners
L.P. with the acknowledgment of Termatsal, S. de R.L. de C.V.10.68
    
    Assignment Agreement entered into on this 12th day of September, 2007 by and between
Rio Vista Operating Partnership L.P., and TransMontaigne Partners L.P. and TransMontaigne
Product Services, Inc.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.
  76




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SIGNATURES
  PENN OCTANE CORPORATIONNovember 19, 2007
    By:

/s/ Ian T. BothwellIan T. BothwellActing Chief Executive Officer, Acting President,
Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary (Principal Executive,
Financial and Accounting Officer)  77




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.63
    
    Binding Letter of Intent made and entered into by and between Transmontaigne
Partners L.P. and Rio Vista Operating Partnership L.P. effective and binding as of
September 12, 200710.64
    
    Restated and amended Promissory Note dated September 12, 2007 between Rio Vista
Operating Partnership L.P. and TransMontaigne Product Services Inc.10.65
    
    Restated and Amended Security Agreement made this 12th day of September 2007, among
Rio Vista Operating Partnership, L.P. and TransMontaigne Product Services, Inc. and
TransMontaigne Partners L.P.10.66
    
    First Priority Equity Interest Pledge Agreement entered into on this 12th day of
September, 2007 by and among Rio Vista Operating Partnership, L.P., Penn Octane
International, LLC, and TransMontaigne Product Services, Inc. and TransMontaigne Partners
L.P. with the acknowledgment of Penn Octane de Mexico, S. de R.L. de C.V.10.67
    
    First Priority Equity Interest Pledge Agreement entered into on this 12th day of
September, 2007 by and among Rio Vista Operating Partnership, L.P., Penn Octane
International, LLC , and TransMontaigne Product Services, Inc. and TransMontaigne Partners
L.P. with the acknowledgment of Termatsal, S. de R.L. de C.V.10.68
    
    Assignment Agreement entered into on this 12th day of September, 2007 by and between
Rio Vista Operating Partnership L.P., and TransMontaigne Partners L.P. and TransMontaigne
Product Services, Inc.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.
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