##### Index to Financial Statements

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

Commission File Number 333-115358-04



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PETRO, INC.

(Exact name of
registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Texas                                                          |  | 74-1816679                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification No.)
|                                                               | 
|6080 Surety Drive El Paso, Texas                               |  | 79905                               
|(Address of principal executive offices)                       |  | (zip code)                          

Registrants telephone number, including area code: (915) 860-4480



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Securities registered pursuant
to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None



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Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈No  x

Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirement for the past 90 days.    Yes  x    No ̈

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated
filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter. Not Applicable

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:

As of December 31, 2005, the number of shares outstanding of the registrants only class of common stock was 99,500.



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##### Index to Financial Statements

Forward Looking Statements

Certain sections of this Annual Report on Form 10-K (this Form 10-K), including Business, Managements Discussion and Analysis of Financial Condition and Results of Operations,
and Quantitative and Qualitative Disclosures about Market Risk, contain various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which
represent managements expectations or beliefs concerning future events that involve risks and uncertainties. These statements may be accompanied by words such as believe, intend, estimate, may,
could, project, anticipate, expect, or predict, that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however,
many important factors could cause our actual results in the future to differ materially from the results referred to in the forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties
that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. Some of these risks are described below in Item 1A, Risk Factors. These risk factors should be
considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

All statements, other than statements of historical facts included in this Form 10-K, may be considered forward-looking statements.

PART I

Item 1. Business

Petro, Inc.

In December 1974, we were formed as a Texas corporation. We own investments in certain oil and gas operations
and real estate joint ventures located in the Southwest United States. In addition, we own an interest in Petro Stopping Centers Holdings, L.P. (Holdings), a Delaware limited partnership, which, in turn, owns Petro Stopping Centers, L.P.
(the Operating Partnership), an operating partnership that operates a nationwide network of truck stopping centers. We are a wholly owned subsidiary of Nevada Trio, Inc.

Oil and Gas

We owned a small residual interest in mineral right royalties related to two oil and gas
wells in which we obtained an interest over 20 years ago. The underlying assets corresponding to this income have been written down to zero on our balance sheet in prior years. Periodically, we receive our share of royalties which are netted against
our share of administrative costs. These royalties and administrative costs are expected to continue to decline year over year.

Real Estate Joint
Venture

We own approximately 20% of the common stock of Hueco Mountain Estates, Inc. (Hueco). Hueco sells land in west
Texas for residential use and in most instances carries the sale contract for the benefit of the purchaser. We own a 10% interest in Trevino Properties (Trevino), a real estate general partnership, which holds undeveloped commercial land
for sale in El Paso, Texas.

Investments

On July 23, 1999, we and certain other parties exchanged our interests in the Operating Partnership for identical interests in Holdings and became owners of Holdings. At this time, we became the sole general partner in both Holdings
(1.1%) and the Operating Partnership (0.25%). In addition, we hold an 11% common limited partnership interest and mandatorily redeemable preferred partnership interests in Holdings. The mandatorily redeemable preferred partnership interests of
$3,774,860 are entitled to cumulative preferred returns of 8% and are subject to mandatory redemption in October 2008. The preferred returns accrue, but are only payable in cash if permitted by the Operating Partnerships and Holdings
then existing debt instruments. At December 31, 2004 and 2005, we had accrued preferred returns on the mandatorily redeemable preferred partnership interest amounting to $1,614,672 and $1,899,463, respectively.



1



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##### Index to Financial Statements

In early 2004, the Operating Partnership and Holdings completed their 2004 Refinancing Transactions in
which both companies refinanced substantially all of their existing indebtedness.

We do not own any assets other than the investments in
Hueco, Trevino, Holdings, and the Operating Partnership; and apart from our general partnership interests, we are not otherwise actively engaged in any business.

Employees

We do not conduct any operations and therefore we do not have any employees.

Item 1A. Risk Factors

Although it is not
possible to predict all risks that may affect future results, these risks may include, but are not limited to, the following:



| |  |  | the economic condition of the long-haul trucking and real estate industry and the U.S. economy in general;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | competition from other truck stops, convenience stores, fast food retailers, restaurants, and truck maintenance and repair facilities; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | environmental regulations.
| | - |  | --------------------------

Item 1B. Unresolved Staff Comments

Not applicable

Item 2.
Properties

We leased commercial space under an operating lease based on a fixed charge. Total rent expense amounted to $150,000 for
each of the years ending December 31, 2003 and 2004, and $37,500 for the year ending December 31, 2005. This lease expired on March 31, 2005.

Item 3. Legal Proceedings

We are involved in various litigation incidental to our business for which an estimate of
the possible loss or range of loss cannot be made at this time. In our opinion, such proceedings will not have a material adverse effect on our financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None

PART II

Item 5. Market of Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

We are a wholly owned subsidiary of Nevada Trio, Inc. Consequently, there is no established public trading market for our equity.

Item 6.
Selected Financial Data

The information set forth below should be read in conjunction with both Managements Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 and the financial



2



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##### Index to Financial Statements

statements and notes thereto included in Item 8. The selected financial data as of and for the year ended
December 31, 2001 has been derived from our unaudited financial statements, the financial data as of and for the years ended December 31, 2002, 2003, 2004, and 2005 has been derived from our audited financial statements. In the opinion of
our management, the unaudited and audited financial data contain all adjustments necessary to present fairly the selected historical financial data.

SELECTED HISTORICAL FINANCIAL DATA



|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                            |  | For the Years Ended December 31, |           
|                                                                            |  | 2001                             |            |   | 2002 |   |            | 2003 |  |   | 2004       |   |  | 2005 |           
|                                                                            |  | (unaudited)                      |            |   |      |   |            |      |  |   |            |   |  |      |           
|Income Statement Data:                                                      |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Revenue (loss):                                                             |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Oil and gas income                                                          |  | $                                | 20,674     |   |      | $ | 13,924     |      |  | $ | 10,274     |   |  | $    | 8,772      |   |  | $ | 21,720     |  
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                                  | 208,094    |   |      |   | 227,062    |      |  |   | 243,439    |   |  |      | 265,989    |   |  |   | 282,105    |  
|Income (loss) on investment in limited partnerships                         |  |                                  | (1,743,782 | ) |      |   | (831,245   | )    |  |   | (942,305   | ) |  |      | (2,177,727 | ) |  |   | 495,475    |  
|Equity in net income (loss) of affiliated entities                          |  |                                  | 44,288     |   |      |   | (21,552    | )    |  |   | (5,772     | ) |  |      | (3,218     | ) |  |   | (17,960    | )
|Other income                                                                |  |                                  | 2,524      |   |      |   |           |      |  |   | 15,244     |   |  |      | 36,000     |   |  |   | 6,000      |  
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total revenue (loss)                                                        |  |                                  | (1,468,202 | ) |      |   | (611,811   | )    |  |   | (679,120   | ) |  |      | (1,870,184 | ) |  |   | 787,340    |  
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|General and administrative expenses                                         |  |                                  | 228,830    |   |      |   | 231,710    |      |  |   | 295,302    |   |  |      | 258,477    |   |  |   | 110,708    |  
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Operating income (loss)                                                     |  |                                  | (1,697,032 | ) |      |   | (843,521   | )    |  |   | (974,422   | ) |  |      | (2,128,661 | ) |  |   | 676,632    |  
|                                                                            |  |                                  |            |   |     
|Interest income - related party                                             |  |                                  | 9,944      |   |      |   | 10,299     |      |  |   | 8,188      |   |  |      | 13,464     |   |  |   | 12,081     |  
|Interest expense - related party                                            |  |                                  | (51,008    | ) |      |   | (46,960    | )    |  |   | (42,619    | ) |  |      | (37,967    | ) |  |   | (32,978    | )
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Income (loss) before income taxes                                           |  |                                  | (1,738,096 | ) |      |   | (880,182   | )    |  |   | (1,008,853 | ) |  |      | (2,153,164 | ) |  |   | 655,735    |  
|Income tax expense                                                          |  |                                  |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   | 24,550     |  
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net income (loss)                                                           |  | $                                | (1,738,096 | ) |      | $ | (880,182   | )    |  | $ | (1,008,853 | ) |  | $    | (2,153,164 | ) |  | $ | 631,185    |  
|                                                                            |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Balance Sheet Data:                                                         |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|(at end of period)                                                          |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total assets                                                                |  | $                                | 1,764,656  |   |      | $ | 879,582    |      |  | $ | 899,336    |   |  | $    | 837,360    |   |  | $ | 887,053    |  
|Total debt                                                                  |  |                                  | 698,029    |   |      |   | 637,998    |      |  |   | 573,628    |   |  |      | 504,603    |   |  |   | 430,590    |  
|Equity in partnership losses in excess of investment                        |  |                                  | 3,643,418  |   |      |   | 4,765,739  |      |  |   | 5,902,468  |   |  |      | 7,890,088  |   |  |   | 7,251,232  |  
|Stockholders deficit and comprehensive income (loss)                       |  |                                  | (3,211,784 | ) |      |   | (4,549,210 | )    |  |   | (5,995,927 | ) |  |      | (8,224,975 | ) |  |   | (7,668,801 | )
|                                                                            |  |                                  |            |   |     
|Other Financial Data:                                                       |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net cash provided by (used in):                                             |  |                                  |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Operating activities                                                        |  | $                                | (251,721   | ) |      | $ | (254,528   | )    |  | $ | (313,971   | ) |  | $    | (234,350   | ) |  | $ | (115,331   | )
|Investing activities                                                        |  |                                  | 85,365     |   |      |   | (3,100     | )    |  |   | (5,334     | ) |  |      | 30,166     |   |  |   |           |  
|Financing activities                                                        |  |                                  | 106,593    |   |      |   | 255,678    |      |  |   | 336,948    |   |  |      | 184,050    |   |  |   | 113,558    |  

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

Explanation of Reporting Format

We
own investments in certain oil and gas operations, real estate joint ventures, and our interests in Holdings and its related entities. We do not have any employees; we do not own any assets other than the investments in these entities; and, apart
from our general partnership interests, we are not otherwise actively engaged in any business.

We have owned a small working interest in
two oil and gas wells for over 20 years. Revenues are netted against expenses and are expected to continue to decline year after year. We own approximately 20% of the common stock of Hueco. Hueco sells land in west Texas for residential use and in
most instances carries the sale contract for the benefit of the purchaser. We own a 10% interest in Trevino, a real estate general partnership, which holds undeveloped commercial land for sale in El Paso, Texas.



3



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##### Index to Financial Statements

Effective July 23, 1999, Holdings was formed as a Delaware limited partnership. Certain other
partners and we exchanged our interests in the Operating Partnership for identical interests in Holdings. As a result of the recapitalization, we became the sole general partner in both Holdings (1.1%) and the Operating Partnership (0.25%). In
addition, we hold an 11% common limited partnership interest and mandatorily redeemable preferred partnership interests in Holdings. The mandatorily redeemable preferred partnership interests of $3,774,860 are entitled to cumulative preferred
returns of 8% and are subject to mandatory redemption in October 2008. The preferred returns accrue, but are only payable in cash if permitted by the Operating Partnerships and Holdings then existing debt instruments. At
December 31, 2004 and 2005, we have accrued preferred returns on the mandatorily redeemable preferred partnership interest amounting to $1,614,672 and $1,899,463 respectively.

We derive our revenues from:



| |  |  | oil and gas drilling interests owned by us;
| | - |  | -------------------------------------------



| |  |  | interest income earned on advances from a related party;
| | - |  | --------------------------------------------------------



| |  |  | our share of income (loss) from our investments in limited partnerships;
| | - |  | ------------------------------------------------------------------------



| |  |  | our share of income (loss) from our investments in affiliated entities; and
| | - |  | ---------------------------------------------------------------------------



| |  |  | sublease income.
| | - |  | ----------------

The following table sets forth our
total revenues (loss) by major source:



|                                                                            |  |                                  |          |   |      |        |   |      |   |            |   |  |        |   |  |   |         |   |  |       |  
|--------------------------------------------------------------------------- |  | -------------------------------- | -------- | - | ---- | ------ | - | ---- | - | ---------- | - |  | ------ | - |  | - | ------- | - |  | ----- | -
|                                                                            |  | For the Years Ended December 31, |         
|                                                                            |  | 2003                             |          |   | 2004 |        |   | 2005 |  
|Oil and gas income                                                          |  | $                                | 10,274   |   |      | 1.5    | % |      | $ | 8,772      |   |  | 0.4    | % |  | $ | 21,720  |   |  | 2.8   | %
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                                  | 243,439  |   |      | 35.8   | % |      |   | 265,989    |   |  | 14.2   | % |  |   | 282,105 |   |  | 35.8  | %
|Income (loss) on investment in limited partnerships                         |  |                                  | (942,305 | ) |      | -138.7 | % |      |   | (2,177,727 | ) |  | -116.3 | % |  |   | 495,475 |   |  | 62.9  | %
|Equity in net loss of affiliated entities                                   |  |                                  | (5,772   | ) |      | -0.8   | % |      |   | (3,218     | ) |  | -0.2   | % |  |   | (17,960 | ) |  | -2.3  | %
|Other income                                                                |  |                                  | 15,244   |   |      | 2.2    | % |      |   | 36,000     |   |  | 1.9    | % |  |   | 6,000   |   |  | 0.8   | %
|                                                                            |  |                                  |          |   |      |        |   |      |   |            |   |  |        |   |  |   |         |   |  |       |  
|Total revenue (loss)                                                        |  | $                                | (679,120 | ) |      | -100.0 | % |      | $ | (1,870,184 | ) |  | -100.0 | % |  | $ | 787,340 |   |  | 100.0 | %
|                                                                            |  |                                  |          |   |      |        |   |      |   |            |   |  |        |   |  |   |         |   |  |       |  

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenue (Loss).Net income increased
for the year ended December 31, 2005 to $631,185 compared to a loss of $2.2 million for the year ended December 31, 2004, due to increased income from our investment in limited partnerships. Those revenues were due primarily to higher fuel
revenues by the Operating Partnership during the 2005 reporting period, in addition to the decrease in costs associated with the debt refinancing by the Operating Partnership and Holdings during the 2004 reporting period. Our income from oil and gas
operations increased to $21,720 from $8,772. We recognized losses of $22,960 and $15,506 related to our investment in Hueco for the years ended December 31, 2004 and 2005, respectively, and recognized income of $19,742 and a loss of $2,454
related to our investment in Trevino for the years ended December 31, 2004 and 2005, respectively.

General and Administrative
Expenses. General and administrative expenses decreased 57.2% to $110,708 for the year ended December 31, 2005 compared to $258,477 for the year ended December 31, 2004 due primarily to lower rent expense.



4



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##### Index to Financial Statements

Interest Expense. Interest expense decreased 13.1%, or $4,989, to $32,978 compared to the year
ended December 31, 2004, due primarily to the decrease in interest bearing debt obligations.

Year Ended December 31, 2004 Compared to Year
Ended December 31, 2003

Revenue (Loss).Net loss increased for the year ended December 31, 2004 to $2.2 million
compared to a loss of $1.0 million for the year ended December 31, 2003, due to increased losses from our investment in limited partnerships. Those losses were due primarily to costs associated with the debt refinancing by the Operating
Partnership and Holdings during the reporting period. Our income from oil and gas operations declined to $8,772 from $10,274. We recognized losses of $23,824 and $22,960 related to our investment in Hueco for the years ended December 31, 2003
and 2004, respectively, and recognized income of $18,052 and $19,742 related to our investment in Trevino for the years ended December 31, 2003 and December 31, 2004, respectively.

General and Administrative Expenses. General and administrative expenses decreased 12.5% to $258,477 for the year ended December 31, 2004
compared to $295,302 for the year ended December 31, 2003 due to reduced property tax expense on previously unoccupied income property.

Interest Expense. Interest expense decreased 10.9% or $4,652 to $37,967 compared to the year ended December 31, 2003, due primarily to the decrease in interest bearing debt obligations.

Liquidity and Capital Resources

Our principal
sources of liquidity are cash flows from our operations and available funds from our parent, Nevada trio, Inc.

Cash Flows

We had cash flows used in operations of $234,350 and $115,331 in 2004 and 2005, respectively. The increase in cash flows was primarily due to increased
revenues from our investment in limited partnerships.

Available Funds from Nevada Trio, Inc.

We anticipate having cash requirements for operations and debt service in excess of expected available funds in the amount of $120,000 through 2006, and a
lower amount thereafter. Our parent, Nevada Trio, Inc., will provide or make available any necessary funds to meet our obligations.

Liquidity Resource
Requirements

The following is a summary of our contractual obligations as of December 31, 2005:



|                                    |  |       |         |                 |   |           |  |           |         |              |   |         |  |   |  
|----------------------------------- |  | ----- | ------- | --------------- | - | --------- |  | --------- | ------- | ------------ | - | ------- |  | - | -
|Contractual Obligations             |  | Total |         | Less Than1 Year |   | 1-3 Years |  | 4-5 Years |         | After5 Years
|Long-term debt (including interest) |  | $     | 507,229 |                 | $ | 106,992   |  | $         | 213,984 |              | $ | 186,253 |  | $ | 
|                                    |  |       |         |                 |   |           |  |           |         |              |   |         |  |   |  
|Total contractual obligations       |  | $     | 507,229 |                 | $ | 106,992   |  | $         | 213,984 |              | $ | 186,253 |  | $ | 
|                                    |  |       |         |                 |   |           |  |           |         |              |   |         |  |   |  

Off-Balance Sheet Arrangements

Concurrent with the 2004 Refinancing Transactions described above, we, together with certain other parties, each entered into an indemnity agreement under
which each agreed to indemnify Holdings, the Operating Partnership, and the general and limited partners thereof, for a definitive amount of debt arising out of the 2004 Refinancing Transactions. The indemnity agreements were entered into by the
parties to address specific income tax issues arising out of the 2004 Refinancing Transactions under the at-risk



5



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##### Index to Financial Statements

limitation rules, the partnership basis rules, and the liability allocation rules found in the Internal Revenue Code and
the Treasury regulations. Consequently, each partys obligation under its respective indemnity agreement is determined by taking into account that partys basis in its partnership interest and the applicable at-risk rules and
liability allocation rules. No demand for payment under the indemnity agreement has been made.

We are a guarantor on a full, joint and
several and senior secured basis, of $250,000,000 aggregate principal amount of 9% Senior Secured Notes due 2012 and of $61,300,000 aggregate principal amount of Senior Secured Credit Facilities due 2008, which were issued by the Operating
Partnership. Payments would be due if the Operating Partnership were to become insolvent and/or entered into default of any debt covenant or indenture. No collateral secures our guarantee.

Critical Accounting Policies

The preparation of our
financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities in our financial statements and accompanying notes. The Securities and Exchange Commission has defined a companys critical accounting policies as the ones that are most important to the portrayal of the companys
financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Based on this definition,
we have identified our critical accounting policies as including those addressed below. We also have other key accounting policies that involve the use of estimates, judgments, and assumptions. See Note 2 of notes to our financial statements
included herein for additional discussion of these accounting policies. We believe that our estimates and assumptions are reasonable, based upon information presently available, however, actual results may differ from these estimates under different
assumptions or conditions.

Income Taxes

Our parent files a consolidated tax return that includes our and other subsidiaries results of operations. Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the book
and tax bases of assets and liabilities, except for net operating losses for tax purposes and tax credits. Potential benefits of net operating losses and tax credits resulting from our operations are not allocated to us. Deferred tax assets are
reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets are adjusted for the effects of changes in tax law and rates on the date
of enactment.

Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,
which replaced the original Interpretation No. 46 issued in January 2003. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The effective dates vary depending
on the type of reporting company and the type of entity that the company is involved with. Companies without publicly traded equity securities, such as the Company, must apply the revised Interpretation immediately to all entities created after
December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December 15, 2004. We have adopted this revised Interpretation and concluded that we do not own interests in any
entities that meet the consolidation requirements.

In May 2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154, Accounting Changes and Error Corrections, which replaced Accounting Principles Board Opinion No. 20, Accounting Changes, and Statement of Financial Accounting



6



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##### Index to Financial Statements

Standards No. 3, Reporting Accounting Changes in Interim Financial Statements. This standard provides
guidance on the accounting and reporting for accounting changes and correction of errors, requiring changes in accounting principles be recognized in a retrospective approach rather than treating them as cumulative effect of changes in accounting
principle. The standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We have adopted this standard and do not believe that the adoption of this standard will have a
significant impact on our financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

As of December 31, 2004 and 2005, the carrying amounts of certain financial instruments employed by us (including cash and cash
equivalents, investment in affiliated entities, accounts payable, advances due from/amounts due to related party, and related party note payable) are representative of fair value because of the short-term maturity of these instruments.

The following table reflects the carrying amount and estimated fair value of our financial instruments, as of December 31:



|                      |  |                |         |      |            |   |                |  |   |            |   |  |   |        
|--------------------- |  | -------------- | ------- | ---- | ---------- | - | -------------- |  | - | ---------- | - |  | - | -------
|                      |  | 2004           |         | 2005
|                      |  | CarryingAmount |         |      | Fair Value |   | CarryingAmount |  |   | Fair Value
|Long-term debt        |  |                |         |      |            |   |                |  |   |            |   |  |   |        
|Fixed rate            |  | $              | 504,603 |      |            | $ | 504,603        |  | $ | 430,590    |   |  | $ | 430,590
|Average interest rate |  |                | 7.0     | %    |            |   |               |  |   | 7.0        | % |  |   |       



7



---

##### Index to Financial Statements

Item 8. Financial Statements and Supplementary Data

PETRO, INC.

BALANCE SHEETS



|                                                                                          |  |                  |             |   |                  |   |             |  
|----------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                          |  | December 31,2004 |             |   | December 31,2005 |  
|Assets                                                                                    |  |                  |             |   |                  |   |             |  
|                                                                                          |  |                 
|Cash and cash equivalents                                                                 |  | $                | 1,773       |   |                  | $ |            |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total current assets                                                                      |  |                  | 1,773       |   |                  |   |            |  
|                                                                                          |  |                 
|Prepaid expenses                                                                          |  |                  | 638         |   |                  |   |            |  
|Advances due from related party                                                           |  |                  | 280,726     |   |                  |   | 356,427     |  
|Investment in affiliated entities                                                         |  |                  | 548,586     |   |                  |   | 530,626     |  
|Leasehold improvements, net                                                               |  |                  | 5,637       |   |                  |   |            |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total assets                                                                              |  | $                | 837,360     |   |                  | $ | 887,053     |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Liabilities and Stockholders Deficit                                                     |  |                  |             |   |                  |   |             |  
|                                                                                          |  |                 
|Current portion of note payable - related party                                           |  | $                | 74,014      |   |                  | $ | 79,364      |  
|Accounts payable and accrued expenses                                                     |  |                  | 1,000       |   |                  |   | 28,183      |  
|Deferred revenue                                                                          |  |                  | 7,500       |   |                  |   |            |  
|Due to related party                                                                      |  |                  | 659,144     |   |                  |   | 845,849     |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total current liabilities                                                                 |  |                  | 741,658     |   |                  |   | 953,396     |  
|                                                                                          |  |                 
|Note payable - related party                                                              |  |                  | 430,589     |   |                  |   | 351,226     |  
|Equity in partnership losses in excess of investment                                      |  |                  | 7,890,088   |   |                  |   | 7,251,232   |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total liabilities                                                                         |  |                  | 9,062,335   |   |                  |   | 8,555,854   |  
|                                                                                          |  |                  |             |   |                  |   |             |  
|Stockholders deficit                                                                     |  |                  |             |   |                  |   |             |  
|Common stock, $.01 par value, 50,000,000 authorized, 99,500 shares issued and outstanding |  |                  | 995         |   |                  |   | 995         |  
|Additional paid-in capital                                                                |  |                  | 13,395,970  |   |                  |   | 13,395,970  |  
|Accumulated deficit                                                                       |  |                  | (21,621,940 | ) |                  |   | (21,065,766 | )
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total stockholders deficit                                                               |  |                  | (8,224,975  | ) |                  |   | (7,668,801  | )
|                                                                                          |  |                  |             |   |                  |   |             |  
|Total liabilities and stockholders deficit                                               |  | $                | 837,360     |   |                  | $ | 887,053     |  
|                                                                                          |  |                  |             |   |                  |   |             |  

See accompanying notes to financial statements.



8



---

##### Index to Financial Statements

PETRO, INC.

STATEMENTS OF OPERATIONS



|                                                                            |  |                            |            |   |                            |   |            |                            |  |   |         |  
|--------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | -------------------------- | - | ---------- | -------------------------- |  | - | ------- | -
|                                                                            |  | Year EndedDecember 31,2003 |            |   | Year EndedDecember 31,2004 |   |            | Year EndedDecember 31,2005 | 
|Revenue (loss)                                                              |  |                            |            |   |                            |   |            |                            |  |   |         |  
|Oil and gas income                                                          |  | $                          | 10,274     |   |                            | $ | 8,772      |                            |  | $ | 21,720  |  
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                            | 243,439    |   |                            |   | 265,989    |                            |  |   | 282,105 |  
|Income (loss) on investment in limited partnerships                         |  |                            | (942,305   | ) |                            |   | (2,177,727 | )                          |  |   | 495,475 |  
|Equity in net loss of affiliated entities                                   |  |                            | (5,772     | ) |                            |   | (3,218     | )                          |  |   | (17,960 | )
|Other income                                                                |  |                            | 15,244     |   |                            |   | 36,000     |                            |  |   | 6,000   |  
|                                                                            |  |                            |            |   |                            |   |            |                            |  |   |         |  
|Total revenue (loss)                                                        |  |                            | (679,120   | ) |                            |   | (1,870,184 | )                          |  |   | 787,340 |  
|                                                                            |  |                            |           
|General and administrative expenses                                         |  |                            | 295,302    |   |                            |   | 258,477    |                            |  |   | 110,708 |  
|                                                                            |  |                            |            |   |                            |   |            |                            |  |   |         |  
|Operating income (loss)                                                     |  |                            | (974,422   | ) |                            |   | (2,128,661 | )                          |  |   | 676,632 |  
|                                                                            |  |                            |           
|Interest income - related party                                             |  |                            | 8,188      |   |                            |   | 13,464     |                            |  |   | 12,081  |  
|Interest expense - related party                                            |  |                            | (42,619    | ) |                            |   | (37,967    | )                          |  |   | (32,978 | )
|                                                                            |  |                            |            |   |                            |   |            |                            |  |   |         |  
|Income (loss) before taxes                                                  |  |                            | (1,008,853 | ) |                            |   | (2,153,164 | )                          |  |   | 655,735 |  
|Income tax expense                                                          |  |                            |           |   |                            |   |           |                            |  |   | 24,550  |  
|Net income (loss)                                                           |  | $                          | (1,008,853 | ) |                            | $ | (2,153,164 | )                          |  | $ | 631,185 |  
|                                                                            |  |                            |            |   |                            |   |            |                            |  |   |         |  

See accompanying notes to financial statements.



9



---

##### Index to Financial Statements

PETRO, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT

AND COMPREHENSIVE INCOME (LOSS)



|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ----------- | - | ------------------------ |  | ------------------ | ---------- |  | ------------------------------------------ | ----------- | - | ----- | - | ------- | - |  | - | ---------- | -
|                                                                            |  | ComprehensiveIncome (Loss) |            |   | CommonStock |   | AdditionalPaid-inCapital |  | AccumulatedDeficit |            |  | AccumulatedOtherComprehensiveIncome (Loss) |             |   | Total |  
|Balances, December 31, 2002                                                 |  |                            |            |   |             | $ | 995                      |  | $                  | 13,395,970 |  | $                                          | (17,889,079 | ) |       | $ | (57,096 | ) |  | $ | (4,549,210 | )
|                                                                            |  |                            |            |   |             |  
|Net loss                                                                    |  |                            | (1,008,853 | ) |             |   |                         |  |                    |           |  |                                            | (1,008,853  | ) |       |   |        |   |  |   | (1,008,853 | )
|Activity from PSC Holdings, LP:                                             |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Comprehensive loss - net unrealized changes in cash flow hedging derivative |  |                            | 57,096     |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   | 57,096  |   |  |   | 57,096     |  
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                            |            |   |             |   |                          |  |                    |            |  |                                            | (492,307    | ) |       |   |         |   |  |   | (492,307   | )
|Partners minimum tax distributions                                         |  |                            |            |   |             |   |                          |  |                    |            |  |                                            | (2,653      | ) |       |   |         |   |  |   | (2,653     | )
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Comprehensive loss                                                          |  | $                          | (951,757   | ) |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Balances, December 31, 2003                                                 |  |                            |            |   |             | $ | 995                      |  | $                  | 13,395,970 |  | $                                          | (19,392,892 | ) |       | $ |        |   |  | $ | (5,995,927 | )
|                                                                            |  |                            |            |   |             |  
|Net loss                                                                    |  |                            | (2,153,164 | ) |             |   |                         |  |                    |           |  |                                            | (2,153,164  | ) |       |   |        |   |  |   | (2,153,164 | )
|Activity from PSC Holdings, LP:                                             |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                            |            |   |             |   |                          |  |                    |            |  |                                            | (76,794     | ) |       |   |         |   |  |   | (76,794    | )
|Partners minimum tax distributions                                         |  |                            |            |   |             |   |                          |  |                    |            |  |                                            | 910         |   |       |   |         |   |  |   | 910        |  
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Comprehensive loss                                                          |  | $                          | (2,153,164 | ) |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Balances, December 31, 2004                                                 |  |                            |            |   |             | $ | 995                      |  | $                  | 13,395,970 |  | $                                          | (21,621,940 | ) |       | $ |        |   |  | $ | (8,224,975 | )
|                                                                            |  |                            |            |   |             |  
|Net income                                                                  |  |                            | 631,185    |   |             |   |                         |  |                    |           |  |                                            | 631,185     |   |       |   |        |   |  |   | 631,185    |  
|Activity from PSC Holdings, LP:                                             |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Accrual of preferred return on mandatorily redeemable partnership interests |  |                            |            |   |             |   |                          |  |                    |            |  |                                            | (75,011     | ) |       |   |         |   |  |   | (75,011    | )
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Comprehensive income                                                        |  | $                          | 631,185    |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  
|Balances, December 31, 2005                                                 |  |                            |            |   |             | $ | 995                      |  | $                  | 13,395,970 |  | $                                          | (21,065,766 | ) |       | $ |        |   |  | $ | (7,668,801 | )
|                                                                            |  |                            |            |   |             |   |                          |  |                    |            |  |                                            |             |   |       |   |         |   |  |   |            |  

See accompanying notes to financial statements.



10



---

##### Index to Financial Statements

PETRO, INC.

STATEMENTS OF CASH FLOWS



|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | -------------------------- | - | ---------- | -------------------------- |  | - | -------- | -
|                                                                                       |  | Year EndedDecember 31,2003 |            |   | Year EndedDecember 31,2004 |   |            | Year EndedDecember 31,2005 | 
|Cash flows from operating activities:                                                  |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Net income (loss)                                                                      |  | $                          | (1,008,853 | ) |                            | $ | (2,153,164 | )                          |  | $ | 631,185  |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities:   |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Equity in net loss of affiliated entities                                              |  |                            | 5,772      |   |                            |   | 3,218      |                            |  |   | 17,960   |  
|Income (loss) on investment in limited partnerships                                    |  |                            | 942,305    |   |                            |   | 2,177,727  |                            |  |   | (495,475 | )
|Interest recorded on accrual of redeemable shares and preferred shares                 |  |                            | (243,439   | ) |                            |   | (265,989   | )                          |  |   | (282,105 | )
|Depreciation expense                                                                   |  |                            | 5,639      |   |                            |   | 22,557     |                            |  |   | 5,637    |  
|Increase (decrease) from changes in:                                                   |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Prepaid assets                                                                         |  |                            |           |   |                            |   | (638       | )                          |  |   | 638      |  
|Advances due from related party                                                        |  |                            | (8,188     | ) |                            |   | (13,462    | )                          |  |   | (11,988  | )
|Accounts payable and accrued expenses                                                  |  |                            | (8,707     | ) |                            |   | (10,599    | )                          |  |   | 26,317   |  
|Deferred revenue                                                                       |  |                            | 1,500      |   |                            |   | 6,000      |                            |  |   | (7,500   | )
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Net cash used in operating activities                                                  |  |                            | (313,971   | ) |                            |   | (234,350   | )                          |  |   | (115,331 | )
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Cash flows from investing activities:                                                  |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Additions to leasehold improvements                                                    |  |                            | (33,834    | ) |                            |   |           |                            |  |   |         |  
|Partnership withdrawal                                                                 |  |                            | 28,500     |   |                            |   | 30,166     |                            |  |   |         |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Net cash provided by (used in) investing activities                                    |  |                            | (5,334     | ) |                            |   | 30,166     |                            |  |   |         |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Cash flows from financing activities:                                                  |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Intercompany advances                                                                  |  |                            | 401,319    |   |                            |   | 253,074    |                            |  |   | 186,705  |  
|Change in book cash overdraft                                                          |  |                            |           |   |                            |   |           |                            |  |   | 866      |  
|Principal payments on related party notes payable                                      |  |                            | (64,371    | ) |                            |   | (69,024    | )                          |  |   | (74,013  | )
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Net cash provided by financing activities                                              |  |                            | 336,948    |   |                            |   | 184,050    |                            |  |   | 113,558  |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                   |  |                            | 17,643     |   |                            |   | (20,134    | )                          |  |   | (1,773   | )
|                                                                                       |  |                            |           
|Cash and cash equivalents, beginning of period                                         |  |                            | 4,264      |   |                            |   | 21,907     |                            |  |   | 1,773    |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Cash and cash equivalents, end of period                                               |  | $                          | 21,907     |   |                            | $ | 1,773      |                            |  | $ |         |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Supplemental schedule of non-cash investing and financing activities:                  |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Interest paid during the period                                                        |  | $                          | 42,619     |   |                            | $ | 37,967     |                            |  | $ | 32,978   |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  
|Activity from investment in limited partnership recorded directly to retained earnings |  | $                          | 437,864    |   |                            | $ | 75,884     |                            |  | $ | 75,011   |  
|                                                                                       |  |                            |            |   |                            |   |            |                            |  |   |          |  

See accompanying notes to financial statements.



11



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



(1) Company Formation and Description of Business

Petro, Inc. (the Company) owns investments in certain oil and gas operations and real estate joint ventures located in the Southwest United States. In addition, the Company owns an interest in Petro
Stopping Centers Holdings, L.P. (Holdings), a Delaware limited partnership, which, in turn, owns Petro Stopping Centers, L.P. (the Operating Partnership), an operating partnership that operates a nationwide network of truck
stopping centers. The Company is a wholly owned subsidiary of Nevada Trio, Inc.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial
statements have been prepared in accordance with generally accepted accounting principles.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Cash and Cash Equivalents

The Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties and all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The
Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash
equivalents. Cash equivalents at December 31, 2004 totaled $1,773. As of December 31, 2005, the Company had no cash and cash equivalents.

Investments

A 20% interest in Hueco Mountain Estates, Inc. (Hueco), a 10% interest in Trevino Properties
(Trevino), a 0.25% general partner interest in the Operating Partnership, and 12.1% general and limited partner interests in Holdings are accounted for using the equity method. The equity method of accounting is used since the ability to
exercise significant influence over these entities exists due to the material related party ownership interests in these entities. Trevino is a joint venture in the form of a general partnership.

Income Taxes

Nevada Trio, Inc., the Companys
parent, files a consolidated tax return that includes the results of operations of the Company and other subsidiaries. Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the
book and tax bases of assets and liabilities, except for net operating losses for tax purposes and tax credits. Potential benefits of net operating losses and tax credits resulting from the operations of the Company are not allocated to the Company.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets are adjusted for the effects of
changes in tax law and rates on the date of enactment.

Leasehold improvements

Leasehold improvements were stated at acquisition cost. Depreciation is computed by the straight-line method. Improvements to leased property are
depreciated over the lesser of the life of the lease or life of the improvements.



(continued)

12



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



Revenue recognition

The Company owns a small residual interest in mineral right royalties related to two oil and gas wells
in which the Company obtained an interest over 20 years ago. The underlying assets corresponding to this income have been written down to zero on the Companys balance sheet in prior years. Periodically, the Company receives its share of
royalties which are recognized as distributions based on the terms specified in the contractual agreements. Income and loss from the Companys investments in Hueco, Trevino, the Operating Partnership, and Holdings are recognized based upon
their proportionate ownership rights.

(3) Financial Results and Liquidity

The Company incurred net losses of $1,008,853 and $2,153,164 for the years ended December 31, 2003 and 2004, respectively, and net income of $631,185
for the year ended December 31, 2005. Despite the losses in 2003 and 2004, the Company was able to secure operating capital from affiliates. The affiliates have indicated their commitment to provide additional funding for the Company sufficient
to satisfy current and future obligations, on an as-needed basis, at least through December 31, 2006.

(4) Advances Due From Related Party

The Company has a receivable due from J.A. Cardwell in the amount of $280,726 and $292,714 at December 31, 2004 and 2005,
respectively. The balance due is related to cash advances made in prior years, and includes interest at the applicable federal rate. The interest rate at December 31, 2005 was 4.40%. Additionally, 2005 includes $63,713 related to Holdings
2005 tax distribution of $63,713.

(5) Investments in Affiliated Entities

Hueco Mountain Estates, Inc. (Income Tax Basis)

The Company owns approximately 20% of the common
stock of Hueco. The following is a summary of the condensed financial position and results of operations of Hueco, an unconsolidated subsidiary as of and for the fiscal years ended July 31, 2004 and 2005.



|                         |  |      |           |   |      |   |           |  
|------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                         |  | 2004 |           |   | 2005 |  
|Total assets             |  | $    | 2,913,528 |   |      | $ | 2,862,224 |  
|Total liabilities        |  |      | 606,410   |   |      |   | 632,637   |  
|                         |  |      |           |   |      |   |           |  
|Net assets               |  | $    | 2,307,118 |   |      | $ | 2,229,587 |  
|                         |  |      |           |   |      |   |           |  
|Revenues                 |  | $    | 352,225   |   |      | $ | 402,195   |  
|Expenses                 |  |      | 469,576   |   |      |   | 479,726   |  
|                         |  |      |           |   |      |   |           |  
|Net loss from operations |  | $    | (117,351  | ) |      | $ | (77,531   | )
|                         |  |      |           |   |      |   |           |  

The Companys equity investment in Hueco at December 31, 2004 and 2005 is summarized
below:



|                                                       |  |      |         |   |      |   |         |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                                       |  | 2004 |         |   | 2005 |  
|Investment in unconsolidated subsidiary at January 1   |  | $    | 464,475 |   |      | $ | 441,515 |  
|Equity in loss of subsidiary                           |  |      | (22,960 | ) |      |   | (15,506 | )
|                                                       |  |      |         |   |      |   |         |  
|Investment in unconsolidated subsidiary at December 31 |  | $    | 441,515 |   |      | $ | 426,009 |  
|                                                       |  |      |         |   |      |   |         |  

Trevino Properties (Income Tax Basis)

The Company owns a 10% partnership interest in Trevino. The following is a summary of the condensed financial position and results of operations of the
partnership (unincorporated real estate joint venture) accounted for on the equity method as of and for the years ended December 31, 2004, and 2005.



(continued)

13



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



|                                       |  |      |           |      |   |           |  
|-------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                       |  | 2004 |           | 2005 |  
|Current assets                         |  | $    | 45,762    |      | $ | 21,331    |  
|Land inventory                         |  |      | 1,088,465 |      |   | 1,153,935 |  
|                                       |  |      |           |      |   |           |  
|Total assets                           |  | $    | 1,134,227 |      | $ | 1,175,266 |  
|                                       |  |      |           |      |   |           |  
|Current liabilities                    |  | $    | 26,182    |      | $ | 26,296    |  
|Partners equity                       |  |      | 1,108,045 |      |   | 1,148,970 |  
|                                       |  |      |           |      |   |           |  
|Total liabilities and partners equity |  | $    | 1,134,227 |      | $ | 1,175,266 |  
|                                       |  |      |           |      |   |           |  
|Net income (loss)                      |  | $    | 195,865   |      | $ | (24,544   | )
|                                       |  |      |           |      |   |           |  

The Companys equity investment in Trevino at December 31, 2004 and 2005 is summarized
below:



|                   |  |      |         |   |      |   |         |  
|------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                   |  | 2004 |         |   | 2005 |  
|Trevino Properties |  | $    | 107,071 |   |      | $ | 104,617 |  
|                   |  |      |         |   |      |   |         |  
|Ownership interest |  |      | 10.00   | % |      |   | 10.00   | %
|                   |  |      |         |   |      |   |         |  

(6) Investment in Limited Partnerships

On July 23, 1999, the Company and certain other partners exchanged their interests in the Operating Partnership for identical interests in Holdings
and became owners of Holdings. At this time, the Company became the sole general partner in both Holdings (1.1%) and the Operating Partnership (0.25%). In addition, the Company holds an 11% common limited partnership interest and mandatorily
redeemable preferred partnership interests in Holdings. The Companys investments in Holdings and the Operating Partnership are accounted for using the equity method. The Company entered into an indemnity agreement under which it agreed to
indemnify the Operating Partnership and Holdings, and the general and limited partners thereof in the event that the indemnified parties are required to pay any current indebtedness or any other liabilities of Holdings or the Operating Partnership
after a default, acceleration by the creditor and exhaustion of any collateral securing the credit facility. No payments have been made under this agreement.

The mandatorily redeemable preferred partnership interests are entitled to cumulative preferred returns of 8% and are subject to mandatory redemption in October 2008. The preferred returns accrue, but are only payable
in cash if permitted by the Operating Partnerships and Holdings then existing debt instruments. At December 31, 2004 and 2005, the Company had accrued preferred returns on the mandatorily redeemable preferred partnership interests
amounting to $1,614,672 and $1,899,463, respectively.

In early 2004, the Operating Partnership and Holdings completed their 2004
Refinancing Transactions in which both companies refinanced substantially all of their existing indebtedness.

Following is a summary of
the financial position of Holdings as of December 31, 2004 and 2005:



|                                                       |  |      |              |   |      |   |              |  
|------------------------------------------------------ |  | ---- | ------------ | - | ---- | - | ------------ | -
|                                                       |  | 2004 |              |   | 2005 |  
|Assets                                                 |  | $    | 327,778,000  |   |      | $ | 374,678,000  |  
|Liabilities                                            |  |      | (406,373,000 | ) |      |   | (450,087,000 | )
|Mandatorily redeemable preferred partnership interests |  |      | (5,000,000   | ) |      |   | (5,000,000   | )
|                                                       |  |      |              |   |      |   |              |  
|Partners deficit                                      |  | $    | (83,595,000  | ) |      | $ | (80,409,000  | )
|                                                       |  |      |              |   |      |   |              |  



(continued)

14



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



The Companys equity investment in the partnership for the years ending December 31, 2004 and 2005 is summarized below:



|                                                                   |  |      |            |   |      |   |            |  
|------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                   |  | 2004 |            |   | 2005 |  
|General partner interest in total deficit                          |  | $    | (1,778,121 | ) |      | $ | (1,741,722 | )
|Limited partner interest in total deficit                          |  |      | (9,404,800 | ) |      |   | (9,117,583 | )
|Minority interest in partnerships total deficit                   |  |      | (199,922   | ) |      |   | (166,787   | )
|Interest in mandatorily redeemable preferred partnership interests |  |      | 3,492,755  |   |      |   | 3,774,860  |  
|                                                                   |  |      |            |   |      |   |            |  
|Equity in partnership losses in excess of investment               |  | $    | (7,890,088 | ) |      | $ | (7,251,232 | )
|                                                                   |  |      |            |   |      |   |            |  

(7) Leasehold Improvements

Leasehold improvements consisted of the following at December 31, 2004:



|                               |  |                         |  |      |       
|------------------------------ |  | ----------------------- |  | ---- | ------
|                               |  | EstimatedLife in Months |  | 2004
|Leasehold improvements         |  | 18                      |  | $    | 53,273
|Less: accumulated depreciation |  |                         |  |      | 47,636
|                               |  |                         |  |      |       
|                               |  |                         |  | $    | 5,637 
|                               |  |                         |  |      |       

The Company had no leasehold improvements as of December 31, 2005.

(8) Related Party Transactions

Nevada Trio, Inc., a
Nevada corporation, is wholly owned by Card Partners, LP, a Texas limited partnership. C&R Distributing, Inc. and the Company are wholly owned subsidiaries of Nevada Trio, Inc. Additionally, the Companys Chief Executive Officer has
significant ownership interests in numerous other entities with which the Company has transactions. Activity with these related entities is summarized below.

The following summarizes amounts due from and to related parties at December 31, 2004 and 2005:



|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                                                                                                                                                                      |  | 2004 |         | 2005
|Intercompany payables:                                                                                                                                                                                                                |  |      |         |      |   |        
|C & R Distributing, Inc.                                                                                                                                                                                                              |  | $    | 659,144 |      | $ | 845,849
|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|Note payable  intercompany:                                                                                                                                                                                                          |  |      |         |      |   |        
|Note payable due to C & R Distributing, Inc., dated August 31, 1998, in an original amount of $1,150,000, payable in monthly
installments of $8,916, including interest at 7%. The note, which is unsecured, matures August 31, 2010. |  | $    | 504,603 |      | $ | 430,590
|                                                                                                                                                                                                                                      |  |     
|Less: current portion                                                                                                                                                                                                                 |  |      | 74,014  |      |   | 79,364 
|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|Long-term portion                                                                                                                                                                                                                     |  | $    | 430,589 |      | $ | 351,226
|                                                                                                                                                                                                                                      |  |      |         |      |   |        



(continued)

15



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



The aggregate minimum principal maturities of the note payable for each of the five years following December 31, 2005 are as follows:



|     |  |   |        
|---- |  | - | -------
|2006 |  | $ | 79,364 
|2007 |  |   | 85,102 
|2008 |  |   | 91,254 
|2009 |  |   | 97,851 
|2010 |  |   | 77,019 
|     |  |   |        
|     |  | $ | 430,590
|     |  |   |        

The following summarizes the income earned and expenses incurred with related parties for each of
the years ended December 31, 2003, 2004, and 2005:



|                                           |  |      |         |      |   |         |  |   |        
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | 2003 |         | 2004 |   | 2005   
|Income                                     |  |      |         |      |   |         |  |   |        
|Interest  J.A. Cardwell                   |  | $    | 8,188   |      | $ | 13,464  |  | $ | 12,081 
|Interest  Holdings                        |  |      | 243,439 |      |   | 265,989 |  |   | 282,105
|                                           |  |      |         |      |   |         |  |   |        
|                                           |  | $    | 251,627 |      | $ | 279,453 |  | $ | 294,186
|                                           |  |      |         |      |   |         |  |   |        
|Expenses                                   |  |      |         |      |   |         |  |   |        
|Interest - C & R Distributing, Inc.        |  | $    | 42,619  |      | $ | 37,967  |  | $ | 32,978 
|Management fees - C & R Distributing, Inc. |  |      | 6,000   |      |   | 6,000   |  |   | 9,300  
|Bank fees and insurance                    |  |      | 969     |      |   | 776     |  |   | 623    
|                                           |  |      |         |      |   |         |  |   |        
|                                           |  | $    | 49,588  |      | $ | 44,743  |  | $ | 42,901 
|                                           |  |      |         |      |   |         |  |   |        

(9) Income Taxes

The tax effects of the primary temporary differences that give rise to the Companys deferred tax assets as of December 31, 2004 and 2005 are as follows:



|                                                   |  |      |            |   |      |   |            |  
|-------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                   |  | 2004 |            |   | 2005 |  
|Deferred tax assets:                               |  |      |            |   |      |   |            |  
|Investments in limited partnerships                |  | $    | 3,454,152  |   |      | $ | 3,667,649  |  
|Net operating loss carryforward                    |  |      | 2,279,964  |   |      |   | 1,882,782  |  
|Alternative minimum tax carryforwards              |  |      | 891,584    |   |      |   | 931,547    |  
|General business credits from limited partnerships |  |      | 306,574    |   |      |   | 357,043    |  
|Other                                              |  |      | 14,220     |   |      |   | 15,372     |  
|                                                   |  |      |            |   |      |   |            |  
|Total deferred tax assets                          |  |      | 6,946,467  |   |      |   | 6,854,393  |  
|Valuation allowance                                |  |      | (6,946,467 | ) |      |   | (6,854,393 | )
|                                                   |  |      |            |   |      |   |            |  
|Net deferred tax assets                            |  | $    |           |   |      | $ |           |  
|                                                   |  |      |            |   |      |   |            |  

Management of the Company does not believe that it is more likely than not that these deferred tax
assets will be realized and therefore has provided a valuation allowance for the entire balance as of December 31, 2004 and 2005. No tax related amounts were due to or from affiliated entities at December 31, 2004 and 2005.

At the end of 2005, $1,882,782 of the Companys gross deferred tax assets arise from net operating loss carry-forwards which will
expire if not utilized by various dates ranging from 2011 to 2024. At the end of 2005, there was $357,043 of general business credits that will expire if not used by various dates ranging from 2018 to 2024. Also, at the end of 2005, the Company had
$931,547 of minimum tax credits that may be carried forward indefinitely as a credit against regular tax.



(continued)

16



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



The actual income tax benefit for the year ended December 31, 2004 and 2005 differs from the expected income tax benefit computed by applying the U.S. federal income tax rate of 34.0% as follows:



|                                                |  |      |            |   |      |   |         |  
|----------------------------------------------- |  | ---- | ---------- | - | ---- | - | ------- | -
|                                                |  | 2004 |            |   | 2005 |  
|Rate reconciliation:                            |  |      |            |   |      |   |         |  
|Income (loss) before income taxes               |  | $    | (2,153,164 | ) |      | $ | 655,735 |  
|                                                |  |     
|Tax expense (benefit) at statutory rate (34.0%) |  |      | (732,076   | ) |      |   | 222,950 |  
|Change in valuation allowance                   |  |      | 787,160    |   |      |   | (92,074 | )
|Tax credits from limited partnerships           |  |      | (90,809    | ) |      |   | (46,980 | )
|Other                                           |  |      | 35,725     |   |      |   | (59,346 | )
|                                                |  |      |            |   |      |   |         |  
|Total tax expense                               |  | $    |           |   |      | $ | 24,550  |  
|                                                |  |      |            |   |      |   |         |  

For the years ended December 31, 2003 and 2004, there were no current or deferred income tax
expense. For the year ended December 31, 2005, there was no deferred tax expense and the only current expense is the result of the alternative minimum tax expense.

(10) Operating Lease

The Company leased commercial rental space under an operating lease based on a fixed charge which
expired in 2005. Total rent expense amounted to $150,000 and $37,500 for the years ending December 31, 2004 and 2005, respectively.

(11)
Commitments and Contingencies

The Company is involved in various litigation incidental to its business for which an estimate of the
possible loss or range of loss cannot be made at this time. In the opinion of management, such proceedings will not have a material adverse effect on the Companys financial position or results of operations.

The Company is a guarantor on a full, joint and several and senior secured basis, of $255,000,000 aggregate principal amount of 9% Senior Secured Notes
due 2012 and of $61,300,000 aggregate principal amount of Senior Secured Credit Facilities due 2008, which were issued by the Operating Partnership. Payments would be due if the Operating Partnership were to become insolvent and/or entered into
default of any debt covenant or indenture. No collateral secures the Companys guarantee.

(12) Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, which replaces the original Interpretation No. 46 issued in January 2003. This Interpretation addresses the consolidation by business enterprises of
variable interest entities as defined in the Interpretation. The effective dates vary depending on the type of reporting company and the type of entity that the company is involved with. Non-public companies, such as the Company, must apply the
revised Interpretation immediately to all entities created after December 31, 2003, and to all other entities no later than the beginning of the first reporting period beginning after December 15, 2004. Management has adopted this revised
Interpretation and concluded that it did not own interest in any entities that meet the consolidation requirements.

In May 2005, the
Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections, which replaced Accounting Principles Board Opinion No. 20, Accounting
Changes, and Statement of Financial Accounting Standards No. 3, Reporting Accounting Changes in Interim Financial Statements. This standard provides guidance on the accounting and reporting for accounting changes and
correction of errors, requiring changes in accounting principles be recognized in a retrospective approach rather than treating them as cumulative effect of changes in accounting principle. The standard is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005. Management has adopted this standard and does not believe that the adaptation of this standard will have a significant impact on the Companys financial position
or results of operations.



(continued)

17



---

##### Index to Financial Statements

PETRO, INC.

NOTES TO FINANCIAL STATEMENTS



(13)
Selected Quarterly Financial Data (unaudited)



|                        |  |               |            |      |               |   |          |              |  |               |         |  |   |        
|----------------------- |  | ------------- | ---------- | ---- | ------------- | - | -------- | ------------ |  | ------------- | ------- |  | - | -------
|2004                    |  | First Quarter |            |      | SecondQuarter |   |          | ThirdQuarter |  | FourthQuarter
|Revenue (loss)          |  | $             | (2,359,620 | )(1) |               | $ | (43,465  | )            |  | $             | 227,020 |  | $ | 305,881
|Operating income (loss) |  |               | (2,421,311 | )(1) |               |   | (101,009 | )            |  |               | 157,936 |  |   | 235,723
|Net income (loss)       |  |               | (2,427,435 | )(1) |               |   | (106,377 | )            |  |               | 152,453 |  |   | 228,195
|                        |  |               |            |     
|2005                    |  | First Quarter |            |      | SecondQuarter |   |          | ThirdQuarter |  | FourthQuarter
|Revenue (loss)          |  | $             | (158,636   | )    |               | $ | 116,841  |              |  | $             | 377,210 |  | $ | 451,925
|Operating income (loss) |  |               | (220,290   | )    |               |   | 103,665  |              |  |               | 367,262 |  |   | 425,995
|Net income (loss)       |  |               | (226,102   | )    |               |   | 98,283   |              |  |               | 362,192 |  |   | 396,812

---

|(1) | Loss primarily due to the loss on retirement of debt and related debt restructuring costs as part of the Operating Partnership and Holdings 2004 Refinancing Transactions.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



---

##### Index to Financial Statements

Report of Independent Registered Public Accounting Firm

The Board of Directors

Petro, Inc.:

We have audited the
accompanying balance sheets of Petro, Inc. as of December 31, 2005 and 2004, and the related statements of operations, changes in stockholders deficit and comprehensive income (loss), and cash flows for each of the years in the three-year
period ended December 31, 2005. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Petro, Inc. as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S.
generally accepted accounting principles.

KPMG LLP

El Paso, Texas

March 29, 2006



19



---

##### Index to Financial Statements

Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

As of December 31, 2005, we completed an evaluation, under the supervision and with the participation of our management, including
our President and Chief Executive Officer and our Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our President and Chief Executive
Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in timely alerting them to material information relating to us that is required to be included
in our periodic Securities and Exchange Commission filings.

There have been no changes in our internal controls over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act during the fourth fiscal quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The following sets forth certain information as of February 1, 2006, with respect to the persons who are members of the Board of Directors and senior management team of the Company. All directors hold office
until death, resignation, or removal.



|                       |  |     |  |                                                 
|---------------------- |  | --- |  | ------------------------------------------------
|Name                   |  | Age |  | Position                                        
|J.A. Cardwell, Sr.     |  | 73  |  | President, Chief Executive Officer, and Director
|James A. Cardwell, Jr. |  | 45  |  | Chief Financial Officer, Treasurer, and Director
|Martha E. Cardwell     |  | 73  |  | Secretary and Director                          
|James M. Singleton     |  | 63  |  | Vice President                                  

Audit Committee Financial Expert

We have not established an audit committee because we are a wholly owned subsidiary of a non-public entity. Considering the size of our Company and its
level of business activity, it is managements judgment that an audit committee is not warranted.

Code of Ethics

We have not adopted a Code of Ethics for our President and Chief Executive Officer and Chief Financial Officer and Treasurer because we are a wholly owned
subsidiary of a non-public entity. Considering the size of our Company and its level of business activity, it is managements judgment that adoption of a Code of Ethics is not warranted.

Item 11. Executive Compensation

None.



20



---

##### Index to Financial Statements

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We are a wholly owned subsidiary of Nevada Trio, Inc., a Nevada corporation, which is wholly owned by Card Partners, LP, a Texas
limited partnership of which Texas MEC, Inc., a Texas Corporation, is the general partner. J.A. Cardwell, Sr. is the sole shareholder of Texas MEC, Inc. Accordingly, J.A. Cardwell, Sr. may be deemed to have beneficial ownership of us.

Item 13. Certain Relationships and Related Transactions

Nevada Trio, Inc., a Nevada corporation, is wholly owned by Card Partners, LP, a Texas limited partnership. We and C&R Distributing, Inc. are wholly owned subsidiaries of Nevada Trio, Inc. Additionally, the Companys Chief
Executive Officer has significant ownership interests in numerous other entities with which the Company has transactions.

We believe that
all of our existing related-party transactions are on terms comparable to those that could have been received in an arms-length transaction. Activity with these related entities is summarized below.

The following summarizes amounts due from and to related parties at December 31, 2004 and 2005:



|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                                                                                                                                                                      |  | 2004 |         | 2005
|Intercompany payables:                                                                                                                                                                                                                |  |      |         |      |   |        
|C & R Distributing, Inc.                                                                                                                                                                                                              |  | $    | 659,144 |      | $ | 845,849
|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|Note payable  intercompany:                                                                                                                                                                                                          |  |      |         |      |   |        
|Note payable due to C & R Distributing, Inc., dated August 31, 1998, in an original amount of $1,150,000, payable in monthly
installments of $8,916, including interest at 7%. The note, which is unsecured, matures August 31, 2010. |  | $    | 504,603 |      | $ | 430,590
|Less: current portion                                                                                                                                                                                                                 |  |      | 74,014  |      |   | 79,364 
|                                                                                                                                                                                                                                      |  |      |         |      |   |        
|Long-term portion                                                                                                                                                                                                                     |  | $    | 430,589 |      | $ | 351,226
|                                                                                                                                                                                                                                      |  |      |         |      |   |        

The following summarizes the income and expenses incurred with related parties for each of the
years ended December 31, 2003, 2004, and 2005:



|                                           |  |      |         |      |   |         |  |   |        
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | 2003 |         | 2004 |   | 2005   
|Income                                     |  |      |         |      |   |         |  |   |        
|Interest  J.A. Cardwell                   |  | $    | 8,188   |      | $ | 13,464  |  | $ | 12,081 
|Interest  Holdings                        |  |      | 243,439 |      |   | 265,989 |  |   | 282,105
|                                           |  |      |         |      |   |         |  |   |        
|                                           |  | $    | 251,627 |      | $ | 279,453 |  | $ | 294,186
|                                           |  |      |         |      |   |         |  |   |        
|Expenses                                   |  |      |         |      |   |         |  |   |        
|Interest - C & R Distributing, Inc.        |  | $    | 42,619  |      | $ | 37,967  |  | $ | 32,978 
|Management fees - C & R Distributing, Inc. |  |      | 6,000   |      |   | 6,000   |  |   | 9,300  
|Bank fees and insurance                    |  |      | 969     |      |   | 776     |  |   | 623    
|                                           |  |      |         |      |   |         |  |   |        
|                                           |  | $    | 49,588  |      | $ | 44,743  |  | $ | 42,901 
|                                           |  |      |         |      |   |         |  |   |        



21



---

##### Index to Financial Statements

Indemnity Agreements

Concurrent with the 2004 Refinancing Transactions described above, we, together with certain other parties, each entered into an indemnity agreement under which each agreed to indemnify Holdings, the Operating
Partnership, and the general and limited partners thereof, for a definitive amount of debt arising out of the 2004 Refinancing Transactions. The indemnity agreements were entered into by the parties to address specific income tax issues arising out
of the 2004 Refinancing Transactions under the at-risk limitation rules, the partnership basis rules, and the liability allocation rules found in the Internal Revenue Code and the Treasury regulations. Consequently, each partys
obligation under its respective indemnity agreement is determined by taking into account that partys basis in its partnership interest and the applicable at-risk rules and liability allocation rules. No demand for payment under the
indemnity agreement has been made.

We are a guarantor on a full, joint and several and senior secured basis, of $250,000,000 aggregate
principal amount of 9% Senior Secured Notes due 2012 and of $61,300,000 aggregate principal amount of Senior Secured Credit Facilities due 2008, which were issued by the Operating Partnership. Payments would be due if the Operating Partnership were
to become insolvent and/or entered into default of any debt covenant or indenture. No collateral secures our guarantee.

Item 14. Principal
Accounting Fees and Services

Audit Fees. Due to the requirement for audited financial statements and notes during 2004 and 2005,
the related audit fees billed by KPMG LLP were approximately $22,500 and $25,000 for the years ended December 31, 2004 and 2005, respectively, all of which were paid by the Operating Partnership.

Audit-Related Fees. There were no audit-related fees billed by KPMG LLP for the years ended December 31, 2004 and 2005.

Tax Fees. There were no tax fees billed by KPMG LLP for the years ended December 31, 2004 and 2005.

All Other Fees. There were no other fees billed by KPMG LLP for the years ended December 31, 2004 and 2005.

Pre-approval Policies and Procedures. As the Company does not have an audit committee, there are no policies and procedures of such a committee to
be disclosed.



22



---

##### Index to Financial Statements

PART IV

Item 15. Exhibits and Financial Statement Schedules



| | (a) | The following documents are filed as a part of this Form 10-K:
| | --- | --------------------------------------------------------------



| | 1. | Financial statements
| | -- | --------------------

The following financial statements of the Company are included in Part II,
Item 8 of this report:



|                                                                               |  |      
|------------------------------------------------------------------------------ |  | -----
|                                                                               |  | Page 
|Balance Sheets                                                                 |  | 8    
|Statements of Operations                                                       |  | 9    
|Statements of Changes in Stockholders Deficit and Comprehensive Income (Loss) |  | 10   
|Statements of Cash Flows                                                       |  | 11   
|Notes to Financial Statements                                                  |  | 12-18
|Report of Independent Registered Public Accounting Firm                        |  | 19   



| | 2. | Financial statement schedules and supplementary information required to be submitted.
| | -- | -------------------------------------------------------------------------------------

All schedules are omitted because they are not applicable, or not required, or because the required information is included in the audited consolidated financial statements or notes thereto.



| | 3. | and (b) Exhibits
| | -- | ----------------

Incorporated herein by reference is
a list of Exhibits contained on the Exhibit Index on page 25 of this Form 10-K.



23



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##### Index to Financial Statements

SIGNATURES

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



PETRO, INC.(Registrant)By:

/s/ J.A. Cardwell, Sr.J.A. Cardwell, Sr.President and Chief Executive Officer(On behalf of the Registrant and as Registrants Principal Executive Officer)


Date: March 30, 2006

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of Petro, Inc.
and in the capacities and on the dates indicated.



|                           |  |                                                                 |  |               
|-------------------------- |  | --------------------------------------------------------------- |  | --------------
|Signature                  |  | Title                                                           |  | Date          
|/s/ J.A. Cardwell, Sr.     |  | President and Chief Executive Officer                           |  | March 30, 2006
|(J.A. Cardwell, Sr.)       |  | (Principal Executive Officer and Director)                      |  |               
|                           |  |                                                                
|/s/ James A. Cardwell, Jr. |  | Chief Financial Officer and Treasurer                           |  | March 30, 2006
|(James A. Cardwell, Jr.)   |  | (Principal Financial and Chief Accounting Officer and
Director) |  |               

Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by
Registrants which have not Registered Securities Pursuant to Section 12 of the Act.

The Company has not sent and will not send an
annual report or proxy materials to its stockholder.



24



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##### Index to Financial Statements

EXHIBIT INDEX



|            |  |                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit Description                                                                                                                                                        
|31.1*       |  | President and Chief Executive Officers Certification pursuant to Rule 13a-14(a) or 15d-14(a).                                                                             
|            | 
|31.2*       |  | Chief Financial Officer and Treasurers Certification pursuant to Rule 13a-14(a) or 15d-14(a).                                                                             
|            | 
|32*         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|* | Filed herewith
|- | --------------



25