UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 2004
PENN OCTANE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-24394 52-1790357
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
77-530 Enfield Land, Bldg D
Palm Desert, California 92211
(Address of principal executive offices) (Zip Code)
(760) 772-9080
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
1
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 2004, Penn Octane Corporation ("Penn Octane" or the
"Company") completed the transfer of a major portion of its physical assets to
the operating subsidiary of Rio Vista Energy Partners L.P. ("Rio Vista"),
followed immediately by the distribution to Penn Octane's common stockholders of
Penn Octane's 100% common units of Rio Vista, previously a wholly-owned
subsidiary of Penn Octane, in accordance with the description of such
transactions contained in the registration statement on Form 10 filed by Rio
Vista with the Securities and Exchange Commission ("SEC") on August 26, 2004, as
amended by Amendment No. 1 thereto filed with the SEC on September 16, 2004 (SEC
File No. 000-50394) (the "Form 10"). The transfer of such assets and the
distribution of the Rio Vista common units were conducted in accordance with the
terms of the Distribution Agreement, the Omnibus Agreement, the Purchase
Agreement for LPG, the Contribution, Conveyance and Assumption Agreement and the
Conveyance Agreement described in Penn Octane's Current Report on Form 8-K
("Prior Form 8-K") filed by Penn Octane with the SEC on September 22, 2004.
Penn Octane retained its 2% general partner interest in Rio Vista.
TRANSFERRED ASSETS
The following assets of Penn Octane were transferred to the operating
subsidiary of Rio Vista effective as of 4:58 p.m. on September 30, 2004:
Brownsville Terminal Facilities:
Building
LPG Terminal facilities
Tank Farm
Leasehold improvements
Capital construction in progress
Equipment
US Pipelines and Rights Of Way:
6" and 8" (Brownsville terminal to US Border)
Various rights of way obtained in connection with operation of US Pipelines
between Brownsville Terminal and US Border
Other:
Land acquired in Brownsville in vicinity of the US Pipelines between
Brownsville
Terminal and US border
Inventory located in storage tanks and pipelines located in Brownsville
(and extending to storage and pipelines located in assets held by the
Mexican subsidiaries)
2
Contracts and Leases (assumed and/or assigned):
Lease Agreements
Port of Brownsville
LPG Terminal Facility
Tank Farm Lease
US State Department Permit
Other licenses and permits in connection with ownership and operation of
the US pipelines between Brownsville and US border
Investment in Subsidiaries:
Penn Octane de Mexico, S. de R.L. de C.V., consisting primarily of a permit
to transport LPG from the Mexican Border to the Matamoros Terminal
Facility
Termatsal, S. de R.L. de C.V., consisting primarily of land, LPG terminal
facilities, Mexican pipelines and rights of way, and equipment used in
the transportation of LPG from the Mexican border to the Matamoros
terminal facility and various LPG terminal equipment located in the
vicinity of Saltillo, Mexico.
Penn Octane International LLC
Other
Option to acquire Tergas, S.A. de C.V.
RELATIONSHIP OF PENN OCTANE AND RIO VISTA
Rio Vista will own and operate the liquefied petroleum gas ("LPG"),
distribution, transportation and marketing business previously conducted by Penn
Octane primarily consisting of the terminal facilities and all other operating
assets located in Brownsville, Texas and Matamoros, Mexico. Pursuant to the
Purchase Contract for LPG, Rio Vista will purchase all of its LPG from Penn
Octane for sales to the Mexican market to the extent Penn Octane is able to
supply sufficient quantities of LPG to meet Rio Vista's needs. Pursuant to the
Omnibus Agreement, Penn Octane will furnish to Rio Vista general administration
and support services, including accounting, treasury, engineering, information
technology, insurance, administration of employee benefit and incentive
compensation plans. Penn Octane owns an indirect ownership of a 2% general
partner interest in Rio Vista held by Rio Vista's general partner, Rio Vista GP
LLC, a Delaware limited liability company that is currently wholly owned by Penn
Octane. However, Penn Octane's indirect 2% general partner interest in Rio Vista
is expected to be decreased to 1% as a result of the exercise by each of Shore
Capital LLC, designee of Richard Shore, Jr., President of Penn Octane, and
Jerome B. Richter, Chief Executive Officer of Penn Octane, of an option to
acquire 25% of the limited liability company interests of Rio Vista's general
partner causing Penn Octane's ownership in the general partner of Rio Vista to
be decreased from 100% to 50%. Mr. Shore and Mr. Richter are each members of the
board of directors of Penn Octane and the board of managers of Rio Vista. Penn
Octane and Rio Vista are parties to the Distribution Agreement, the Omnibus
Agreement, the Purchase Agreement for LPG, the Contribution,
3
Conveyance and Assumption Agreement and the Conveyance Agreement described in
the Prior Form 8-K. Copies of each of the foregoing agreements are filed as
exhibits to the Form 10.
FURTHER INFORMATION
Further information regarding the transactions and agreements described
above may be found in the Form 10 and the Prior Form 8-K.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES
On September 30, 2004, pursuant to the terms of an employment agreement
dated as of May 13, 2003 with Richard Shore, Jr., President of Penn Octane, the
Company issued to Shore Capital, LLC, the designee of Mr. Shore, a warrant to
purchase 763,737 shares of Penn Octane's common stock at an exercise price of
$1.14 per share. The warrant is exercisable beginning on October 1, 2004, and
expires on July 10, 2006. This issuance was granted as compensation to Mr.
Shore for past and future services and was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof because neither the
issuance nor the exercise of the warrant involves any public offering of
securities.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENN OCTANE CORPORATION
By: /s/ Ian T. Bothwell
----------------------
Name: Ian T. Bothwell
Title: Vice President, Treasurer,
Assistant Secretary, Chief
Financial Officer and Principal
Accounting Officer
Date: October 6, 2004
5
PENN OCTANE CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial information
for Penn Octane give effects to the asset transfer and the resulting allocation
of sales, cost of goods sold and expenses, and to certain pro forma adjustments.
The unaudited pro forma condensed consolidated statement of income for the year
ended July 31, 2003 assumes that the above transaction was consummated as of
August 1, 2002. The unaudited pro forma condensed consolidated balance sheet at
July 31, 2003 assumes that the transaction was consummated on July 31, 2003.
The unaudited pro forma condensed consolidated statement of income for the nine
months ended April 30, 2004 assumes that the above transaction was consummated
as of August 1, 2003. The unaudited pro forma condensed consolidated balance
sheet at April 30, 2004 assumes that the transaction was consummated on April
30, 2004. Because Penn Octane has control of Rio Vista by virtue of its
ownership and related voting control of the general partner, Rio Vista has been
consolidated with Penn Octane and the interests of the limited partners have
been classified as minority interests in the unaudited pro forma condensed
consolidated financial information.
Rio Vista will be liable as guarantor for the Company's collateralized debt and
will continue to pledge all of its assets as collateral. Rio Vista may also be
prohibited from making any distributions to unit holders if it would cause an
event of default, or if an event of default is existing, under the Company's
revolving credit facilities, or any other covenant which may exist under any
other credit arrangement or other regulatory requirement at the time.
The Spin-Off is a taxable transaction for federal income tax purposes (and may
also be taxable under applicable state, local and foreign tax laws) to both the
Company and its stockholders. The Company intends to treat the Spin-Off as a
"partial liquidation" for federal income tax purposes. A "partial liquidation"
is defined under Section 302(e) of the Code as a distribution that (i) is "not
essentially equivalent to a dividend," as determined at the corporate level,
which generally requires a genuine contraction of the business of the
corporation, (ii) constitutes a redemption of stock and (iii) is made pursuant
to a plan of partial liquidation and within the taxable year in which the plan
is adopted or within the succeeding taxable year.
The Company may have a federal income tax liability in connection with the
Spin-Off. If the income tax liability resulting from the Spin-Off is greater
than $2,500,000, Rio Vista has agreed to indemnify the Company for any tax
liability resulting from the transaction which is in excess of that amount.
F-1
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 31, 2003
(UNAUDITED)
AS REPORTED PRO FORMA PRO FORMA
JULY 31, 2003 ADJUSTMENTS JULY 31, 2003
-------------------- ------------------ ---------------
ASSETS:
Current Assets
Cash $ 71,064 $ 154,669 (1) $ 225,733
Restricted cash 3,404,782 - 3,404,782
Trade accounts receivable, net 4,143,458 - 4,143,458
Inventories 878,082 - 878,082
Assets held for sale 720,000 - 720,000
Prepaid expenses and other current assets 476,109 476,109
-------------------- ------------------ ---------------
Total Current Assets 9,693,495 154,669 9,848,164
Investment in Subsidiary - 15,466,943 (2) -
(154,669)(1)
(15,033,939)(3)
(216,502)(5)
(61,833)(6)
Property Plant And Equipment - net 17,677,830 (15,466,943)(2) 17,677,830
15,466,943 (5)
Lease rights (net of accumulated amortization of
$707,535) 446,504 - 446,504
Other non-current assets 19,913 - 19,913
-------------------- ------------------ ---------------
Total Assets $ 27,837,742 $ 154,669 $ 27,992,411
==================== ================== ===============
F-2
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET-CONTINUED
JULY 31, 2003
(UNAUDITED)
AS REPORTED PRO FORMA PRO FORMA
JULY 31, 2003 ADJUSTMENTS JULY 31, 2003
----------------- --------------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Current maturities of long-term debt $ 746,933 $ - $ 746,933
Short-term debt 1,744,128 - 1,744,128
Revolving line of credit - - -
LPG trade accounts payable 7,152,098 - 7,152,098
Other accounts payable 2,470,880 - (10) 2,470,880
Foreign taxes payable 60,000 - 60,000
Accrued liabilities 1,083,966 - 1,083,966
----------------- --------------------- ---------------
Total Current Liabilities 13,258,005 - 13,258,005
----------------- --------------------- ---------------
Long-term debt, less current maturities 60,000 - 60,000
Commitments and contingencies - - -
Minority interest in equity earnings of subsidiary - 15,250,441 (4) 15,250,441
Stockholders Equity:
Common stock - $.01 par value, 25,000,000 shares
Authorized; 15,274,749 shares issued and outstanding 152,747 - 152,747
Additional paid-in-capital 28,298,301 (15,250,441)(4) 28,985,643
15,250,441 (5)
687,342 (6)
Notes receivable from an officer and another party for
Exercise of warrants, net of reserves of $535,736 (2,897,520) - (2,897,520)
Accumulated deficit (11,033,791) (749,175)(6) 26,816,905)
(15,033,939)(3)
- (10)
----------------- --------------------- ---------------
Total Stockholders' equity 14,519,737 (15,095,772) (576,035)
----------------- --------------------- ---------------
Total Liabilities and Stockholders' equity $ 27,837,742 $ 154,669 $ 27,992,411
================= ===================== ===============
F-3
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2003
(UNAUDITED)
AS REPORTED PRO FORMA
AUGUST 1, 2002 - PRO FORMA AUGUST 1, 2002-
July 31, 2003 ADJUSTMENTS July 31, 2003
------------------ ------------------ -----------------
Revenues $ 162,489,565 $ - $ 162,489,565
Cost of goods sold 152,375,349 - 152,375,349
------------------ ------------------ -----------------
Gross Profit 10,114,216 - 10,114,216
------------------ ------------------ -----------------
Selling, general and administrative expenses
Legal and professional fees 2,597,065 - 2,597,065
Salaries and payroll related expenses 2,411,843 749,175 (7) 3,161,018
Other 1,380,009 - 1,380,009
------------------ ------------------ -----------------
6,388,917 749,175 7,138,092
------------------ ------------------ -----------------
Operating income (loss) 3,725,299 (749,175) 2,976,124
Other income (expense)
Interest and LPG financing expense (1,757,664) - ( 1,757,664)
Interest income 95,327 - 95,327
Settlement of litigation ( 145,153) - ( 145,153)
Minority interest in equity earnings of subsidiary - ( 1,997,499) (8) ( 1,997,499)
------------------ ------------------ -----------------
Income (loss) before taxes 1,917,809 ( 2,746,674) ( 828,865)
Provision (benefit) for income taxes ( 40,000) - (10) (40,000)
------------------ ------------------ -----------------
Net income (loss) $ 1,957,809 $( 2,746,674) $ (788,865)
================== ================== =================
Net income (loss) per common share $ 0.13 $ (.05)
================== =================
Net income (loss) per common share assuming dilution $ 0.13 $ (.05)
================== =================
Weighted average common shares outstanding 15,035,220 15,035,220
================== =================
F-4
PENN OCTANE CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED JULY 31, 2003
(UNAUDITED)
The following unaudited pro forma condensed consolidated financial information
(Pro Forma Statements) for Penn Octane give effect to the spin off of 100% of
the limited partner units of Rio Vista to the common stockholders of Penn Octane
(Spin-Off). The Pro Forma Statements are based on the available information and
contain certain assumptions that Penn Octane deems appropriate. The Pro Forma
Statements do not purport to be indicative of the financial position or results
of operations of Penn Octane had the Spin-Off occurred on the dates indicated,
nor are the Pro Forma Statements necessarily indicative of the future financial
position or results of operations of Penn Octane. The Pro Forma Statements
should be read in conjunction with the consolidated balance sheet of Penn
Octane.
BALANCE SHEET:
The unaudited pro forma condensed consolidated balance sheets assume that such
transactions were consummated on July 31, 2003.
(1) To record the exercise of the options granted to Shore and Mr. Richter
to each acquire 25% of the limited liability company interests of the
general partner of Rio Vista.
(2) To reflect the transfer of assets from Penn Octane to Rio Vista in
exchange for limited and general partnership interests.
(3) To record the Spin-Off of Penn Octane's limited partnership interests
in Rio Vista to its stockholders.
(4) To reflect minority interest in the equity of Rio Vista.
(5) To eliminate intercompany transactions between Penn Octane and Rio
Vista.
(6) Represents the estimated intrinsic value associated with the (i)
options granted to Shore and Mr. Richter to acquire a 50% interest in
the general partner and (ii) options granted to Shore to acquire a 5%
limited partnership interest in Rio Vista and 5% interest in the
common Shore of Penn Octane.
(10) Taxable income, if any, resulting from the Spin-Off is assumed to be
offset at July 31, 2003 by existing net operating loss carryforwards.
INCOME STATEMENT:
The unaudited pro forma condensed consolidated statements of income for the year
ended July 31, 2003 assume that the Spin-Off was consummated as of August 1,
2002.
(7) Represents the estimated intrinsic value associated with the (i)
options granted to Shore and Mr. Richter to acquire a 50% interest in
the general partner and (ii) options granted to Shore to acquire a 5%
limited partnership interest in Rio Vista and 5% interest in the
common shares of Penn Octane.
(8) To record minority interest in earnings of Rio Vista.
(9) Proforma earnings per share has been calculated based on pro forma
weighted average shares outstanding for the year ended July 31, 2003.
(10) Taxable income, if any, resulting from the Spin-Off is assumed to be
offset at July 31, 2003 by existing net operating loss carryforwards.
(11) Penn Octane anticipates that it will incur additional direct costs,
including tax related services, public listing fees and transfer fees
resulting from Rio Vista becoming publicly traded.
F-5
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 2004
(UNAUDITED)
AS REPORTED PRO FORMA PRO FORMA
APRIL 30, 2004 ADJUSTMENTS APRIL 30, 2004
--------------- -------------- ---------------
ASSETS:
Current Assets
Cash $ 17,570 $ 150,440 (1) $ 168,010
Restricted cash 4,726,845 - 4,726,845
Trade accounts receivable, net 6,853,054 - 6,853,054
Inventories 828,798 - 828,798
Assets held for sale - - -
Prepaid expenses and other current assets 183,697 183,697
--------------- -------------- ---------------
Total Current Assets 12,609,964 150,440 12,760,404
Investment in Subsidiary - 15,044,014 (2) -
( 150,440) (1)
( 14,622,850) (3)
( 210,582) (5)
(60,142) (6)
Property Plant And Equipment - net 16,993,392 ( 15,044,014) (2) 16,993,392
15,044,014 (5)
Lease rights - net 412,157 - 412,157
Other non-current assets 18,130 - 18,130
--------------- -------------- ---------------
Total Assets $ 30,033,643 $ 150,440 $ 30,184,083
=============== ============== ===============
F-6
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET-CONTINUED
APRIL 30, 2004
(UNAUDITED)
AS REPORTED PRO FORMA PRO FORMA
APRIL 30, 2004 ADJUSTMENTS APRIL 30, 2004
--------------------- ------------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Current maturities of long-term debt $ 162,694 $ - $ 162,694
Short-term debt - - -
Revolving line of credit - - -
LPG trade accounts payable 8,869,912 - 8,869,912
Other accounts payable 1,369,315 - (10) 1,369,315
Foreign taxes payable 43,914 - 43,914
Accrued liabilities 1,062,197 - 1,062,197
--------------------- ------------------- ----------------
Total Current Liabilities 11,508,032 - 11,508,032
--------------------- ------------------- ----------------
Long-term debt, less current maturities 1,706,220 - 1,706,220
Commitments and contingencies - - -
Minority interest in equity earnings of subsidiary - 14,833,432 (4) 14,833,432
Stockholders' Equity:
Common stock - $.01 par value, 25,000,000 shares
authorized; 15,285,245 shares issued and outstanding 152,852 - 152,852
Additional paid-in-capital 28,460,971 (14,833,432) (4) 28,648,137
14,833,432 (5)
187,166 (6)
Notes receivable from an officer and another party for
exercise of warrants, net of reserves of $468,693 (2,728,000) - (2,728,000)
Accumulated deficit (9,066,432) (247,308) (6) (23,936,590)
(14,622,850) (3)
- (10)
--------------------- ------------------- ----------------
Total Stockholders' equity 16,819,391 (14,682,992) 2,136,399
--------------------- ------------------- ----------------
Total Liabilities and Stockholders' equity $ 30,033,643 $ 150,440 $ 30,184,083
===================== =================== ================
F-7
PENN OCTANE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 2004
(UNAUDITED)
AS REPORTED PROFORMA
AUGUST 1, 2003 - PROFORMA AUGUST 1, 2003-
APRIL 30, 2004 ADJUSTMENTS APRIL 30, 2004
------------------ ------------------ -----------------
Revenues $ 131,957,252 $ - $ 131,957,252
Cost of goods sold 124,378,138 - 124,378,138
------------------ ------------------ -----------------
Gross Profit 7,579,114 - 7,579,114
------------------ ------------------ -----------------
Selling, general and administrative expenses
Legal and professional fees 1,542,254 - 1,542,254
Salaries and payroll related expenses 1,747,941 925,786 (7) 2,673,727
Other 992,756 - 992,756
------------------ ------------------ -----------------
4,282,951 925,786 5,208,737
Reduction of value on asset held for sale ( 500,000) - ( 500,000)
------------------ ------------------ -----------------
Operating income (loss) 2,796,163 (925,786) 1,870,377
Other income (expense)
Interest and LPG financing expense (1,047,380) - (1,047,380)
Interest income 54,992 - 54,992
Other income 210,000 - 210,000
Minority interest in equity earnings of subsidiary - ( 1,819,775) (8) (1,819,775)
------------------ ------------------ -----------------
Income (loss) before taxes 2,013,775 ( 2,745,561) ( 731,786)
Provision (benefit) for income taxes 46,414 - (10) 46,414
------------------ ------------------ -----------------
Net income (loss) $ 1,967,361 $( 2,745,561) $ (778,200)
================== ================== =================
Net income (loss) per common share
$ 0.13 $ ( .05)
================== =================
Net income (loss) per common share assuming dilution
$ 0.13 $ ( .05)
================== =================
Weighted average common shares outstanding
15,312,301 15,312,301
================== =================
F-8
PENN OCTANE CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
NINE MONTHS ENDED APRIL 30, 2004
(UNAUDITED)
The following unaudited pro forma condensed consolidated financial information
(Pro Forma Statements) for Penn Octane give effect to the spin off of 100% of
the limited partner units of Rio Vista to the common stockholders of Penn Octane
(Spin-Off). The Pro Forma Statements are based on the available information and
contain certain assumptions that Penn Octane deems appropriate. The Pro Forma
Statements do not purport to be indicative of the financial position or results
of operations of Penn Octane had the Spin-Off occurred on the dates indicated,
nor are the Pro Forma Statements necessarily indicative of the future financial
position or results of operations of Penn Octane. The Pro Forma Statements
should be read in conjunction with the consolidated balance sheet of Penn
Octane.
BALANCE SHEET:
The unaudited pro forma condensed consolidated balance sheets assume that such
transactions were consummated on April 30, 2004.
(1) To record the exercise of the options granted to Shore and Mr. Richter
to each acquire 25% of the limited liability company interests of the
general partner of Rio Vista.
(2) To reflect the transfer of assets from Penn Octane to Rio Vista in
exchange for limited and general partnership interests.
(3) To record the Spin-Off of Penn Octane's limited partnership interests
in Rio Vista to its stockholders.
(4) To reflect minority interest in the equity of Rio Vista.
(5) To eliminate intercompany transactions between Penn Octane and Rio
Vista.
(6) Represents the estimated intrinsic value associated with the (i)
options granted to Shore and Mr. Richter to acquire a 50% interest in
the general partner and (ii) options granted to Shore to acquire a 5%
limited partnership interest in Rio Vista and 5% interest in the
common shares of Penn Octane.
(10) Taxable income, if any, resulting from the Spin-Off is assumed to be
offset at April 30, 2004 by existing net operating loss carryforwards.
INCOME STATEMENT:
The unaudited pro forma condensed consolidated statements of income for the nine
months ended April 30, 2004 assume that the Spin-Off was consummated as of
August 1, 2003.
(7) Represents the estimated intrinsic value associated with the (i)
options granted to Shore and Mr. Richter to acquire a 50% interest in
the general partner and (ii) options granted to shore to acquire a 5%
limited partnership interest in Rio Vista and 5% interest in the
common shares of Penn Octane.
(8) To record minority interest in earnings of Rio Vista.
(9) Proforma earnings per share has been calculated based on pro forma
weighted average shares outstanding for the nine months ended April
30, 2004
(10) Taxable income, if any, resulting from the Spin-Off is assumed to be
offset at April 30, 2004 by existing net operating loss carryforwards.
(11) Penn Octane anticipates that it will incur additional direct costs,
including tax related services, public listing fees and transfer fees
resulting from Rio Vista becoming publicly traded.
F-9