ENGY Central Energy Partners LP (CE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A – ORGANIZATION

Central Energy Partners LP (“ Partnership ”), is a Delaware limited partnership, which was formed by Penn Octane Corporation (“ Penn Octane ”) on July 10, 2003. The limited partnership interests in the Partnership (“ Common Units”) represent 98% of the interest in the Partnership. The General Partner is Central Energy GP LLC (“ General Partner ”) (see Note B — General Partner Interest), which holds the remaining 2% interest in the Partnership. The General Partner is entitled to receive distributions from the Partnership on its General Partner interest and additional incentive distributions (see Note G – Partners’ Capital — Distributions of Available Cash) as provided in the Partnership’s partnership agreement (“ Partnership Agreement ”). The General Partner has sole responsibility for conducting the Partnership’s business and for managing the Partnership’s operations in accordance with the Partnership Agreement. Common Unitholders do not participate in the management of the Partnership. The General Partner does not receive a management fee in connection with its management of the Partnership’s business, but is entitled to be reimbursed for all direct and indirect expenses incurred on the Partnership’s behalf.

On November 17, 2010, the Partnership, Penn Octane and Central Energy, LP, as successor in interest to Central Energy LLC, completed the transactions contemplated by the terms of a Securities Purchase and Sale Agreement, as amended. At closing, the Partnership sold 12,724,019 Common Units (“ Newly Issued Common Units ”) to Central Energy, LP for $3,950,000 and Penn Octane sold 100% of the limited liability company interests in the General Partner (“ GP Interests ”) to Central Energy, LP for $150,000 (“ Sale ”). As a result, Penn Octane no longer has any interest in the General Partner or any control over the operations of the Partnership. Central’s strategy is to acquire assets with a focus on gas transportation and services assets, including gas gathering, dehydration and compression systems, pipelines, fractionation and condensate stabilization facilities and related assets, but may include producing oil and gas properties.

In July 2007, the Partnership acquired the business of Regional Enterprises, Inc. (“ Regional ”). The principal business of Regional is the storage, transportation and railcar trans-loading of bulk liquids, including hazardous chemicals and petroleum products owned by its customers. Regional’s facilities are located on the James River in Hopewell, Virginia, where it receives bulk chemicals and petroleum products from ships and barges into approximately 10 million gallons of available storage tanks for delivery throughout the mid-Atlantic region of the United States. Regional also receives product from a rail spur which is capable of receiving 15 rail cars at any one time for trans-loading of chemical and petroleum liquids for delivery throughout the mid-Atlantic region of the United States. Regional also operated a trans-loading facility in Johnson City, Tennessee, with 6 rail car slots until March 31, 2013. Regional also provides transportation services to customers for products which don’t originate at any of Regional’s terminal facilities.

The accompanying consolidated financial statements include the Partnership and its only operating subsidiary, Regional. The Partnership has two other subsidiaries that have no operations – Rio Vista Operating Partnership L.P. (see Note G – Commitments and Contingencies – TransMontaigne Dispute) and Rio Vista Operating GP LLC. All significant intercompany accounts and transactions are eliminated. The Partnership and its consolidated subsidiaries are hereinafter referred to as “Central” and/or “Company”.

The unaudited consolidated balance sheet as of June 30, 2013, the unaudited consolidated statements of operations for the three months and six months ended June 30, 2012 and 2013 and the unaudited consolidated statements of cash flows for the six months ended June 30, 2012 and 2013 and the unaudited consolidated statement of partners’ capital (deficit) for the six months ended June 30, 2013, have been prepared by Central without audit. In the opinion of management, the unaudited consolidated financial statements include all adjustments (which include only normal recurring adjustments) necessary to present fairly the unaudited consolidated financial position as of June 30, 2013, the unaudited consolidated results of operations for the three months and six months ended June 30, 2012 and 2013, the unaudited consolidated statements of cash flows for the six months ended June 30, 2012 and 2013 and the unaudited consolidated statement of partners’ capital (deficit) for the six months ended June 30, 2013.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A – ORGANIZATION – Continued

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities Exchange Commission, although Central believes that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.

Basis of Presentation

Certain reclassifications have been made to prior period balances to conform in the current presentation. All reclassifications have been consistently applied to the periods presented.

NOTE B – PARTNERS’ CAPITAL

General Partner Interest

The General Partner owns a 2% general partner interest in the Partnership (“ GP Interests ”). The General Partner generally has unlimited liability for the obligations of the Partnership, such as its debts and environmental liabilities, except for those contractual obligations of the Partnership that are expressly made without recourse to the General Partner. The membership interests of the General Partner are held by the members of Central Energy, LP as a result of the distribution of the GP Interests in September 2011 in accordance with the terms of the limited partnership agreement of Central Energy, LP.

Messrs. Imad K. Anbouba and Carter R. Montgomery, the sole members of Central Energy, LP’s general partner, each beneficially own 30.17% of the GP Interests. The Cushing LLP Opportunity Fund I, L.P. (“ Cushing Fund ”) holds 25% of the GP Interests and the remaining interests are held by others, none representing more than 5% individually.

Common Units

The Common Units represent limited partner interests in the Partnership and 98% of its outstanding capital. The holders of Common Units (“ Unitholders ”) are entitled to participate in the Partnership’s distributions and exercise the rights or privileges available to limited partners under the Partnership Agreement. The Unitholders have only limited voting rights on matters affecting the Partnership. Unitholders have no right to elect the General Partner or its directors on an annual or other continuing basis. Messrs. Anbouba and Montgomery and the Cushing Fund have the right to appoint the directors of the General Partner. Although the General Partner has a fiduciary duty to manage the Partnership in a manner beneficial to the Partnership and its Unitholders, the directors of the General Partner also have a fiduciary duty to manage the General Partner in a manner beneficial to the holders of the membership interests in the General Partner. The General Partner generally may not be removed except upon the vote of the holders of at least 80% of the outstanding Common Units; provided, however, if at any time any person or group, other than the General Partner and its affiliates, or a direct or subsequently approved transferee of the General Partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units of the Partnership then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of Unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes, unless such provision is waived by the General Partner. (The General partner has waived this provision with respect to the 46.7% interest in the Partnership held by the Cushing Fund as described below.). In addition, the Partnership Agreement contains provisions limiting the ability of holders of Common Units to call meetings or to acquire information about Central’s operations, as well as other provisions limiting the Unitholders ability to influence the manner or direction of management.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE B – PARTNERS’ CAPITAL - continued

Private Placement of Common Units

On November 17, 2010, the Partnership sold the Newly Issued Common Units to Central Energy LP for $3,950,000 in cash pursuant to the terms of the Securities Purchase and Sale Agreement dated May 25, 2010, as amended, by and among the Partnership, Penn Octane and Central Energy LP.

On May 26, 2011, pursuant to the terms of its limited partnership agreement, Central Energy LP distributed the Newly Issued Common Units of the Partnership to its limited partners. As a result, the Cushing Fund holds 7,413,013 Common Units of the Partnership (46.7%). Sanctuary Capital LLC holds 1,017,922 Common Units of the Partnership (6.4%). Messrs. Anbouba and Montgomery were not distributed any Newly Issued Common Units from Central Energy, LP.

Distributions of Available Cash

Until December 2010, all Unitholders had the right to receive distributions from the Partnership of “available cash” as defined in the partnership agreement in an amount equal to at least the minimum distribution of $0.25 per quarter per unit, plus any arrearages in the payment of the minimum quarterly distribution on the Common Units from prior quarters subject to any reserves determined by the General Partner. The General Partner has a right to receive a distribution corresponding to its 2% General Partner interest and the incentive distribution rights described below. The distributions are to be paid within 45 days after the end of each calendar quarter.

The Partnership has not made any distributions since August 18, 2008 for the quarter ended June 30, 2008 due to the lack of available cash.

In December 2010, the General Partner and Unitholders holding more than a majority in interest of the Common Units of the Partnership approved an amendment to the Partnership Agreement to provide that the Partnership was no longer obligated to make distributions of “Common Unit Arrearage” or “Cumulative Common Unit Arrearages” pursuant to the terms of the Partnership Agreement in respect of any quarter prior to the quarter beginning October 1, 2011. The impact of this amendment is that the Partnership was not obligated to Unitholders for unpaid minimum quarterly distributions prior to the quarter beginning October 1, 2011 and Unitholders would only be entitled to minimum quarterly distributions arising from the quarter beginning October 1, 2011 and thereafter. This amendment was incorporated into the Partnership Agreement in April 2011. Based on Central’s cash flow constraints and the likelihood of a restriction on distributions by the Partnership as a result of anticipated acquisitions, effective March 22, 2012, the General Partner and Unitholders holding more than a majority in interest of the Common Units of the Partnership voted to amend the Partnership Agreement to change the commencement of the payment of “Common Unit Arrearages” or “Cumulative Common Unit Arrearages” from the quarter beginning October 1, 2011 until an undetermined future quarter to be established by the Board of Directors of the General Partner. The impact of this amendment is that the Partnership is not obligated to Unitholders for unpaid minimum quarterly distributions until such time as the Board of Directors of the General Partner reinstates the obligation to make minimum quarterly distributions. Unitholders will only be entitled to minimum quarterly distributions arising from and after the date established by the Board of Directors for making such distributions.

At the present time, the limited partners of Central Energy, LP, the entity that acquired the Newly-Issued Common Units, hold 80% of the total issued and outstanding Common Units of the Partnership and, therefore, control any Limited Partner vote on Partnership matters. The ability of the Partnership to make distributions can be further impacted by many factors including the ability to successfully complete an acquisition, the financing terms of debt and/or equity proceeds received to fund an acquisition and the overall success of the Partnership and its operating subsidiaries.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE B – PARTNERS’ CAPITAL – Continued

Distributions of Available Cash – continued

In addition to eliminating the obligation to make payments of minimum quarterly distributions until an undetermined future quarter to be established by the Board of Directors of the General Partner, the General Partner expects that the minimum quarterly distribution amount and/or the target distribution levels will be adjusted to a level which reflects the existing economics of the Partnership and provides for the desired financial targets, including Common Unit trading price, targeted cash distribution yields and the participation by the General Partner in incentive distribution rights. The distribution of the 12,724,019 Newly-Issued Common Units in the Sale (which did not result in the acquisition of any proportional increase in distributable cash flow) and any additional issuance of Common Units or other Partnership securities in connection with an acquisition will not support the current minimum quarterly distribution of $0.25 per Common Unit. Management anticipates making this adjustment in connection with an acquisition by the Partnership since the financing of an acquisition is likely to involve the issuance of additional Common Units or other securities by the Partnership. In connection with an acquisition, the General Partner will be able to better determine the future capital structure of the Partnership and the amounts of “distributable cash” that the Partnership may generate in the future. The establishment of a revised target distribution rate may be accomplished by a reverse split of the number of Partnership Common Units issued and outstanding and/or a reduction in the actual amount of the target distribution rate per Common Unit.

In addition to its 2% General Partner interest, the General Partner is currently the holder of incentive distribution rights which entitled the holder to an increasing portion of cash distributions as described in the Partnership Agreement. As a result, cash distributions from the Partnership are shared by the Unitholders and the General Partner based on a formula whereby the General Partner receives disproportionately more distributions per percentage interest than the holders of the Common Units as annual cash distributions exceed certain milestones.

NOTE C – INCOME ( Loss) Per Common UNIT

Net income (loss) per Common Unit is computed on the weighted average number of Common Units outstanding in accordance with ASC 260. During periods in which Central incurs losses, giving effect to common unit equivalents is not included in the computation as it would be antidilutive. The following tables present reconciliations from net income (loss) per Common Unit to net income (loss) per Common Unit assuming dilution. During the three months and six months ended June 30, 2013, Central did not have any dilutive securities outstanding (see Note F – Unit Options and Equity Incentive Plan):

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Depreciation expense of property, plant and equipment totaled $147,000 and $133,000 for the three months ended June 30 2012 and 2013 and $297,000 and $268,000 for the six months ended June 30, 2012 and 2013, respectively.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE D - PROPERTY, PLANT AND EQUIPMENT - Continued

Sale of Regional’s Owned Tractor Fleet

During May 2012 and June 2012, in connection with Regional’s Vehicle Lease Service Agreement (see Note G - Commitments and Contingencies – Penske Truck Lease), Regional sold 21 of its owned tractors for total proceeds of $410,000. The proceeds were used to meet ongoing debt service obligations.

In connection with the sale of the tractor fleet, a gain of $201,000 and $256,000 was recorded during the three months and six months ended June 30, 2012, respectively.

RZB Loan

In connection with the acquisition of Regional during July 2007, the Partnership funded a portion of the acquisition through a loan of $5,000,000 (“ RZB Loan ”) from RB International Finance (USA) LLC, formerly known as RZB Finance LLC (“ RZB ”), dated July 26, 2007 (“ Loan Agreement ”). The RZB Loan was due on demand and if no demand, with a one-year maturity. In connection with the RZB Loan, Regional granted to RZB a security interest in all of Regional’s assets, including a deed of trust on real property owned by Regional, and the Partnership delivered to RZB a pledge of the outstanding capital stock of Regional.

The RZB Loan was converted to a term loan in June 2009 in connection with the Sixth Amendment, Assumption of Obligations and Release Agreement between Regional, the Partnership and RZB (the “ Sixth Amendment ”). The Sixth Amendment provided for an increase in the principal amount of the RZB Loan to $4,250,000 as the result of an “incremental loan” of $250,000, established a monthly amortization for the principal amount of the Loan, increased the annual interest rate to 8%, and extended the Maturity Date to April 30, 2012, among other terms and conditions. Regional assumed all obligations of the Partnership under the RZB Loan and related collateral agreements upon execution of the Sixth Amendment. The Maturity Date of the RZB Loan was extended to May 31, 2014 in connection with the Seventh Amendment to the Loan Agreement among the parties dated May 21, 2010. On November 29, 2012, Regional and RZB entered into a “Limited Waiver and Ninth Amendment” (“ Ninth Amendment ”) to the Loan Agreement. The Ninth Amendment waived the defaults existing at the time of the Ninth Amendment and reduced required monthly amortization payments to $50,000 per month beginning January 31, 2013. The Ninth Amendment also shortened the maturity date of the RZB Loan from May 31, 2014 to March 31, 2013. Regional made the January 31, 2013 monthly amortization payment but failed to make the February 28, 2013 monthly amortization payment. On March 1, 2013, Regional received a “Notice of Default, Demand for Payment and Reservation of Rights” (“ March 1, 2013 Demand Notice ”) from RZB in connection with the Loan Agreement.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE E — DEBT OBLIGATIONS - Continued

RZB Loan – continued

The March 1, 2013 Demand Notice was delivered as the result of Regional’s failure to pay the monthly principal payment in the amount of $50,000 due and payable on February 28, 2013 as prescribed under the Ninth Amendment and the continued default with respect to the non-payment of interest and principal due under the Loan Agreement which had been previously waived pursuant to the Ninth Amendment. The March 1, 2013 Demand Notice declared all Obligations (as defined in the Loan Agreement) immediately due and payable and demanded immediate payment in full of all Obligations, including fees, expenses and other costs of RZB. The March 1, 2013 Demand Notice also (1) contemplated the initiation of foreclosure proceedings in respect of the property owned by Regional and covered by that certain Mortgage, Deed of Trust and Security Agreement dated as of July 26, 2007 and (2) demanded immediate payment of all rents due upon the property pursuant to the terms of the Assignment of Leases and Rents dated July 26, 2006.  In connection with the Hopewell Loan, on March 20, 2013, all obligations unpaid and outstanding under the RZB Loan Agreement totaling $1,975,000 were paid in full. In connection with the closing of the Hopewell Loan, RZB provided Regional with a payoff letter and released all of the collateral previously held as security. The interest rate related to the RZB Loan for the period January 1, 2013 through March 20, 2013 approximated 9.5 %.

Hopewell Loan

On March 20, 2013, Regional entered into a Term Loan and Security Agreement (“ Hopewell Loan Agreement ”) with Hopewell Investment Partners, LLC (“ Hopewell ”) pursuant to which Hopewell would loan Regional up to $2,500,000 (“ Hopewell Loan ”), of which $1,998,000 was advanced on such date and an additional $252,000 and $250,000 was advanced on March 26, 2013 and July 19, 2013, respectively. William M. Comegys III, a member of the Board of Directors of the General Partner, is a member of Hopewell. As a result of this affiliation, the terms of the Hopewell Loan were reviewed by the Conflicts Committee of the Board of Directors of the General Partner. The committee determined that the Hopewell Loan was on terms better than could be obtained from a third-party lender.

In connection with the Hopewell Loan, Regional issued Hopewell a promissory note (“ Hopewell Note ”) and granted Hopewell a security interest in all of Regional’s assets, including a first lien mortgage on the real property owned by Regional and an assignment of rents and leases and fixtures on the remaining assets of Regional. In connection with the Hopewell Loan, the Partnership delivered to Hopewell a pledge of the outstanding capital stock of Regional and the Partnership entered into an unlimited guaranty for the benefit of Hopewell. In addition, Regional and the Partnership entered into an Environmental Certificate with Hopewell representing as to the environmental condition of the property owned by Regional, agreeing to clean up or remediate any hazardous substances from the property, and agreeing, jointly and severally, to indemnify Hopewell from and against any claims whatsoever related to any hazardous substance on, in or impacting the property of Regional.

The principal purpose of the Hopewell Loan was to repay the entire amounts due by Regional to RZB in connection with the Loan Agreement totaling $1,975,000 at the time of payoff, including principal, interest, legal fees and other expenses owed in connection with the Loan Agreement. The remaining amounts provided under the Hopewell Loan to Regional were used for working capital.

The Hopewell Loan matures in three years and carries a fixed annual rate of interest of 12%. Under the terms of the Hopewell Loan, Regional is required to make interest payments only for the first six months beginning April 20, 2013 and then 29 equal monthly payments of $56,000 (principal and interest) from the seventh month through the 35 ^th month with a balloon payment of $1,491,000 due on March 19, 2016.

Per the Hopewell Loan Agreement, Regional is required to provide annual audited and certified quarterly financial statements to Hopewell. The failure to provide those financial statements as prescribed is an event of default, and Hopewell may, by written notice to Regional, declare the Hopewell Note immediately due and payable.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE F – UNIT OPTIONS AND EQUITY INCENTIVE PLAN

The Partnership has no employees and is managed by its General Partner.

The Partnership may issue options, warrants, rights or appreciation rights with respect to Common Units for any Partnership purpose, including to non-employees for goods and services and to acquire or extend debt, without approval of the Limited Partners. The Partnership applies the provisions of ASC 505 to account for such transactions. ASC 505 requires that such transactions be accounted for at fair value. If the fair value of the goods and services or debt related transactions are not readily measurable, the fair value of the options, warrants, rights or appreciation rights is used to account for such transactions. Central did not record any unit-based payment costs for non-employees for the three months and six months ended June 30, 2012 and 2013 under the fair-value provisions of ASC 505.

The Partnership applies ASC 718 for options and/or Common Units granted to employees and directors of the General Partner. During the quarter ended March 31, 2006, Central adopted the provisions of ASC 718 for unit-based payments to employees using the modified prospective application transition method. Under this method, previously reported amounts should not be restated to reflect the provisions of ASC 718. ASC 718 requires measurement of all employee unit-based payment awards using a fair-value method and recording of such expense in the consolidated financial statements over the requisite service period. The fair value concepts have not changed significantly in ASC 718; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, Central will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant. Central will reconsider use of this model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

As described below on March 20, 2013, the Partnership agreed to issue a grant of 200,000 Common Units to an executive officer of the General Partner which will fully vest upon issuance. The Partnership recorded unit-based compensation of $16,000 during the six months ended June 30, 2013 in connection with the issuance of the 200,000 Common Units. Central did not record any unit-based compensation for employees for the three months and six months ended June 30, 2012 under the fair-value provisions of ASC 718.

Equity Incentive Plan

On March 9, 2005, the Board of Directors of the General Partner (“ Board ”) approved the 2005 Equity Incentive Plan (“ 2005 Plan ”). The 2005 Plan permits the grant of common unit options, common unit appreciation rights, restricted Common Units and phantom Common Units to any person who is an employee (including to any executive officer) or consultant of Central or the General Partner or any affiliate of Central or the General Partner. The 2005 Plan provides that each outside director of the General Partner shall be granted a common unit option once each fiscal year for not more than 5,000 Common Units, in an equal amount as determined by the Board of Directors. The aggregate number of Common Units authorized for issuance as awards under the 2005 Plan is 750,000. The 2005 Plan remains available for the grant of awards until March 9, 2015, or such earlier date as the Board of Directors may determine. The 2005 Plan is administered by the Compensation Committee of the Board of Directors. In addition, the Board of Directors may exercise any authority delegated to the Compensation Committee under the 2005 Plan. Under the terms of the Partnership Agreement and the then applicable rules of the NASDAQ National Market, no approval of the 2005 Plan by the Unitholders of the Partnership was required.

On March 20, 2013, the Board of Directors of the General Partner (“ Board ”), approved the entering into an employment agreement (“ Agreement ”) with Mr. Ian T. Bothwell, Executive Vice President, Chief Financial Officer and Secretary of the General Partner and President of Regional (“ Executive ”) (see Note J– Commitments and Contingencies – Employment Agreement). Under the terms of the Agreement, the Executive was granted 200,000 Common Units of the Partnership under the 2005 Plan which vested immediately upon such grant as set forth in a separate Unit Grant Agreement between the Executive and the General Partner.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE F — UNIT OPTIONS AND EQUITY INCENTIVE PLAN - Continued

Equity Incentive Plan – continued

In addition to any grants of Common Units or other securities of the Partnership as the Compensation Committee of the Board may determine from time to time pursuant to one or more of the General Partner’s benefit plans, the General Partner shall provide to the Executive one or more future grants of Common Units equal to the number of Common Units determined by dividing (1) one and one-half percent (1.5%) of the gross amount paid for each of the next one or more acquisitions completed by the Partnership and/or an affiliate of the Partnership during the term of the Agreement, which gross amount shall not exceed $100 million (each an “ Acquisition ”), by (2) the average value per Common Unit assigned to the equity portion of any consideration issued by the Partnership and/or an affiliate of the Partnership to investors in connection with each Acquisition including any provisions for adjustment to equity as offered to investors, if applicable. In the event the General Partner does not extend the Agreement after the second anniversary date thereof for any reason other than as provided in the Agreement, the Partnership shall issue to the Executive the number of Common Units determined by dividing (1) the amount calculated by multiplying three-quarters of one percent (0.75%) times the sum determined by subtracting the gross amount paid for each of the Acquisitions completed by the Partnership and/or an affiliate of the Partnership during the term of the Executive’s employment by the General Partner from $100 million by (2) the average value per Common Unit assigned to the equity portion of any consideration issued by the Partnership and/or an Affiliate of the Partnership to investors in connection with each Acquisition including any provisions for adjustment to equity as offered to investors, if applicable. The Common Units subject to issuance above will be issued pursuant to a Unit Grant Agreement, which grant will be governed by the terms and conditions of the 2005 Plan (or its successor). The right to receive the Common Units will not terminate until fully issued in the event the Executive is (a) terminated by the General Partner without Cause, (b) the Executive resigns for Good Reason, (c) a termination results from a Change in Control of the General Partner, or (d) a termination results from the Death or Disability of the Executive as more fully described in the Agreement.

At June 30, 2013, there were no options outstanding under the 2005 Plan. At June 30, 2013, approximately 422,310 Common Units remain available for issuance under the 2005 Plan.

NOTE G - COMMITMENTS AND CONTINGENCIES

Legal Proceedings

VOSH Actions

On July 25, 2005, an equipment failure during the loading of nitric acid from a railcar to a tanker truck resulted in a release of nitric acid and injury to an employee of Regional. Cleanup costs totaled approximately $380,000 in 2005 and were covered entirely by reimbursement from Regional’s insurance carrier. Several lawsuits against Regional were filed by property owners in the area. All of these suits were settled for an aggregate amount of $115,000, which was within insurance coverage limits. The Virginia Department of Labor and Industry, Occupational Safety and Health Compliance (“ VOSH ”) issued a citation against Regional on October 7, 2005 seeking a fine of $4,500. Regional requested withdrawal of the citation and disputed the basis for the citation and the fine. On June 18, 2007, the Commissioner of Labor and Industry filed suit against Regional in the Circuit Court for the City of Hopewell for collection of the unpaid fine. The citation arose from allegations that Regional had failed to evaluate properly the provision and use of employer-supplied equipment.  During September 2012, the Court dismissed the citations after a bench trial. In January 2013, the final order in the matter was issued by the Court. VOSH did not request an appeal of the decision by the required due date.

On November 27, 2005, an employee of Regional died following inhalation of turpentine vapors. Under Virginia law, recovery by the deceased employee’s estate was limited to a workers compensation claim, which was closed on April 20, 2007 for the amount of $11,000. The Virginia Department of Labor and Industry, Occupational Safety and Health Compliance issued a citation against Regional on May 24, 2006 seeking a fine of $28,000. Regional requested withdrawal of the citation and disputed the basis for the citation and the fine.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

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(UNAUDITED)

NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

Legal Proceedings – continued

VOSH Actions - continued

The amount of the fine is not covered by insurance. On June 18, 2007, the Commissioner of Labor and Industry for the Commonwealth of Virginia filed suit against Regional in the Circuit Court for the City of Hopewell for collection of the unpaid fine. There were four citations involved in the case referenced above.  One of the citations arose from the Commissioner's allegations that Regional had exposed this employee to levels of hydrogen sulfide gas in excess of the levels permitted by applicable regulations. Another citation arose from the Commissioner's allegations that Regional had not provided respiratory protection equipment needed to protect this employee from hazards in the workplace. The other two citations arose from the Commissioner's allegations that Regional had not evaluated the need for respiratory equipment in this work environment and had not evaluated the need to create a confined-space permit entry system for the employee's work in taking a sample of turpentine from the top of the railcar. During September 2012, the Court dismissed the first two citations after a bench trial. The Court subsequently dismissed the remaining two citations.  In April 2013, the final order in the matter was issued by the Court. VOSH did not request an appeal of the decision by the required due date.

TransMontaigne Dispute

Rio Vista Operating Partnership L.P. (“ RVOP ”) is a subsidiary of the Partnership which held liquid petroleum gas assets located in southern Texas and northern Mexico contributed (“ LPG Assets ”) to it by Penn Octane Corporation upon formation of the Partnership. It sold all of the LPG Assets to TransMontaigne in two separate transactions. The first transaction included the sale of substantially all of its U.S. assets, including a terminal facility and refined products tank farm located in Brownsville, Texas and associated improvements, leases, easements, licenses and permits, an LPG sales agreement and its LPG inventory in August 2006. In a separate transaction, RVOP sold its remaining LPG Assets to affiliates of TransMontaigne, including TMOC Corp., in December 2007. These assets included the U.S. portion of two pipelines from the Brownsville terminal to the U.S. border with Mexico, along with all associated rights-of-way and easements and all of the rights for indirect control of an entity owning a terminal site in Matamoros, Mexico. The Purchase and Sale Agreement dated December 26, 2007 (“ Purchase and Sale Agreement ”) between TransMontaigne and RVOP provided for working capital adjustments and indemnification under certain circumstances. RVOP has received demands for indemnification dated December 17, 2008, December 31, 2008, March 17, 2009, May 12, 2009, May 18, 2009, March 18, 2010, September 22, 2010 and January 24, 2011 (“ Indemnification Notices ”) seeking reimbursement from RVOP for $775,000 in claims relating to working capital adjustments and indemnification obligations as prescribed under the Purchase and Sale Agreement.

In addition to the aforementioned claims, the January 24, 2011 Indemnification Notice included a demand for indemnification based on a lawsuit filed by MCAR Development against Razorback, LLC, a subsidiary of TransMontaigne, on January 4, 2011, which lawsuit demands payment of damages resulting from a pipeline meandering outside the recorded pipeline easement. Razorback had requested that RVOP assume the defense of the litigation and provide indemnification to Razorback. RVOP did not agree to assume the defense of the litigation but is cooperating with TransMontaigne in its defense of the litigation.

RVOP intends to work with TransMontaigne to define the scope of the adjustments contained in the Indemnification Notices to an amount which RVOP considers to be more realistic and which also considers RVOP offsets to the amounts already presented by TransMontaigne. Any amount which may subsequently be agreed to by TransMontaigne and RVOP shall first be charged to the $500,000 Holdback provided for in the Purchase and Sale Agreement, and also is subject to the $1,000,000 indemnification limitation. RVOP has accrued a reserve of approximately $283,000 for potential future obligations in addition to the Holdback. RVOP’s management believes that the amount of the TransMontaigne claim will be resolved within the amounts provided.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

Legal Proceedings – continued

SGR Energy LLC

On July 1, 2013, Regional filed suit in the United States District Court for the Eastern District of Virginia, “Regional Enterprises, Inc. v. SGR Energy, LLC, Civil Action No. 3:13v418” (“ Litigation ”) in connection with SGR Energy, LLC’s (“ SGR ”) failure to make the required payments due to Regional under the terms of a Services Agreement between the parties pursuant to which Regional stores and transports product (“ Product ”). In connection with the Litigation, Regional is seeking payment of all amounts owing under the Services Agreement including all costs associated with the removal of the Product currently stored at Regional’s facilities and the cleanup of the facilities which were provided under the Services Agreement. Regional intends to seek all remedies to collect the amounts due including a lien sale of the Product. SGR has represented that the value of the Product is in excess of the amounts which are currently owed as of June 30, 2013 and the estimated future amounts associated with removal of the Product and cleanup of the facilities. At June 30, 2013, the amount of accounts receivable due from SGR totaled approximately $140,000.

Other

Central is involved with other proceedings, lawsuits and claims in the ordinary course of its business. Central believes that the liabilities, if any, ultimately resulting from such proceedings, lawsuits and claims should not materially affect its consolidated financial results.

Terminal Operator Status of Regional Facility

In May 2011, Regional was contacted by the IRS regarding whether its Hopewell, Virginia facility would qualify as a “terminal operator” which handles “taxable fuels” and accordingly is required to register through a submission of Form 637 to the IRS. Code Section 4101 provides that a “fuel terminal operator” is a person that (a) operates a terminal or refinery within a foreign trade zone or within a customs bonded storage facility or, (b) holds an inventory position with respect to a taxable fuel in such a terminal. In June 2011, an agent of the IRS toured the Hopewell, Virginia facility and notified the plant manager verbally that he thought the facility did qualify as a “terminal operator.” As a result, even though Regional disagrees with the IRS agent’s analysis, it elected to submit, under protest, to the IRS a Form 637 registration application in July 2011 to provide information about the Hopewell facility. Regional believes that its Form 637 should be rejected by the IRS because (1) the regulations do not apply to Regional’s facility, (2) the items stored do not meet the definition of a “taxable fuel” and (3) there were no taxable fuels being stored or expected to be stored in the foreseeable future that would trigger the registration requirement. Regional had not received a response with respect to its Form 637 submission or arguments that it is not subject to the Requirements.

During December 2012, Regional received notification from IRS’ appeals unit (“ Appeals Unit ”) that the above matter was under review. A telephonic meeting took place in January 2013 whereby the Appeal Unit determined that Regional did not meet the conditions of a terminal operator which handled taxable fuels and that the matter was dismissed. During March 2013, Regional received formal notification from the IRS that the matter was dismissed with no further action required by Regional. As indicated above, should Regional’s operations in the future include activities which qualify Regional as a terminal operator which handles taxable fuels as defined in the Code, Regional would be subject to additional administrative and filing requirements, although the costs associated with compliance are not expected to be material and Regional would be subject to penalties for the failure to file timely with the IRS any future required reports or forms.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

Agreements

Penske Truck Lease

Effective January 18, 2012, Regional entered into a Vehicle Maintenance Agreement (“ Maintenance Agreement ”) with Penske Truck Leasing Co., L. P. (“ Penske ”) for the maintenance of its owned tractor and trailer fleet. The Maintenance Agreement provides for (i) fixed servicing as described in the agreement, which is basically scheduled maintenance, at the fixed monthly rate for tractors and for trailers and (ii) additional requested services, such as tire replacement, mechanical repairs, physical damage repairs, tire replacement, towing and roadside service and the provision of substitute vehicles, at hourly rates and discounts set forth in the agreement. Pricing for the fixed services is subject to upward adjustment for each rise of at least one percent (1%) for the Consumer Price Index for All Urban Consumers for the United States published by the United States Department of Labor. The term of the agreement is 36 months. Regional is obligated to maintain liability insurance coverage on all vehicles naming Penske as a co-insured and indemnify Penske for any loss it or its representatives may incur in excess of the insurance coverage. Penske has the right to terminate the Maintenance Agreement for any breach by Regional upon 60 days written notice, including failure to pay timely all fees owing Penske, maintenance of Regional’s insurance obligation or any other breach of the terms of the agreement.

On February 17, 2012, Regional entered into a Vehicle Lease Service Agreement with Penske for the outsourcing of 20 new Volvo tractors (“ New Tractors ”) to be acquired by Penske and leased to Regional, and the outsourcing of the maintenance of the New Tractors to Penske (“ Lease Agreement ”). Under the terms of the Lease Agreement, Regional made a $90,000 deposit, the proceeds for which were obtained from the sale of six of Regional’s owned tractors, and will pay a monthly lease fee per tractor and monthly maintenance charge (“ Maintenance Charge ”) which is based on the actual miles driven by each New Tractor during each month. The Maintenance Charge covers all scheduled maintenance, including tires, to keep the New Tractors in good repair and operating condition. Any replacement parts and labor for repairs which are not ordinary wear and tear shall be in accordance with Penske fleet pricing, and such costs are subject to upward adjustment on the same terms as set forth in the Maintenance Agreement. Penske is also obligated to provide roadside service resulting from mechanical or tire failure. Penske will obtain all operating permits and licenses with respect to the use of the New Tractors by Regional.

The term of the Lease Agreement is for seven years. The New Tractors were delivered by Penske during May 2012 and June 2012. Under the terms of the Lease Agreement, Regional (i) may acquire any or all of the New Tractors after the first anniversary date of the Lease Agreement based on the non-depreciated value of the tractor and (ii) has the option after the first anniversary date of the Lease Agreement to terminate the lease arrangement with respect to as many as five of the New Tractors leased based on a documented downturn in business. On May 31, 2013, Regional notified Penske of its intent to terminate the lease arrangement effective June 15, 2013, for five tractors as provided for in the Lease Agreement as a result of the decline in Regional’s transportation business. As a result of this partial termination, Regional now leases fifteen tractors pursuant to the Lease Agreement. Regional is obligated to maintain liability insurance coverage on all vehicles covered by the Lease Agreement on the same basis as in the Lease Agreement.

The Lease Agreement can be terminated by Penske upon an “event of default” by Regional. An event of default includes (i) failure by Regional to pay timely any lease charges when due or maintain insurance coverage as required by the Lease Agreement, (ii) any representation or warranty of Regional is incorrect in any material respect, (iii) Regional fails to remedy any non-performance under the agreement within five (5) days of written notice from Penske, (iv) Regional or any guarantor of its obligations becomes insolvent, makes a bulk transfer or other transfer of all or substantially all of its assets or makes an assignment for the benefit of creditors or (v) Regional files for bankruptcy protection or any other proceeding providing for the relief of debtors. Penske may institute legal action to enforce the Lease Agreement or, with or without terminating the Lease Agreement, take immediate possession of the New Trucks wherever located or, upon five (5) days written notice to Regional, either require Regional to purchase any or all of the New Tractors or make the “alternative payment” described below. In addition, Regional is obligated to pay all lease charges for all such New Tractors accrued and owing through the date of the notice from Penske as described above.

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NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

Agreements - continued

Penske Truck Lease

Penske’s ability to require Regional to purchase the New Truck fleet or make the “alternative payment” would place a substantial financial burden on Regional.

The Lease Agreement can also be terminated by either party upon 120 days written notice to the other party as to any New Truck subject to the agreement on any annual anniversary of such tractor’s in-service date. Upon termination of the Lease Agreement by either party, Regional shall, at Penske’s option, either acquire the New Tractor that is the subject of the notice at the non-depreciated value of such tractor, or pay Penske the “alternative payment.” The “alternative payment” is defined in the Lease Agreement as the difference, if any, between the fair market value of the New Tractor and such tractor’s “depreciated Schedule A value” ($738 per month commencing on the in-service date of such tractor). If the Lease Agreement is terminated by Penske and Regional is not then in default under any term of the Lease Agreement, Regional is not obligated to either acquire the New Tractor that is the subject of the termination or pay Penske the “alternative payment” as described above.

Asphalt Agreement

On November 30, 2000, Regional renewed a Storage and Product Handling Agreement with a customer with an effective date of December 1, 2000 (“ Asphalt Agreement ”). The Asphalt Agreement provides for the pricing, terms and conditions under which the customer will purchase terminal services and facility usage from Regional for the storage and handling of the customer’s asphalt products. The Asphalt Agreement was amended on October 15, 2002 with an effective date of December 1, 2002 (“ Amended Asphalt Agreement ”). The term of the Amended Asphalt Agreement was five years with an option by the customer for an additional five-year renewal term, which the customer exercised in July 2007. After the additional five-year term, the Amended Asphalt Agreement has been renewed automatically for successive one-year terms through November 30, 2013. During July 2013, Regional provided written notice in accordance with the Asphalt Agreement that it did not intend to renew the Asphalt Agreement under the existing terms. The parties are currently negotiating terms for a renewal of the Asphalt Agreement, which is expected to be completed prior to the Asphalt Agreement expiration. Under the terms of the Asphalt Agreement, Regional agrees to provide minimum annual throughput of 610,000 net barrels per contract year, with additional volume to be paid on a per barrel basis. During the term of the Amended Asphalt Agreement, Regional agrees to provide three storage tanks and certain related equipment to the customer on an exclusive basis as well as access to Regional’s barge docking facility.

On March 19, 2012, one of the storage tanks (“ Storage Tank ”) leased under the Amended Asphalt Agreement was discovered to have a leak. During April 2012, after removal of the existing product from the Storage Tank, the customer of the Storage Tank was notified by Regional that the Storage Tank was no longer available for use until necessary repairs were completed. During the year ended December 31, 2012, Regional recorded a loss of $238,000 (“Asphalt Loss”) in connection with the leak, including the estimated amounts to repair the Storage Tank. Lost revenue with respect to the Storage Tank totaled approximately $200,000 in 2012 and $75,000 and $150,000 for the three months and six months ended June 30, 2013. Regional expects that repairs of the Storage Tank will completed and the tank will be operational during September 2013. Regional’s insurance providers have notified Regional that the incident did not fall within insurance coverage limits.

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NOTE G — COMMITMENTS AND CONTINGENCIES – Continued

Agreements - continued

Fuel Oil Agreement

On November 16, 1998, Regional renewed a Terminal Agreement with a customer with an effective date of November 1, 1998, as amended on April 5, 2001, October 11, 2001 and August 1, 2003 (“ Fuel Oil Agreement ”). The Fuel Oil Agreement provides for the pricing, terms and conditions under which Regional will provide terminal facilities and services to the customers for the delivery of fuel oil. Pursuant to the agreement, as amended, Regional agreed to provide three storage tanks, certain related pipelines and equipment, and at least two tractor tankers to the customer on an exclusive basis, as well as access to Regional’s barge docking facility. Under the terms of the Terminal Agreement, the customer paid an annual tank rental plus a product transportation fee calculated on a per 100 gallon basis, each subject to annual adjustment for inflation. Regional agreed to deliver a minimum daily quantity of fuel oil on behalf of the customer. During December 2008, the customer and Regional negotiated a new Fuel Oil Agreement whereby Regional was only required to provide two storage tanks through May 2009 and one storage tank through November 30, 2011, which was subsequently extended by the customer through November 30, 2013 in accordance with the terms of the Fuel Oil Agreement. In addition, under the newly negotiated Fuel Oil Agreement, the customer pays an annual tank rental plus a product transportation fee calculated on a per gallon basis, each subject to annual adjustment for inflation. The Fuel Oil Agreement expires on November 30, 2013.

Sodium Hydroxide Agreement

On September 27, 2007, Regional entered into a Terminal Agreement with Suffolk Solutions, an affiliate of Suffolk Sales with an effective date of June 1, 2008 and an expiration date of May 30, 2013. On May 21, 2013, the Terminal Agreement was extended to August 31, 2013. On July 11, 2013, the parties entered into a new Terminal Agreement effective June 28, 2013 and an expiration date of June 27, 2016, subject to being automatically renewed in one-year increments unless terminated upon 120 days advance written notice by either party. Under the terms of the Terminal Agreement, either party may cancel the agreement at any time by providing 120 days advance written notice after the one year anniversary of the effective date. This Terminal Agreement provides for the pricing, terms, and conditions under which Regional will provide terminal facilities and services to the customer for the receipt, storage and distribution of sodium hydroxide. Pursuant to the agreement, Regional agrees to provide two storage tanks, certain related pipelines and equipment, as well as access to Regional’s barge docking and rail facilities. In exchange for use of Regional’s facilities and services, the customer pays an annual fixed tank rental fee and variable fees based on excess of certain minimum levels of thru-put, plus a product transportation fee calculated on a per run basis, each subject to annual adjustment for inflation. Regional also contracts with Suffolk to provide other transportation and trans-loading services of specialty chemicals.

No. 6 Oil Agreements

On March 1, 2012, Regional entered into a Services Agreement with a customer with an effective date of March 1, 2012 and a termination date of February 28, 2015, subject to being automatically renewed in one-year increments unless terminated upon 180 days advance written notice by either party. This Services Agreement provides for the pricing, terms, and conditions under which Regional will provide terminal facilities and services to the customer for the receipt, storage and distribution of No. 6 oil. Pursuant to the agreement, Regional agrees to provide one storage tank (capacity of approximately 1.2 million gallons), certain related pipelines and equipment, necessary tractor tankers, as well as access to Regional’s barge docking and rail facilities. In exchange for use of Regional’s facilities and services, the customer pays an annual tank rental amount, plus loading and unloading fees. As part of the lease, Regional insulated the tank and made other modifications to the tank and barge line. As described in Note G – Legal Proceedings – SGR Energy LLC, Regional has recently filed a lawsuit against this customer as a result of non-payment of fees owed pursuant to the Services Agreement.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTE G — COMMITMENTS AND CONTINGENCIES – Continued

Agreements - continued

MORLIFE 5000 Agreement

During January 1, 2013, Regional entered into a Services Agreement with a customer with an effective date of January 1, 2013 and a termination date of December 31, 2015. The customer has the sole discretion to extend the term of the Services Agreement prior to expiration for up to two successive one-year terms upon providing Regional 90 days advance written notice prior to expiration of the Services Agreement. This Services Agreement provides for the pricing, terms, and conditions under which Regional will provide terminal facilities and services to the customer for the receipt, storage and distribution of MORLIFE 5000, an asphalt additive. Pursuant to the agreement, Regional agrees to provide Tank 120, certain related pipelines and equipment, necessary tractor tankers, as well as access to Regional’s barge docking and rail facilities. In exchange for use of Regional’s facilities and services, the customer pays an annual tank rental amount, plus loading and unloading fees.

Employment Agreement

On March 20, 2013, the Board approved an employment agreement with Mr. Ian T. Bothwell, Executive Vice President, Chief Financial Officer and Secretary of the General Partner and President of Regional (“ Executive ”). The general provisions of the employment agreement (“ Agreement ”) include:

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NOTE G — COMMITMENTS AND CONTINGENCIES – Continued

Employment Agreement – continued

In the event the General Partner does not extend this Agreement after the second anniversary date of this Agreement for any reason other than as provided in the Agreement, the Partnership shall issue to Executive the number of Common Units of the Partnership determined by dividing (1) the amount calculated by multiplying three-quarters of one percent (0.75%) times the sum determined by subtracting the gross amount paid for each of the Acquisitions completed by the Partnership and/or an affiliate of the Partnership during the term of Executive’s employment by the General Partner from $100 million by (2) the average value per Common Unit assigned to the equity portion of any consideration issued by the Partnership and/or an Affiliate of the Partnership to investors in connection with each Acquisition including any provisions for adjustment to equity as offered to investors, if applicable. The Common Units subject to issuance under this bullet point will be issued pursuant to a Unit Grant Agreement, which grant will be governed by the terms and conditions of the 2005 Plan (or its successor) and the Unit Grant Agreement. The right to receive the Common Units pursuant to this bullet point will not terminate until fully issued in the event the Executive is (a) terminated by the General Partner without Cause, (b) the Executive resigns for Good Reason, (c) due to a termination resulting from Change in Control of the General Partner, or (d) a termination resulting from Death or Disability of the Executive as more fully described in the Agreement. All Common Units issued pursuant to this bullet point will be registered pursuant to a Form S-8 registration statement to be filed by the Partnership or an amendment to the current Form S-8 registration statement on file with the SEC if still deemed effective by the SEC.

In the event that the parties decide not to renew the Agreement, the General Partner terminates the Agreement for cause or the Executive terminates the Agreement without good reason, the Executive shall be entitled to receive all accrued and unpaid salary, expenses, vacation, bonuses and incentives awarded prior to the termination date (Accrued Amounts). In the event the Executive is terminated pursuant to clauses (a), (b) and (c) in the last bullet point above, then the Executive shall be entitled to receive the Accrued amounts together with (i) severance pay equal to two (2) times the sum of (1) the Executive’s Base Salary in the year in which the termination date occurs and (2) the amount of the Annual and Anniversary Bonus for the year prior to the year in which the termination date occurs and (ii) for a period of up to 18 months following termination, continuation of all employee benefit plans and health insurance as provided prior to termination. The Agreement also contains restrictions on the use of “confidential information” during and after the term of the Agreement and restrictive covenants that survive the termination of the Agreement including (i) a covenant not to compete, (ii) a non-solicitation covenant with respect to employees and customers and (iii) a non-disparagement covenant, all as more fully described in the Agreement.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G — COMMITMENTS AND CONTINGENCIES – Continued

Payment of Compensation

Effective November 1, 2011, Messrs. Anbouba and Montgomery, executive officers of the General Partner, agreed to forego any further compensation until such time as the General Partner completed its plan for recapitalizing the Partnership and obtaining sufficient funds needed to conduct its operations. On January 1, 2012, the Chief Financial Officer of the General Partner also ceased receiving compensation. During June 2012, the Chief Financial Officer of the General Partner began receiving a portion of his ongoing monthly salary. The Partnership has also failed to reimburse expenses to Messrs. Anbouba and Montgomery since September 2011 and the Chief Financial Officer since September 2011. Central has looked at several different financing scenarios to date, each involving the acquisition of additional assets, to meet its future capital needs. None of these acquisitions has been successfully completed. Management continues to seek acquisition opportunities for Central to expand its assets and generate additional cash from operations. It is anticipated that the payment of compensation and reimbursement of expenses to the General Partner’s executive officers will be reinstated once an acquisition transaction is completed.

Partnership Tax Treatment

The Partnership is not a taxable entity for U.S. tax purposes (see below) and incurs no U.S. federal income tax liability. Regional is a corporation and as such is subject to U.S. federal and state corporate income tax. Each Unitholder of the Partnership is required to take into account that Unitholder’s share of items of income, gain, loss and deduction of the Partnership in computing that Unitholder’s federal income tax liability, even if no cash distributions are made to the Unitholder by Partnership. Distributions by Partnership to a Unitholder are generally not taxable unless the amount of cash distributed is in excess of the Unitholder’s adjusted basis in Partnership.

Regional is a corporation and as such is subject to U.S. federal and state corporate income tax. Most of its income is not “qualifying income” as discussed below. Central believes that a portion of Regional’s income could be considered as “qualifying income”. Central believes that income derived from the storage of Asphalt, No. 2 Oil and/or No. 6 Oil could constitute “qualifying income.” Central may explore options regarding the reorganization of some or all of its Regional assets into a more efficient tax structure to take advantage of the tax savings that could result from the “qualified income” being generated at the Partnership level rather than at the Regional level. Central expects that there would be a tax expense associated with the transfer of income from Regional to the Partnership.

Section 7704 of the Internal Revenue Code (Code) provides that publicly traded partnerships shall, as a general rule, be taxed as corporations despite the fact that they are not classified as corporations under Section 7701 of the Code. Section 7704 of the Code provides an exception to this general rule for a publicly traded partnership if 90% or more of its gross income for every taxable year consists of “qualifying income” (“Qualifying Income Exception”). For purposes of this exception, “qualifying income” includes income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines and ships) or marketing of any mineral or natural resource. Other types of “qualifying income” include interest (other than from a financial business or interest based on profits of the borrower), dividends, real property rents, gains from the sale of real property, including real property held by one considered to be a “dealer” in such property, and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes “qualifying income”. Non qualifying income which is held and taxed through a taxable entity (such as Regional), is excluded from the calculation in determining whether the publicly traded partnership meets the qualifying income test. The Partnership estimates that more than 90% of its gross income (excluding Regional) was “qualifying income.” No ruling has been or will be sought from the IRS and the IRS has made no determination as to the Partnership’s classification as a partnership for federal income tax purposes or whether the Partnership’s operations generate a minimum of 90% of “qualifying income” under Section 7704 of the Code.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G — COMMITMENTS AND CONTINGENCIES – Continued

Partnership Tax Treatment - continued

If the Partnership was classified as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, the Partnership’s items of income, gain, loss and deduction would be reflected only on the Partnership’s tax return rather than being passed through to the Partnership’s Unitholders, and the Partnership’s net income would be taxed at corporate rates.

If the Partnership was treated as a corporation for federal income tax purposes, the Partnership would pay tax on income at corporate rates, which is currently a maximum of 35%. Distributions to Unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, or deductions would flow through to the Unitholders. Because a tax would be imposed upon the Partnership as a corporation, the cash available for distribution to Unitholders would be substantially reduced and the Partnership’s ability to make minimum quarterly distributions would be impaired. Consequently, treatment of the Partnership as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to Unitholders and therefore would likely result in a substantial reduction in the value of the Partnership’s Common Units.

Current law may change so as to cause the Partnership to be taxable as a corporation for federal income tax purposes or otherwise subject the Partnership to entity-level taxation. The Partnership Agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subject the Partnership to taxation as a corporation or otherwise subjects the Partnership to entity-level taxation for federal, state or local income tax purposes, then the minimum quarterly distribution amount and the target distribution amount will be adjusted to reflect the impact of that law on the Partnership.

NOTE H – MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

Major Customers

For the three months ended June 30, 2013, Suffolk Sales, MeadWestVaco, and SGR Energy LLC accounted for approximately 20%, 16%, and 15% of Regional’s revenues, respectively. For the six months ended June 30, 2013, Suffolk Sales, SGR Energy LLC, MeadWestVaco, and General Chemical Corporation accounted for approximately 19%, 18%, 15%, and 11% of Regional’s revenues, respectively. At June 30, 2013, SGR Energy LLC, Suffolk Sales, and MeadWestVaco accounted for approximately 30%, 27%, and 12% of Regional’s accounts receivable, respectively.

Concentrations of Credit Risk

The balance sheet items that potentially subject Central to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Central maintains cash balances in different financial institutions. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“ FDIC” ) limits of $250,000 per institution. At June 30, 2013, Central did not have any cash balances in financial institutions in excess of FDIC insurance coverage. Concentrations of credit risk with Regional’s accounts receivable are mitigated by Regional’s ongoing credit evaluations of its customers.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE I — INCOME TAXES

Federal Tax Liabilities - Regional

As of June 30, 2013, Regional has accrued $0 and $25,000 for federal income taxes and associated penalties and interest, respectively.

On February 18, 2013, in response to the IRS’s demand for $160,000 of past due income taxes for the tax year December 2011 and $55,000 of penalties and interest owed by Regional for the tax years ended December 2008 and December 2011, Regional requested from the IRS an installment agreement arrangement (the “ IRS 2013 Installment Agreement ”). During June 2013, Regional filed its 2012 federal income tax return and filed forms to request a refund of $160,000 of income taxes as a result of the carryback of losses incurred during the 2012 tax year which effectively eliminated the $160,000 of taxes associated with the December 31, 2011 tax return. Regional has received verbal confirmation from the IRS that the recently filed tax returns and application for refund have been processed and such amounts have been offset against the amounts reflected as owing to the IRS described above. Regional intends to enter into the IRS 2013 Installment Agreement which will provide for the remaining amounts due to the IRS of approximately $25,000 to be paid in 5 monthly installments beginning August 28, 2013.

State Tax Liabilities - Regional

As of June 30, 2013, Regional has accrued $32,000 and $29,000 for Virginia state income taxes and associated penalties and interest, respectively. The Commonwealth of Virginia, Department of Taxation (“ VDOT ”) has previously notified Regional that approximately $62,000 and $63,000 of income tax, penalties and interest related to the tax periods ended October 2006 and July 2007, respectively, were outstanding (“ 2006 and 2007 Taxes ”) and $42,000 of income tax, penalties and interest related to the tax year ended December 31, 2011 (“ 2011 Taxes ”) were also outstanding. During June 2013, Regional made arrangements with the VDOT to pay the 2011 Taxes due in installments of $6,500 per month until such amounts have been fully paid. The VDOT has also included approximately $31,000 of sales taxes included in accrued expenses at June 30, 2013 as part of this payment arrangement. During June 2013, Regional filed its 2012 Virginia state income tax return and filed forms to request a refund of $29,000 of state income taxes as a result of the carryback of losses incurred during the 2012 tax year which effectively eliminated the $29,000 of taxes associated with the 2011 Taxes. The VDOT has informed Regional that the payment amounts owed in connection with the 2011 Taxes will be offset by the refund request referred to above and associated penalties and interest will be removed. In connection with the 2006 and 2007 Taxes, Regional believes that the amounts related to the tax period October 2006 are in error and has submitted a request to the VDOT to have those amounts removed. Regional intends to have any amounts ultimately determined to be owed in connection with the 2006 and 2007 Taxes included in the payment arrangement for the 2011 Taxes. During the six months ended June 30, 2013, Regional has recorded state income tax expense of $4,000.

Late Filings and Delivery of Schedules K-1 to Unitholders

The Partnership does not file a consolidated tax return with Regional since this wholly-owned subsidiary is a corporation.

On June 14, 2011, the Partnership filed the previously delinquent federal partnership tax returns for the periods from January 1, 2008 through December 31, 2008 and January 1, 2009 through December 31, 2009. On June 23, 2011, the Partnership also distributed the previously delinquent Schedules K-1 for such taxable periods to its Partners. The Partnership also filed all of the previously delinquent required state partnership tax returns for the years ended December 31, 2008 and 2009 during 2011. The Internal Revenue Code of 1986, as amended (“ Code ”), provides for penalties to be assessed against taxpayers in connection with the late filing of the federal partnership returns and the failure to furnish timely the required Schedules K-1 to investors. Similar penalties are also assessed by certain states for late filing of state partnership returns. The Code and state statutes also provide taxpayer relief in the form of reduction and/or abatement of penalties assessed for late filing of the returns under certain circumstances. The Internal Revenue Service (“ IRS ”) previously notified the Partnership that its calculation of penalties for the delinquent 2008 and 2009 tax returns was approximately $2.5 million.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE I — INCOME TAXES - Continued

Tax Liabilities – continued

Late Filings and Delivery of Schedules K-1 to Unitholders – continued

The Partnership previously estimated that the maximum penalty exposure for all state penalties for delinquent 2008 and 2009 tax returns was $940,000.

During September 2011, the Partnership submitted to the IRS its request for a waiver of the penalties for failure to timely file the Partnership’s federal tax returns and associated K-1’s for the tax years 2008 and 2009. The waiver request was made pursuant to Code Section 6698(a)(2) which provides that the penalty will not apply if the taxpayer establishes that its failure to file was due to reasonable cause. The Partnership also requested a waiver based on the IRS’s past administrative policies towards first offenders. On November 19, 2012, the Partnership received a notice from the IRS that its request for a waiver of the penalties for failure to timely file the Partnership’s federal tax returns and associated K-1’s for tax years 2008 and 2009, was denied (“ Notice ”). The Notice indicated that the information submitted in connection with the request did not establish reasonable cause or show due diligence. On January 11, 2013, the Partnership submitted its appeal of the Notice. On February 8, 2013 and June 10, 2013, the Partnership received notice from the IRS that its request to remove the 2008 and 2009 penalties, respectively, was granted.

Since filing the delinquent 2008 and 2009 state partnership tax returns, the Partnership had also (i) submitted a request for abatement of penalties based on reasonable cause and/or (ii) applied for participation into voluntary disclosure and compliance programs for first offenders which provide relief of the penalties to those states which impose significant penalties for late filing of state returns (“ Requests ”). During 2012, the Partnership received notices from all of the applicable states that the Requests to have the penalties abated and/or waived through participation in voluntary disclosure and compliance programs were granted.

During May 2013, the Partnership received a notice from the State of California Franchise Tax Board (“ CAFTB ”) that indicated the Partnership was liable for late filing penalties of approximately $316,000 in connection with the short tax year return (“ Short Tax Year Return ”) filed for the period January 1, 2011 through May 26, 2011 as a result of a technical termination that occurred under §Section 708(b) of the Code. The Partnership had previously been granted an extension by the IRS to file the federal Short Year Tax Return to the time that the Partnership’s 2011 federal tax return would have been due had a technical termination not occurred. The Partnership has filed a request with the CAFTB to have the penalties removed based on the similar hardship which the IRS had considered in granting the Partnership its extension for filing the federal Short Year Tax Return.

During the six months ended June 30, 2013, the Partnership has recorded a reduction of tax penalties of $803,000 in connection with the removal of $1,119,000 associated with the prior accrual of penalties associated with 2009 partnership federal tax return offset by the additional tax penalty currently being assessed by the CAFTB. There can be no assurance that the Partnership’s request for relief from the CAFTB tax penalties will be approved by the CAFTB. The Partnership does not currently have the financial resources to pay the penalties that may be due to the CAFTB in the event its request to remove such penalties is denied.

The Partnership has timely applied for an automatic extension to file its 2012 federal and state income tax returns and Schedule K-1’s and expects to deliver the 2012 tax returns and Schedules K-1 to its Unitholders by the required extensions due date, which is September 15, 2013. However, there is no certainty that the Schedules K-1 for the 2012 Tax Year will be completed and delivered timely to Unitholders by the Partnership due its lack of operating capital.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE J — ENVIRONMENTAL MATTERS

Regional is subject to various federal, state and local laws and regulations relating to the protection of the environment. Regional has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Regional accounts for environmental contingencies in accordance with ASC 450. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities for environmental contingencies are recorded when environmental assessments and/or clean-ups are probable and the costs can be reasonably estimated. Central maintains insurance which may cover in whole or in part certain types of environmental contingencies. For the six months ended June 30, 2012 and 2013, Regional had no environmental contingencies requiring specific disclosure or the recording of a liability.

NOTE K — RELATED PARTY TRANSACTIONS

The General Partner has a legal duty to manage the Partnership in a manner beneficial to the Partnership’s Unitholders. However, the General Partner also has a legal duty to manage its affairs in a manner that benefit its members. This can create a conflict of interest between the Unitholders of the Partnership and the members of the General Partner. The Partnership Agreement provides certain requirements for the resolution of conflicts, but also limits the liability and reduces the fiduciary duties of the General Partner to the Unitholders. The Partnership Agreement also restricts the remedies available to Unitholders for actions that might otherwise constitute breaches of the General Partner’s fiduciary duty.

Advances from General Partner

During the year ended December 31, 2011 and the nine months ended September 30, 2012, the General Partner made cash advances to the Partnership of $955,000 and $30,000, respectively, for the purpose of funding working capital. On September 14, 2012, a Super-Majority of the Members, as defined in the Second Amended and Restated Limited Liability Company Agreement of the General Partner, dated April 12, 2011, as amended (“ Agreement ”), approved the issuance and sale by the General Partner of 12,000 additional Membership Interests of the General Partner (“ Additional Interests ”) at a purchase price of $50.00 per unit, pursuant to Sections 3.2(a) and 6.13(a) of the Agreement (“ GP Sale ”). The Additional Interests were purchased by all the existing members of the General Partner, except 144 units offered to one existing member (“ Unsubscribed Units ”), in accordance with their pro rata ownership of the General Partner. In accordance with the Agreement, the General Partner offered the Unsubscribed Units to those members whom participated in the GP Sale for which those members also purchased their pro rata portion of the Unsubscribed Units.

As of December 31, 2012 and June 30, 2013, $434,000 and $73,000, respectively, of the net proceeds from the GP Sale, which totaled $507,000 (after the offset of $93,000 of prior advances from Messrs. Anbouba and Montgomery that were applied towards their purchase price amounts due in connection with the GP Sale) were used by the General Partner to fund working capital requirements of the Partnership, including the payment of certain outstanding obligations. All funds advanced to the Partnership by the General Partner since November 17, 2010 have been treated as a loan pursuant to the terms of an intercompany demand promissory note effective March 1, 2012. The intercompany demand note provides for advances from time to time by the General Partner to the Partnership of up to $2,000,000. Repayment of such advances, together with accrued and unpaid interest, is to be made in 12 substantially equal quarterly installments starting with the quarter ended March 31, 2016. The note bears interest at the imputed rate of the IRS for medium term notes. The rate at June 1, 2013 is 0.95% per annum and such rate is adjusted monthly by the IRS under IRB 625. At June 30, 2013, the total amount owed to the General Partner by the Partnership, including accrued interest, was $1,591,000.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE K — RELATED PARTY TRANSACTIONS – Continued

Intercompany Loans and Receivables

Regional Acquisition Funding

In connection with the Regional acquisition, on July 26, 2007 Regional issued to the Partnership a promissory note in the amount of $2,500,000 (“ Central Promissory Note ”) in connection with the remaining funding needed to complete the acquisition of Regional. Interest on the Central Promissory Note is 10% annually and such interest is payable quarterly. The Central Promissory Note is due on demand. Regional has not made an interest payment on the Central Promissory Note since its inception. Interest is accruing but unpaid. The balance on the note at June 30, 2013 is $3,983,000. The payment of this amount is subordinated to the payment of the Hopewell Note by Regional.

Other Advances

In addition to the Central Promissory Note, there have been other intercompany net advances made from time to time from the Partnership and/or RVOP to Regional, including the $1.0 million advanced by the Partnership to Regional in connection with the third amendment to the RZB Loan Agreement and allocations of corporate expenses, offset by actual cash payments made by Regional to the Partnership and/or RVOP. These intercompany amounts were historically evidenced by book entries. Effective March 1, 2012, Regional and the Partnership entered into an intercompany demand promissory note incorporating all advances made as of December 31, 2010 and since that date. The note bears interest at the rate of 10% annually from January 1, 2011. At June 30, 2013, the intercompany balance owed by Regional to the Partnership and/or RVOP is approximately $1,586,000, which includes interest. This amount is due to the Partnership and RVOP on demand; however, as is the case with the Central Promissory Note, payment of these amounts is also subordinated to payment of the Hopewell Note by Regional.

Allocated Expenses Charged to Subsidiary

Regional is charged for direct expenses paid by the Partnership on its behalf, as well as its share of allocable overhead for expenses incurred by the Partnership which are indirectly attributable for Regional related activities. For the three months and six months ended June 30, 2012 and 2013, Regional recorded allocable expenses of $68,000, $55,000, $187,000 and $113,000, respectively.

Reimbursement Agreements

Effective November 17, 2010, the Partnership moved its principal executive offices to Dallas, Texas. As a result, it has entered into a Reimbursement Agreement with AirNow Compression Systems, LTD, an affiliate of Imad K. Anbouba, the General Partner’s Chief Executive Officer and President. The agreement provides for the monthly payment of allocable “overhead costs,” which include rent, utilities, telephones, office equipment and furnishings attributable to the space utilized by employees of the General Partner. The term of the agreement is month-to-month and can be terminated by either party on 30 day’s advance written notice. Effective January 1, 2011, the Partnership entered into an identical agreement with Rover Technologies LLC, a limited liability company affiliated with Ian Bothwell, the General Partner’s Executive Vice President, Chief Financial Officer and Secretary, located in Manhattan Beach, California. Mr. Bothwell is a resident of California and lives in Manhattan Beach. Since June 2012, Regional has been directly charged for its allocated portion of Rover Technologies LLC’s expenses.

The Partnership has not reimbursed Rover Technologies LLC since September 2011 for its share of the overhead costs. Management intends to satisfy the outstanding expense reimbursements upon completion of a recapitalization. For the three months and six months ended June 30, 2012 and 2013, expenses billed in connection with both of these agreements were $24,000, $12,000, $51,000 and $30,000, respectively.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE L — REALIZATION OF ASSETS

The unaudited consolidated balance sheets of Central have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of Central as a going concern. Central had a loss from operations for the year ended December 31, 2012 and the six months ended June 30, 2013. During March 2013, the RZB Loan ($1,970,000 at December 31, 2012) was repaid with proceeds from the $2,500,000 of total advances received by Regional under the Hopewell Loan.

Central’s deficit in working capital, excluding the current amounts due under the Hopewell Loan and income taxes, penalties and interest, totaled $2,160,000 at June 30, 2013. Regional’s unpaid income and sales taxes totaled approximately $167,000 at June 30, 2013, including penalties and interest and excluding approximately $82,000 of adjustments yet to be recognized by the related tax authorities. In addition, the Partnership is liable for tax penalties to the CAFTB of $316,000. RVOP is also responsible for contingencies associated with the TransMontaigne dispute (see Note G – Commitments and Contingencies – TransMontaigne Dispute). The Partnership and the General Partner have limited cash resources and are dependent on Regional to fund ongoing corporate expenses.

Substantially all of Central’s assets are pledged or committed to be pledged as collateral for the Hopewell Loan, and therefore, Central is unable to obtain additional financing collateralized by those assets. Central believes that Regional will have sufficient working capital for its ongoing operations assuming (a) the Storage Tank is placed back into service as currently projected, (b) the expected increase in revenues from recent contracts entered into by Regional are realized, (c) the expiring contracts during 2013 are renewed without disruption in service and at terms no less favorable than the existing contract terms, (d) that Regional’s obligations to creditors are not accelerated, (e) that Regional satisfactorily resolves the Litigation with SGR and (f) that Regional’s costs to operate do not increase. Until such time as the aforementioned conditions are achieved, Regional’s working capital may not be adequate to meet current cash requirements and Regional is unable to fund any amount of working capital to Central. Regional is currently seeking to obtain additional funding through an increase in the amounts advanced under the Hopewell Loan or from a funding transaction completed by the Partnership and/or the General Partner.

Central’s ability to raise capital is hindered by the existing pledge and therefore the ability to obtain additional capital over the cash generated from operations to make the Hopewell Note payments, for payment of taxes, penalties and interest, for payment of the contingent liabilities, for expansion, repair of the Storage Tank, capital improvements to existing assets, for working capital or otherwise is limited. In addition, the Partnership has obligations under existing registrations rights agreements. These rights may be a deterrent to any future equity financings. Management continues to seek acquisition opportunities for the Partnership to expand its assets and generate additional cash from operations. As described above, there is no assurance that Regional will have sufficient working capital to cover its ongoing cash requirements or any of the ongoing overhead expenses of the Partnership for the period of time that management believes is necessary to complete an acquisition that will provide additional working capital for the Partnership. If the Partnership does not have sufficient cash reserves, its ability to pursue additional acquisition transactions will be adversely impacted. Furthermore, despite significant effort, the Partnership has thus far been unsuccessful in completing an acquisition transaction. There can be no assurance that the Partnership will be able to complete an accretive acquisition or otherwise find additional sources of working capital. If an acquisition transaction cannot be completed or if additional funds cannot be raised and cash flow is inadequate, the Partnership and/or Regional would be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE L — REALIZATION OF ASSETS – Continued

In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon the ability of (1) Regional to achieve operating results as currently projected, (2) Regional to pay its creditors as required, including the Hopewell Loan and the IRS and the VDOT amounts under arrangements satisfactory to Regional, (3) the Partnership resolving favorably the exposure for late tax filing penalties to the CAFTB, (4) satisfactory resolution to the Litigation with SGR, (5) RVOP satisfactorily resolving the TransMontaigne dispute, (6) Regional satisfactorily completing the repairs associated with the Storage Tank, (7) the Partnership continuing to receive waiver of salaries and expenses by the Partnership’s executive officers until sufficient working capital is received, (8) Regional’s ability to obtain additional advances under the Hopewell Loan, and (9) the Partnership’s ability to receive additional distributions from Regional or future advances from the General Partner in amounts necessary to fund overhead until an acquisition transaction is completed by the Partnership.

The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should Central be unable to obtain adequate funding to maintain operations and to continue in existence.

NOTE M - 401K

Regional sponsors a defined contribution retirement plan (“ 401(k) Plan” ) covering all eligible employees effective November 1, 1988. The 401(k) Plan allows eligible employees to contribute, subject to Internal Revenue Service limitations on total annual contributions, up to 60% of their compensation as defined in the 401(k) Plan, to various investment funds. Regional matches, on a discretionary basis, 50% of the first 6% of employee contributions. Furthermore, Regional may make additional contributions on a discretionary basis at the end of the Plan year for all eligible employees.

NOTE N - SEGMENT INFORMATION

Central reports segment information in accordance with ASC 280. Under ASC 280, all publicly traded companies are required to report certain information about the operating segments, products, services and geographical areas in which they operate and their major customers. Operating segments are components of a company for which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and assess performance. This information is reported on the basis that it is used internally for evaluating segment performance. Central had only one operating segment (transportation and terminaling business of Regional) during the three months and six months ended June 30, 2012 and 2013. The following are amounts related to the transportation and terminaling business included in the accompanying consolidated financial statements for the three months and six months ended June 30, 2012 and 2013 and at December 31, 2012 and June 30, 2013:

CENTRAL ENERGY PARTNERS LP AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE O – REGISTRATION RIGHTS AGREEMENTS

Penn Octane Corporation

In November 2011, the Partnership granted piggy-back registration rights to Penn Octane Corporation with respect to 197,628 Common Units held by Penn Octane in connection with the transaction whereby Penn Octane and an affiliate sold 100% of the limited liability company interests in the General Partner to Central Energy, LP and the Partnership sold 12,724,019 Common Units to Central Energy, LP (see Note A – Organization).

Limited Partners of Central Energy, LP

Effective as of August 1, 2011, the Partnership and the limited partners of Central Energy, LP executed a Registration Rights Agreement. The Registration Rights Agreement was prepared and signed by the parties as a part of the transaction consummated on November 17, 2010 pursuant to which Central Energy, LP, an affiliate of the General Partner, acquired 12,724,019 newly-issued Common Units of the Partnership. The Registration Rights Agreement provides the limited partners of Central Energy, LP who acquired newly-issued Common Units in the November 17, 2010 transaction (“ Purchasers ”) with shelf registration rights and piggyback registration rights, with certain restrictions, for the Common Units held by them (“ Registrable Securities ”). The Partnership is required to file a “shelf registration statement” covering the Registrable Securities as soon as practicable after April 15, 2012, and maintain the shelf registration statement as “effective” with respect to the Registrable Securities until the earlier to occur of (1) all securities registered under the shelf registration statement have been distributed as contemplated in the shelf registration statement, (2) there are no Registrable Securities outstanding or (3) two years from the dated on which the shelf registration statement was first filed. The piggyback registration rights permit a Purchaser to elect to participate in an underwritten offering of the Partnership’s securities other than a registration statement filed in connection with the registration of the Partnership’s securities relating solely to (1) employee benefit plans or (2) a Rule 145 transaction. The amount of Registrable Securities that the Purchasers can offer for sale in a piggyback registration is subject to certain restrictions as set forth in the Registration Rights Agreement.

The Partnership is required to pay all costs associated with the shelf registration, any piggyback registration or an underwritten offer except for the underwriting fees, discounts and selling commission, transfer taxes (if any) applicable to the sale of the Registrable Securities, and fees and disbursements of legal counsel for any Purchaser. the Partnership is also indemnifying the Purchasers and their respective directors, officers, employees, agents, managers and underwriters, pursuant to an applicable underwriting agreement with such underwriter, from any losses, claims, damages, expenses or liabilities (1) arising from any untrue statement or alleged untrue statement of a material fact contained in the shelf registration statement or any other registration statement relating to the Registrable Securities or (2) the omission or alleged omission to state in such registration statement a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Rights Agreement also prohibits the Partnership from entering into a similar agreement which would be inconsistent with the rights granted in the Registration Statement or provide any other holder of the Partnership’s securities rights that are more favorable than those granted to Purchasers without the prior written approval of Purchasers holding a majority of the Registrable Securities.

Given the current financial condition of Central, as well as the current bid/ask price of the Common Units, the Partnership does not anticipate filing the shelf registration statement for the foreseeable future. The Partnership will seek to amend the Registration Rights Agreement to extend such filing requirement to a later date.