OTHER INFORMATION

Legal Proceedings

Risk Factors

Business Factors.  As a result of the Restated LPG Asset Sale, Penn Octane’s sources of cash flows are expected to be derived from the Fuel Sales Business and from distributions from its interest in the General Partner, if any.  The Fuel Sales Business may not provide Penn Octane with sufficient cash flow to meet its cash operating expenses.  Rio Vista’s sources of cash flows are expected to be derived from the LPG Transportation Agreement, assuming that the TLP Transaction is not consummated, from the operations of Regional and from the operations of the Oklahoma Assets subsequent to the date of the acquisitions, assuming that such acquisitions are consummated. Under the LPG Transportation Agreement, Rio Vista may only transport LPG on behalf of TransMontaigne using the Retained Assets. Accordingly, there is no assurance that TransMontaigne will utilize the Retained Assets and if so, at capacity levels which provide Rio Vista with gross profit.  In addition, although TransMontaigne’s agreement with PMI expired on March 31, 2007, and TransMontaigne has continued to utilize the Retained Assets at historical levels, there can be no assurance that TransMontaigne will continue selling LPG to PMI.  From April 1, 2007 through September 30, 2007 TransMontaigne has continued to sell LPG to PMI which has been transported using the Retained Assets in the volumes reflected above.  Although the operations of Regional are expected to be profitable, the cash flows of Regional are subject to payments required under the RZB Loan Agreement and income taxes on Regional’s stand-alone consolidated earnings.  The RZB Note is due on demand and otherwise is required to be paid within one year.  The additional $1.0 million loan due in connection with the Regional Acquisition requires four semi-annual payments beginning December 27, 2007.  There is no assurance that Regional’s operations will continue to be profitable and/or sufficient to cover the additional tax and debt obligations. There is no assurance that the LPG Transportation Agreement, the Regional operations and the Oklahoma Assets operations, if the acquisitions are consummated, will provide sufficient cash flow for Rio Vista to meet its future cash operating expenses.  Future natural gas production from the Oklahoma Assets, if the acquisitions are consummated and related reserves may prove lower than anticipated. The ability of Penn Octane and/or Rio Vista to complete future acquisitions may require the use of a portion or substantially all of Penn Octane’s and/or Rio Vista’s liquid assets, the issuance of additional debt and/or the issuance of additional stock and/or units.  Currently, substantially all of the Company’s assets are pledged or committed to be pledged as collateral on existing debt in connection with the RZB Credit Facility, the TransMontaigne Note and the RZB Loan Agreement. Accordingly Penn Octane and/or Rio Vista may be unable to obtain additional financing collateralized by those assets.      Future acquisitions and expansions may not be successful, may substantially increase the Company’s indebtedness and contingent liabilities, and may create integration difficulties.  The Company’s business would be adversely affected if operations at its transportation, terminal and distribution facilities were interrupted. 

Management Factors.  The Company is engaged in multiple acquisition, disposition and financing transactions, as well as ongoing operations in California, Texas, Virginia and Mexico.  The Company has limited management resources to oversee these operations and transactions.  The Company has limited experience managing the Virginia operations which were acquired in July 2007.  The Company has not previously operated exploration and production (E&P) assets such as the Oklahoma Assets proposed to be acquired.  These limitations may adversely affect the Company’s ability to execute its business strategy.  The Company’s chief financial officer, Ian T. Bothwell, is currently also serving as acting president and acting chief executive officer. The Company is dependent upon the services of Mr. Bothwell and members of the board of directors of Penn Octane and the board of managers of the general partner of Rio Vista. The loss of the services of any of these individuals could have a material adverse effect upon the Company. The Company currently does not have an employment agreement with Mr. Bothwell or key man life insurance.

Acquisition Factors.  The advancement, cost and results of particular projects sought by the Company, including projects and/or acquisitions which do not specifically fall within the areas of the Company’s current lines of business will depend on:  the outcome of negotiations for such projects and/or acquisitions; the ability of the Company’s management to manage such businesses; the ability of the Company to obtain financing for such acquisitions; business integration issues; changes in operating conditions or costs; and the occurrence of unforeseen operational difficulties.  Rio Vista recently acquired Regional and has limited experience operating this business.