Alternative Energy

Contango Venture Capital Corporation

As of June 30, 2007, Contango Venture Capital Corporation ("CVCC"), our wholly-owned subsidiary, held a direct investment in three alternative energy portfolio companies: Gridpoint, Inc. ("Gridpoint"), Moblize Inc. ("Moblize") and Trulite Inc. ("Trulite"). Our investment in Gridpoint is less than a 20% ownership interest and we account for this investment under the cost method. Our investment in Moblize rose above a 20% ownership interest during the three months ended September 30, 2006 when the Company exercised its right pursuant to two warrants, to purchase additional shares of Moblize. We account for this investment under the equity method. Trulite is a publicly traded company. We account for this investment in accordance with Statement of Financial Accounting Standard ("SFAS") No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities".

Gridpoint, Inc.

As of June 30, 2007, CVCC had invested approximately $1.0 million in Gridpoint in exchange for 333,333 shares of Gridpoint preferred stock, which represents an approximate 1.8% ownership interest. Gridpoint's intelligent energy management products ensure clean, reliable power, increase energy efficiency, and integrate renewable energy. With Gridpoint, home and business owners can protect themselves from power outages, manage their energy online and reduce their carbon footprint.

Moblize Inc.

As of June 30, 2007, CVCC had invested $1.2 million in Moblize in exchange for 648,648 shares of Moblize convertible preferred stock, which represents an approximate 33% ownership interest. Moblize develops real time diagnostics and field optimization solutions for the oil and gas and other industries using open-standards based technologies. Moblize has deployed its technology on our Grand Isle 72 well which allows COI to remotely monitor, control and record, in real time, daily production volumes. Moblize is continuing to deploy its technology on oil fields near Houston belonging to Chevron U.S.A. Inc. and on other COI operated wells.

Trulite, Inc.

As of June 30, 2007, the Company had loaned Trulite approximately $1.0 million under various promissory notes, with various due dates. The notes initially bear interest at a per annum rate of 11.25%, before changing to Prime plus 3% and then Prime plus 4%. For the fiscal year ended June 30, 2007, the Company earned and accrued approximately $55,000 in interest income from the Trulite notes. Please see Note 18 – Related Party Transactions of Notes to Consolidated Financial Statements included as part of this Form 10-K, for a discussion of our promissory notes with Trulite.

As of June 30, 2007, CVCC owned 25% of Contango Capital Partners Fund, L.P. (the "Fund"). The Fund currently holds a direct investment in two alternative energy companies - Protonex Technology Corporation ("Protonex") and Jadoo Power Systems ("Jadoo"). We account for our investment in the Fund under the equity method. The Fund, however, accounts for its investment in Protonex in accordance with SFAS 115, and accounts for its investment in Jadoo at fair value in accordance with the AICPA Audit and Accounting Guide, "Investment Companies".

Protonex Technology Corporation.

As of June 30, 2007, the Fund had invested $1.5 million in Protonex in exchange for 2,400,000 shares of Protonex common stock, which represents an approximate 7% ownership interest. Protonex provides long-duration portable and remote power sources with a focus on providing solutions to the U.S. military and supplies complete power solutions and application engineering services to original equipment manufacturers customers. Protonex trades its common shares on the AIM market of the London Stock Exchange under the stock symbol "PTX.L". As a result, the Fund marks-to-market its investment in Protonex based on public pricing. At June 30, 2007, the Fund's investment in Protonex had a mark-to-market value of approximately $4.4 million ($1.1 million net to Contango's interest).

Jadoo Power Systems.

As of June 30, 2007, the Fund has invested approximately $1.2 million and owns 2,200,000 shares of Jadoo common stock, which represents an approximate 5% ownership interest. Jadoo develops high energy density power products for the law enforcement, military and electronic news gathering applications. During the fourth quarter of our fiscal year ended June 30, 2007, the management of Jadoo determined that the company was impaired. The Fund therefore incurred an impairment charge of $1.2 million ($0.3 million net to Contango) for the fiscal year ended June 30, 2007, related to our investment in Jadoo.

For more information please visit Contango Capital Partnership Management website.