---

---

# UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549

---

# FORM 10-K

(Mark One)

|x | ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For
the fiscal year ended February 28, 2009
|- | --------------------------------------------------------------------------------------------------------------------------

|o | TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _______ to ______
|- | ------------------------------------------------------------------------------------------------------------------------------------

# Commission file
number: 0-50472

|New Frontier Energy, Inc.                         
|--------------------------------------------------
|(Exact name of registrant as specified in charter)

|Colorado                                                       | 84-1530098                       
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)

|1789 W. Littleton Blvd., Littleton, Colorado | 80120     
|-------------------------------------------- | ----------
|(Address of principal executive offices)     | (Zip Code)

(303) 730-9994
(Registrant's telephone number)

Securities registered
under Section 12 (b) of the Exchange Act:     None

Name Of Each Exchange
On Which Registered               n/a

Securities registered
under Section 12 (g) of the Exchange Act:

Common Stock, $.001 par
value  (Title of Class)

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

Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.      Yes o   
No x

---



Check whether the issuer (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past 90 days.
     Yes x   
No o

Check is there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.       o

Indicate by check mark whether the
issuer is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company.  See the definitions of large accelerated
filer, accelerated filer, and smaller reporting company in
rule 12b-2 of the Exchange Act.

| |                                                                                                                 |                                                 
| | --------------------------------------------------------------------------------------------------------------- | ------------------------------------------------
| | Large accelerated filer  o                
Non-accelerated filer o  (Do not check if smaller reporting company) | Accelerated filer o
Smaller reporting company  x

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

The Companys revenues for the
fiscal year ended February 28, 2009 was $1,355,682.

The aggregate market value of the
voting and non-voting common stock held by non-affiliates of the Registrant as of August
31, 2008 was approximately $7,549,963 based upon the last reported sale on that date.

The number of the Registrants
shares of $0.001 par value common stock outstanding as of May 21, 2009 was 13,441,884.

---



TABLE OF CONTENTS

|              |  | Page Number
|------------- |  | -----------
|Part I        |  |            
|Item 1.       |  |            
|Item 1A.      |  |            
|Item 1B.      |  |            
|Item 3.       |  |            
|Item 4.       |  |            
|              |  |            
|Part II       |  |            
|Item 5.       |  |            
|Item 6.       |  |            
|Item 7.       |  |            
|Item 7A.      |  |            
|Item 8.       |  |            
|Item 9.       |  |            
|Item 9(T)(A). |  |            
|Item 9B.      |  |            
|              |  |            
|Part III      |  |            
|Item 10.      |  |            
|Item 11.      |  |            
|Item 12.      |  |            
|Item 13.      |  |            
|Item 14.      |  |            
|              |  |            
|Part IV       |  |            
|Item 15       |  |            
|SIGNATURES    |  |            

# Additional Information

Descriptions
in this Annual Report on Form 10-K are qualified in their entirety by reference to the
content of any contract, agreement or other document described or incorporated herein and
are not necessarily complete. Reference is made to each such contract, agreement or
document filed as an exhibit to this Report or incorporated herein by reference by the
Company as permitted by regulations of the Securities and Exchange Commission (the
SEC or the Commission).

---



# FORWARD-LOOKING
STATEMENTS

This
Annual Report on Form 10-K contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the Securities Act),
and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act), and New Frontier Energy, Inc. (the Company), intends that such
forward-looking statements be subject to the safe harbors created thereby. These
statements include, among others:

| |  | Our
business strategy and financial condition;
| | - | ----------------------------------------------

| |  | exploration
and development drilling prospects, inventories, projects, plans and programs;
| | - | ------------------------------------------------------------------------------------------

| |  | Oil
and natural gas reserves;
| | - | -----------------------------

| |  | availability
and costs of drilling rigs and field services;
| | - | -----------------------------------------------------------

| |  | The
price of oil and gas and the general state of the economy;
| | - | --------------------------------------------------------------

| |  | The
willingness and ability of third parties to honor their contractual commitments;
| | - | ------------------------------------------------------------------------------------

| |  | Our
ability to raise additional capital, as it may be affected by current conditions in the
stock market and competition in the oil and gas industry for risk capital;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Environmental
and other regulations, as the same presently exist and may hereafter be amended;
| | - | ----------------------------------------------------------------------------------------------

| |  | Volatility
of our stock price; and
| | - | ----------------------------------

| |  | Plans,
objectives, expectations and intentions.
| | - | -----------------------------------------------

These
statements may be made expressly in this document or may be incorporated by reference to
documents that we will file with the SEC. You can find many of these statements by looking
for words such as believes, expects, anticipates,
estimates or similar expressions used in this Annual Report. Although we
believe that the expectations reflected in such forward-looking statements are reasonable,
we cannot give any assurance that such expectations will prove to have been correct. These
statements are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled Risk Factors, that
may cause our or our industrys actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements. We
caution you not to put undue reliance on these statements, which speak only as of the date
of this Annual Report. Further, the information contained in this Annual Report or
incorporated herein by reference is a statement of our present intention and is based on
present facts and assumptions and may change at any time and without notice, based on
changes in such facts or assumptions.

3

---



While
these forward-looking statements, and any assumptions upon which they are based, are made
in good faith and reflect our current judgment regarding the direction of our business,
actual results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested herein. We
undertake no responsibility or obligation to update publicly these forward-looking
statements but may do so in the future in written or oral statements. Investors should
take note of any future statements made by or on our behalf.

[REMAINDER OF THIS PAGE
LEFT BLANK INTENTIONALLY]

4

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# PART I

# Item 1. Business and
Item 2. Properties

# Overview

New
Frontier Energy, Inc. (the Company or we or us) is a
domestic energy company engaged in the exploration for, and development of, oil and
natural gas reserves in the continental United States. We were originally organized under
the laws of the State of Colorado as Storage Finders.com, Inc. on January 7, 2000.

In
February 2002, we were acquired by Wyoming Oil & Minerals, Inc. (WYOG). In
mid 2003, we determined to become an independent, but publicly traded, entity.
Accordingly, WYOG transferred certain oil and gas assets and we assumed certain WYOG
liabilities and appointed new management. WYOG declared a dividend payable by distributing
12,775,616 shares of New Frontier Energy, Inc. Common Stock to its shareholders. On March
3, 2004, the Board of Directors authorized a 1 to 4 reverse split of our $0.001 par value
common stock (Common Stock) to stockholders of record in order to facilitate
the marketability and liquidity of the Common Stock based on the current market conditions
and other relevant factors. The shares were registered with the Securities and Exchange
Commission on Form SB-2 in April 2004, and became quoted on the Over-The- Counter Bulletin
Board in May 2004 under the symbol NFEI.OB. Effective February 28, 2005, we
merged Skyline Resources, Inc. (Skyline) our wholly owned subsidiary, into the
Company in a tax-free merger.

The
Company owns 82.76% of the limited partnership interests (the Limited Partnership
Interests) of Slater Dome Gathering, LLLP (SDG). SDG owns the 18-mile
gas gathering line that transports the Companys natural gas from the Slater Dome
Field to the Questar transportation line in Baggs, Wyoming.

On
December 26, 2007, the Company entered into a Partnership Interest Purchase Agreement with
Natural Resource Group Gathering, LLC (NRGG) to acquire NRGGs general
partnership interest (the General Partnership Interest) in SDG effective as of
January 1, 2008. In connection with the purchase of the General Partnership Interest, the
Company was appointed the general partner of SDG. The General Partnership Interest is
equal to 25% of the Percentage Interests (as defined in SDGs Limited Partnership
Agreement) in SDG.

Prior
to December 2006, the Company was non-operating partner with a 30% working interest in the
Slater Dome Field. Effective December 14, 2006, the Company purchased Cedar Ridge,
LLCs (Cedar Ridge) 36.66667% working interest (29.33336% net revenue
interest) in eleven gas and 2 water disposal wells and 33,949 net acres in the Slater Dome
Field located along the eastern edge of the Greater Green River basin in northwest
Colorado and south central Wyoming. The properties are entirely within the Companys
existing leasehold at the Slater Dome Field. The Company now owns a 66.66667% working
interest (53.33% net revenue interest) in the Slater Dome Field. Pursuant to the Purchase
and Sale Agreement for Cedar Ridges interests, we were responsible for the
obligations attributable to their interests as of November 1, 2006. Following the
consummation of these interests, we became the operator of the Slater Dome Field.

5

---



# Our Business

We
explore for, produce and gather oil and natural gas. During the fiscal year ended February
28, 2009, we had an interest in five principal properties, (i) the Slater Dome Field,
located in northwest Colorado and south central Wyoming, (ii) the Flattops Prospect
located in southwest Wyoming (the Flattops Prospect), (iii) the Gibraltar
Peaks Prospect (Gibraltar Peaks), (iv) the North Slater Dome Prospect
(North Slater Dome Prospect:) located in south central Wyoming, and (v) the
Weitzel Prospect, formerly known as the Amber Waves Prospect (Weitzel
Prospect) located in northeast Colorado in the Denver Julesburg Basin. The Flattops,
North Slater Dome, Gibralter Peaks, and Weitzel Prospect are, undeveloped, which means
they do not currently produce any oil or natural gas. The Company is the operator of the
Slater Dome Field, the Weitzel Prospect, the North Slater Dome Prospect and the Flattops
Prospect. We also own certain royalty interests in certain wells in the state of Wyoming
other than in the Slater Dome Field.

On
July 31, 2007, the Company entered into an amended Farmout Agreement with Clayton Williams
Energy, Inc. (Clayton Williams), whereby the Company shall become the operator
of and acquire substantially all of Clayton Williams interest in the Focus Ranch
Unit (the Focus Ranch Unit) leaving Clayton Williams with a 1% working
interest, The Focus Ranch Unit consists of approximately 38,695 gross acres in Routt
County Colorado adjacent to and southeast of the Companys Slater Dome Field and one
gas well, the Focus Ranch Federal 12-1 well.

On
September 1, 2008, the Company further amended the Farmout Agreement (the
Amendment) with Clayton Williams, whereby the Company would act as an
independent contractor to test the Federal 12-1 well. Pursuant to the Amendment, upon the
completion of the testing or 45 days after the commencement of testing of the 12-1,
Clayton Williams shall assign 99% of its interest in the underlying leases in the Focus
Ranch Federal Unit. At the time of the assignment of the Focus Ranch Unit to the Company,
Clayton Williams shall resign as the operator of the Focus Ranch Unit and agrees to vote
for the Company as the successor operator. Further, in the Amendment, the Company agreed
to intervening and joining the civil action against Stull Ranches, LLC over an easement
through the Federal Focus Ranch Unit. Clayton Williams agreed not to assign
the Stull Ranch easement agreement without first having obtained the consent of Stull
Ranches, LLC. On May 15, 2009, the Company entered into a settlement agreement with
Clayton Williams and Stull Ranches, LLC whereby the Stull Ranch easement agreement will be
assigned to the Company. See Item 3. Legal Proceedings. The Focus Ranch Unit
is in the process of being assigned to the Company, but as of the date of this Annual
Report, it had not been assigned to the Company. The Company plans to finish testing the
Federal 12-1 well in July or August 2009 and is in the process of taking assignment of the
Focus Ranch Unit leases.

SDG
owns the 18-mile gas gathering pipeline (the Gas Gathering Pipeline) that
transports the Companys natural gas from the Slater Dome Field to the Questar
transportation line in Baggs, Wyoming. The Flattops Prospect is relatively close to the
Gas Gathering Pipeline.

6

---



Our
executive  offices are located at 1789 W. Littleton  Blvd.,  Littleton,  Colorado 80120
and our telephone  number is (303) 730-9994.

# Operations and Properties

All
of our properties are located in the States of Colorado and Wyoming. At February 28, 2009,
we had an interest in 66,357 gross, 44,777 net acres of oil and gas properties not
including the Focus Ranch Unit acreage which is in the process of assignment. We had a
working interest in 19 gross coal bed methane gas wells and 12.7 net wells as of February
28, 2009.

The
following table summarizes the Companys interest in oil and gas properties on
February 28, 2009:

|Proved developed oil and gas acres: |  | Gross |  | Net   | 
|----------------------------------- |  | ----- |  | ----- | 
|Wyoming                             |  |       |  | 240   | 
|Colorado                            |  |       |  | 1,360 | 
|                                    |  |       |  |      
|Total                               |  |       |  | 1,600 | 
|                                    |  |       |  |      

|Undeveloped oil and gas acres: |  | Gross (1) |  | Net (1) | 
|------------------------------ |  | --------- |  | ------- | 
|Wyoming                        |  |           |  | 22,983  | 
|Colorado                       |  |           |  | 39,774  | 
|                               |  |           |  |        
|Total                          |  |           |  | 64,757  | 
|                               |  |           |  |        

| | (1) | Does
not include the Focus Ranch Unit gross and net acres which are 34,245 gross
               acres and 31,658 net acres, which have not yet been assigned to the
Company.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Substantially
all of our working interests are held pursuant to leases from third parties. A title
opinion is usually obtained prior to the commencement of drilling operations on
properties. We have obtained title opinions or conducted a thorough title review on
substantially all of our producing properties and believe that we have satisfactory title
to such properties in accordance with standards generally accepted in the oil and gas
industry. We also perform a title investigation before acquiring undeveloped leasehold
interests.

Slater
Dome Field

The
Slater Dome Field  is comprised of 41,277 gross acres and 28,177
net acres. We acquired our interest in the Slater Dome Field in 2001, when we acquired
Skyline. Skyline in turn, acquired its interest in the Slater Dome Field in November 1998
from Energy Investments, Inc., a privately held, independent third party. Skyline drilled
an exploratory well to test for gas in 1998 and participated in drilling six additional
wells. During the period from 1998 to 2002, Skyline owned a 33.33% working interest in the
Slater Dome Field. In 2002, Skyline acquired an additional 33.33% interest in the
property, following which it owned a total of approximately 66.67%. In an effort to
diversify its holdings and obtain an operator experienced in coal-bed methane development
and production, Skyline sold a 36.67% undivided working interest in the Slater Dome Field
to Cedar Ridge. That transaction was completed with an effective date of February 28,
2003.

7

---



Effective
November 3, 2006, the Company entered into a Purchase and Sale Agreement (the Cedar
Ridge Agreement) with Cedar Ridge, whereby the Company acquired Cedar Ridges
36.66667% working interest (29.33336% net revenue interest) in eleven gas and 2 water
disposal wells together with 33,949 net acres in the Slater Dome Field, which was closed
effective December 14, 2006. The purchase price for Cedar Ridges interest was
$8,000,000. In connection with the purchase of Cedar Ridges interest, the Company
became the operator of the Slater Dome Field.

The
primary drilling objective in the Slater Dome Field is the lower Iles coal-bearing
formation of the Mesa Verde Group at depths ranging from 700 to 3,200 feet. A secondary
objective consists of a group of sands that exist between the base of the Iles formation
and the top of the Mancos shale. The Deep Creek Sand is the basal sand of this group. The
Deep Creek Sand was productive in the Savery Field just north of the Slater Dome Field.
However, there is no assurance that gas can be produced economically from the Deep Creek
Sand or any other formation in the Slater Dome Field.

The
Company has a permanent surface water discharge permit for the Slater Dome Field that
allows the Company to discharge water on the surface after it has been purified in
compliance with applicable environmental and clean water laws.

At
February 28, 2009, there were no recoverable reserves from the Companys wells in the
Slater Dome Field due to the existing economic and operating, conditions, i.e. prices and
costs as of February 28, 2009. The Company did not drill any wells during the fiscal year
ended February 28, 2009. At February 29, 2008 our estimated proved reserves in the Slater
Dome Field totaled 15,561 MCF of gas to our interest. The Company drilled eight wells in
the Slater Dome Field during the fiscal year ended February 28, 2008 with no dry holes. At
February 28, 2007, our estimated proved reserves in the Slater Dome Field totaled 12,114
MCF of gas to our interest. The Company did not drill any wells during the fiscal year
ended February 28, 2007.

During
the fiscal year ended February 28, 2009, the Slater Dome Field produced 229,629 MCF of
gas, of which 38,939 MCF was used in operations and 190,690 MCF was sold.

We
do not intend to drill any additional wells in the Slater Dome Field during the next
fiscal year ending February 28, 2010.

The
North Slater Dome Prospect

In
March 2007, we acquired leases for approximately 1,600 acres in the North Slater Dome
Prospect in Southwestern Wyoming. We own 100% of the working interest in approximately
1,600 gross acres and net acres and are the operator of this prospect.

8

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Flattops
Prospect

We
acquired fee leases in the Flattops Prospect in fiscal 2006 from approximately 20 mineral
interest owners. We own 100% of the working interest in approximately 3,881 gross and
2,411 net acres and are the operator of this prospect.

The
Flattops Prospect is postulated around the Montgomery #1 well in Carbon County, Wyoming.
Kirby Petroleum drilled this well in 1967 to test the Mesa Verde sands for oil production.
Gas was encountered in the Fort Union, Lance and Almond sections of the Mesa Verde
formation. Gas flowed to the surface on a drill stem test in the Almond section of the
Mesa Verde formation at a rate of 147 MCF per day. This well was plugged and abandoned for
lack of a gas transmission line in the region. We believe that additional gas potential
exists in the Mesa Verde coals and sands (6,000'-6,700), the Lance coals and sands
(2,650'-3,550) and the Fort Union coals (1,825'-1,910), as well as the Fort
Union Sands.

In
the future, the Company intends to drill the plug out of the Montgomery well and log and
test this well using modern logs and testing. Further, we also intend to drill and test
these same formations in an up-dip position approximately 1.5 miles due east of the
re-entry well. The Gas Gathering Pipeline is less than one-half mile from the proposed
wells, which would provide the ability to connect the wells into the Gas Gathering
Pipeline.

The
Weitzel Prospect (formerly called the Amber Waves Prospect)

Commencing
in the fall of 2007 through the fall of 2008 we acquired leases for approximately $577,600
in the Denver Julesberg Basin located in Northeast Colorado from approximately 35 interest
owners (the Weitzel Prospect). We own 100% of the working interest in
approximately 16,560 gross acres and 1,731 net acres and are the operator of the Weitzel
Prospect. We are in the process of marketing this prospectus to industry partners and will
attempt to obtain a promoted or carried working interest as well as a prospect fee.

The
Gibraltar Peaks Prospect

Effective
July 21, 2006, the Company entered into a Purchase Agreement with Infinity Oil & Gas
of Wyoming, Inc. (Infinity), whereby the Company acquired a 15% working
interest (13.125% net revenue interest) in 15,049 gross acres, 2,257 net acres in Routt
County Colorado. The acreage includes all rights from the surface of the earth to the base
of the Mesa Verde Formation. The purchase price for the acreage was $35,967. This prospect
is southeast of, and directly adjacent to the Slater Dome Field and is included in the
Focus Ranch Unit.

Focus
Ranch Unit

The
Focus Ranch Unit consists of approximately 34,225 gross acres, 31,658 net acres adjacent
to and southeast of the Slater Dome Field in northwest Colorado and one gas well, the
Focus Ranch Federal 12-1 well (Focus Ranch Unit). On June 4, 2007, we entered
into an agreement to acquire and take over operations for the Focus Ranch Unit from
Clayton Williams Energy, Inc. (Clayton Williams). On July 31, 2007, the
Company entered into an amended Farmout Agreement with Clayton Williams, whereby the
Company shall become the operator of and acquire Clayton Williams interest in the
Focus Ranch Unit. Clayton Williams will retain a 1% working interest in the Unit and the
Company will acquire the balance of Clayton Williams interest ranging between a 74% and a
99% working interest.

9

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On
September 1, 2008, the Company further amended the Farmout Agreement (the
Amendment) with Clayton Williams, whereby the Company would act as an
independent contractor to test the Federal 12-1 well. Pursuant to the Amendment, upon the
completion of the testing or 45 days after the commencement of testing of the 12-1,
Clayton Williams shall assign 99% of its interest in the underlying leases in the Focus
Ranch Federal Unit. At the time of the assignment of the Focus Ranch Unit to the Company,
Clayton Williams shall resign as the operator of the Focus Ranch Unit and agrees to vote
for the Company as the successor operator. Further, in the Amendment, the Company agreed
to intervening and joining the civil action against Stull Ranches, LLC over an easement
through the Federal Focus Ranch Unit.  Clayton Williams agreed not to assign
the Stull Ranch easement agreement without first having obtained the consent of Stull
Ranches, LLC. On May 15, 2009, the Company entered into a settlement agreement with
Clayton Williams and Stull Ranches, LLC whereby the Stull Ranch easement agreement will be
assigned to the Company. See Item 3. Legal Proceedings. The Focus Ranch Unit
is in the process of being assigned to the Company, but as of the date of this Annual
Report, it had not been assigned to the Company. The Company plans to finish testing the
Federal 12-1 well in July or August 2009 and is in the process of taking assignment of the
Focus Ranch Unit leases.

Other
Properties

We
lease on a month-to-month basis approximately 1,600 square feet of office space located at
1789 W. Littleton Blvd., Littleton, Colorado 80120, for approximately $2,667 per month.
The prior lease expired on December 31, 2008. The lease is with Spotswood Properties, LLC,
(Spotswood) a Colorado limited liability company and an affiliate of Paul G.
Laird, President and Chief Executive Officer of the Company. The lease is on terms that
the Board of Directors, which includes Mr. Laird, believe are no less favorable than those
that may be obtained from third parties.

On
June 14, 2007, we purchased a 35.5 acre residential property located at 29300 RCR 14A,
Steamboat Springs, Colorado 80487 (the Steamboat Property). Included on the
Steamboat Property is an approximately 4,100 square foot single family residence. The
purchase price for the Steamboat Property was $1,175,000. In connection with the purchase
of the Steamboat Property, the Company entered into a five-year mortgage in the principal
amount of $881,250 (the Steamboat Mortgage), which bears interest at a rate of
7.56% per annum. The Steamboat Mortgage requires equal monthly payments during the term of
the mortgage in the amount of $8,255.86. On February 26, 2009, the Steamboat Mortgage was
modified to, among other things, accelerate the maturity date until September 1, 2009. The
Steamboat Mortgage can be prepaid at any time without penalty.  The Company uses the Steamboat Property as a field
office and for housing for its employees conducting operations in the Slater Dome Field.

10

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Natural
Gas Gathering Pipeline

Prior
to May 2005, there was no operating gathering pipeline available at the Slater Dome Field
to transport our gas. However, SDG, an affiliate of Paul G. Laird, the Companys
President and Chief Executive Officer, completed construction of the 18-mile Gas Gathering
Pipeline to the Slater Dome Field in May 2005, and we commenced the sale of natural gas in
June 2005. The Gas Gathering Pipeline transports the Companys natural gas from the
Slater Dome Field to a Questar transportation line in Baggs, Wyoming. The Company owns
82.76% of the Limited Partnership Interests of SDG and on December 26, 2007 acquired
NRGGs general partnership interest (the General Partnership Interest).
In connection with the purchase of the General Partnership Interest, the Company was
appointed the general partner of SDG. The General Partnership Interest is equal to 25% of
the Percentage Interests (as defined in SDGs Limited Partnership Agreement) in SDG.

Gas
produced from other owners and operators in the area around the Slater Dome Field may be
transported through the Gas Gathering Pipeline for a fee, assuming the wells are connected
to the Gas Gathering Pipeline. The Company and the other producer at the Slater Dome Field
entered into a ten-year gathering agreement and agreed to pay SDG a fee of $0.50 per MCF,
subject to annual escalations for cost recovery of gas transported through the line, until
the costs of the Gas Gathering Pipeline are recovered and $0.25 thereafter and to dedicate
their gas to the Gas Gathering Pipeline. The construction costs for the Gas Gathering
Pipeline were $2,609,841. The Company and the other producer agreed to guarantee
two-thirds of the aggregate construction costs, or $1,739,894 through the producers
payment of gathering fees. The fees may be increased to cover annual calculations of
shortfalls from the minimum daily quantity (MDQ); the fee may be increased at
the end of each of the first four years beginning June 3, 2005. If the total gathering
revenue for the preceding year is less than two-thirds of the construction costs divided
by five, SDG may increase the gathering fee for the year immediately following the year in
which the shortfall occurs by the dollar amount per million British Thermal Units (MMBtu)
necessary to make up the monetary equivalent of the annual shortfall. In the event that
total gas gathering revenue for the preceding year is greater than two-thirds of the
construction costs divided by five, SDG will credit such excess to the following
years comparison.

The
following table summarizes the MDQ requirements whereby each producer agrees to deliver a
MDQ/MMBtu of gas during the first ten years of operations of the Gas Gathering Pipeline:

|Year |  | Minimum
Producers' Aggregate
MDQ/MMBtu Quantities | 
|---- |  | ------------------------------------------------- | 
|1    |  |                                                   | 
|2    |  |                                                   | 
|3    |  |                                                   | 
|5    |  |                                                   | 
|6    |  |                                                   | 
|7    |  |                                                   | 
|8    |  |                                                   | 
|9    |  |                                                   | 
|10   |  |                                                   | 

11

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Effective
December 31, 2007 the Company entered into a Purchase and Sale Agreement with Natural
Resource Group Gathering, LLC (NRGG), whereby the Company increased its
investment in Slater Dome Gathering, LLLP (SDG) by acquiring the general
partners interest for $1,075,000 consisting of $268,750 in cash and executing a
promissory note (the Note) in the amount of $806,250. On December 24, 2008,
the Note was modified to extend the maturity date of the Note from December 31, 2008 to
December 31, 2009. The Corporation made payments on the Note on August 5, 2008, in the
amount of $213,877.14 and on December 24, 2008 in the amount of $207,443.71, including
interest in the amount of $12,315 and $5,881, respectively. The Note bears interest at a
rate of 2.5% per annum. As of February 28, 2009, the balance due on the note was $403,125.
The Corporation may prepay the Note at any time without penalty, and at the option of the
Corporation, the quarterly payments may be deferred until the Maturity Date. As a result,
the Company owns the 25% general partners interest together with 82.76% of the Class
A limited partnership interests in SDG.

The
creditors of SDG do not have recourse to the general credit of the Company.

In
connection with the acquisition of SDGs Limited Partnership Interests, the Company
executed SDGs limited liability limited partnership agreement (the Partnership
Agreement). The Partnership Agreement provides that distributions will be allocated
(i) first, to the General Partner (which General Partnership Interests the Company
acquired in December 2007) in the amount of the Out-of-Pocket Costs (as defined in the
Partnership Agreement) to reimburse the General Partner for such costs; (ii) second, 90%
to the Limited Partners of SDG (pro rata in accordance with their respective Percentage
Interests, as defined in the Partnership Agreement) and 10% to the Company as General
Partner until such time as the Unreturned Capital (as defined in Partnership Agreement) of
all of the Limited Partners is reduced to zero; and (iii) thereafter, 75% to the Limited
Partners (pro rata in accordance with their respective Percentage Interests) and 25% to
the Company as General Partner. Distributions shall be distributed at such time or times
as the General Partner shall determine in its sole discretion. The Company will receive
84.487% of SDG cash distributions until the limited partners have received cash
distributions equal to their initial capital contributions and 87.07% of cash
distributions thereafter.

Drilling
Activity

The
results of our coal-bed methane gas drilling activity at the Slater Dome Field in Colorado
during the year ended February 28, 2009, February 29, 2008 and February 28, 2007 is below:

12

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|                   | February
28, 2009 |  | February 29, 2008 |   | February 28, 2007 | 
|------------------ | ----------------- |  | ----------------- | - | ----------------- | 
|
|Development wells: |                   |  |                   |   |                   | 
|Productive         |                   |  |                   | 0 |                   | 
|Dry                |                   |  |                   | 0 |                   | 
|                   |                   |  |                   |   |                   | 
|Total              |                   |  |                   | 0 |                   | 
|                   |                   |  |                   |   |                   | 

All
of our drilling activities are conducted on a contract basis with independent drilling
contractors.

We
do not intend to drill any additional wells in the Slater Dome Field during the next
fiscal year ending February 28, 2010.

Productive
wells

As
of February 28, 2009 and February 29, 2008, we had working interests in 19 wells at the
Slater Dome Field. Of the 19 wells, 16 are producing wells (16 gross wells, 10.6 net) and
three are non-producing wells (3 gross wells, 2 net). We also have an interest in one
water disposal well.

Gas
production volumes and average sales price are as follows:

The
following summarizes the gas production in the Slater Dome Field to the Companys
interest during the fiscal years ended February 28, 2009, February 29, 2008 and February
28, 2007 to the Companys interest:

|                                  | Fiscal Years Ended | 
|--------------------------------- | ------------------ | 
|
|Gas production in MCF             |                    | 
|                                  |                    | 
|Average price per unit:           |                    | 
|                                  |                    | 
|Average production cost per unit: |                    | 
|                                  |                    | 

13

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During
the fiscal year ended February 28, 2009, the Slater Dome Field produced 229,629 MCF of
gas, of which 38,939 MCF was used in operations and 190,690 was sold. During the fiscal
year ended February 29, 2008, the Slater Dome Field produced 184,001 MCF of gas, of which
44,027 MCF was used in operations and 139,974 MCF was sold. During the fiscal year ended
February 28, 2007, the Slater Dome Field produced 51,903 MCF of gas, of which 13,621 MCF
was used in operations and 38,282 MCF was sold.

Oil
and gas reserve information

At
February 28, 2009, the Company prepared its own internal reserve report and in accordance
with definition of proved oil and gas reserves as found in Regulation S-X of the
Securities Exchange Act of 1934, there were no recoverable reserves from the
Companys wells at the existing economic and operating, conditions, i.e. prices and
costs as of February 28, 2009. The estimated oil and gas reserves presented below for the
fiscal years ended February 29, 2008 and February 28, 2007 were derived from reports
prepared by Norwest Questa Engineering, Corp., an independent petroleum engineering firm.
The reserve estimates are developed using geological and engineering data and interests
and burdens information developed by the Company. Reserve estimates are inherently
imprecise and are continually subject to revisions based on production history, results of
additional exploration and development, prices of oil and gas and other factors.

The
values shown in the following tables are not intended to represent the current market
value of the estimated proved oil and gas reserves owned by the Company. The estimated
quantities and estimated net revenues are summarized as follows:

At
February 28, 2009, our estimated proved reserves were 0 MCF. The present value of
estimated net revenues before income tax, discounted at 10%, is $0, using a price of $2.86
per MMbtu.

|Estimated Net Proved Reserves       |  | February 28, 2009
Net Reserves (MCF) | 
|----------------------------------- |  | ------------------------------------ | 
|Proved Developed                    |  |                                      | 
|Proved Undeveloped                  |  |                                      | 
|Total Estimated Net Proved Reserves |  |                                      | 

At
February 29, 2008, our estimated proved reserves totaled 15,561 MCF. The present value of
estimated net revenues before income tax, discounted at 10%, is $32,611,000, using a price
of $7.30 per MMbtu. The values shown in the following table are not intended to represent
the current market value of the estimated proved oil and gas reserves owned by the
Company. The estimated quantities and estimated net revenues are summarized as follows:

|Estimated Net Proved Reserves       |  | February 28, 2008
Net Reserves (MCF) | 
|----------------------------------- |  | ------------------------------------ | 
|Proved Developed                    |  |                                      | 
|Proved Undeveloped                  |  |                                      | 
|Total Estimated Net Proved Reserves |  |                                      | 

14

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As
of February 28, 2007, the estimated quantities of proved developed and proved undeveloped
reserves net to our interest (all of which are located within the United States at the
Slater Dome Field) were 12,114 MCF of gas. The present value of estimated net revenues
before income tax, discounted at 10%, was $14,319,000, using a price of $5.21 per MMbtu.
The estimated quantities and estimated net revenues are summarized as follows:

|Estimated Net Proved Reserves       |  | February 28, 2007
Net Reserves (MCF) | 
|----------------------------------- |  | ------------------------------------ | 
|Proved Developed                    |  |                                      | 
|Proved Undeveloped                  |  |                                      | 
|Total Estimated Net Proved Reserves |  |                                      | 

The
present value of estimated net revenues before income tax, discounted at 10% using prices
of $2.86, $7.30 and $5.21 per MMbtu as of February 28, 2009 and February 29, 2008,
respectively, is summarized as follows:

|                                                   | February 28,
2009 |  | February 29,
2008 |  
|-------------------------------------------------- | ----------------- |  | ----------------- | -
|Future cash inflows                                |                   |  | $                 | 
|                                                   |                   |  |                   |  
|Deduct:                                            |                   | 
|                                                   |                   | 
|Future production costs                            |                   |  |                   | 
|                                                   |                   | 
|Future development costs                           |                   |  |                   | 
|                                                   |                   | 
|Future income taxes                                |                   |  |                   | 
|                                                   |                   |  |                   |  
|                                                   |                   | 
|                                                   |                   |  |                   | 
|                                                   |                   |  |                   |  
|                                                   |                   | 
|                                                   |                   | 
|Future net cash flows                              |                   |  |                   | 
|                                                   |                   | 
|                                                   |                   | 
|Less 10% discount amount                           |                   |  |                   | 
|                                                   |                   |  |                   |  
|Standardized measure of discounted future net cash |                   | 
|flows relating to proved oil and gas reserves      |                   |  | $                 | 
|                                                   |                   |  |                   |  
|                                                   |                   | 

Proved
developed reserves are reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Proved undeveloped reserves are
proved reserves that are expected to be recovered from new wells drilled to known
reservoirs on undrilled acreage for which the existence and recoverability of such
reserves can be estimated with reasonable certainty, or from existing wells on which a
relatively major expenditure is required to establish production.

The
data in the tables above represents estimates only. Oil and natural gas reserve
engineering is inherently a subjective process of estimating underground accumulations of
oil and natural gas that cannot be exactly measured. The accuracy of any reserve estimate
is a function of the quality of available data and engineering and geological
interpretation and judgment. Accordingly, reserve estimates may vary from the quantities
of oil and natural gas that are ultimately recovered. See Risk Factors.

15

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Future
prices received for production and costs may vary, perhaps significantly, from the prices
and costs assumed for purposes of these estimates. The net future cash flows should not be
construed as the current market value of the reserves. The 10% discount factor used to
calculate present value is not necessarily the most appropriate discount rate. The present
value, no matter what discount rate is used, is materially affected by assumptions as to
timing of future production, which may prove to be inaccurate.

Market
for Oil and Gas and Major Customers

The
availability of a ready market for our oil and gas depends upon numerous factors beyond
our control, including the extent of domestic production and importation of oil and gas,
the relative status of the domestic and international economies, the capacity of the gas
transportation systems, the marketing of other competitive fuels, fluctuations in seasonal
demand and governmental regulation of production, refining, transportation and pricing of
oil, natural gas and other fuels.

Effective
August 1, 2007, we entered into an agreement with an independent third party whereby they
would market the gas produced from the Slater Dome Field. During the fiscal year ended
February 28, 2009, sales to two unaffiliated customers were $1,219,565 (89.96% of sales
and $136,117 (10.04% of sales). During the fiscal year ended February 29, 2008, sales to
three unaffiliated customers was $461,700 (61% of sales), $160,742 (21% of sales) and
$135,297 (18% of sales). Due to the nature of its product, the Company believes that it is
not dependent upon any of these customers.

Based
on the current demand for natural gas and oil, and the availability of other purchasers,
we believe that the loss of the major purchaser of our gas would not have a material
adverse effect on the Companys financial condition and results of operations.

Seasonality

Generally,
but not always, the demand for natural gas decreases during the summer months and
increases during the winter months. Pipelines, utilities, local distribution companies and
industrial users utilize natural gas storage facilities and purchase some of their
anticipated winter requirements during the summer, which can lessen seasonal demand
fluctuations.

Seasonal
weather conditions and wildlife restrictions limit our drilling and producing activities
and other oil and natural gas operations and our easement to the Focus Ranch Unit. These
seasonal anomalies can increase competition for equipment, supplies and personnel during
the spring and summer months, which could lead to shortages and increase costs or delay
our operations.

16

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Competition

The
oil and natural gas industry is intensely competitive. Our competition includes major
natural resource companies that operate globally, as well as independent operators located
throughout the world, including North America. Many of these companies have greater
financial resources than we do. These companies may be able to pay more for productive oil
and natural gas properties and exploratory prospects or to define, evaluate, bid for and
purchase a greater number of properties and prospects than our financial or human
resources permit. In addition, these companies may have a greater ability to continue
exploration activities during periods of low oil and natural gas market prices. Our larger
or integrated competitors may be able to absorb the burden of existing, and any changes
to, federal, state, and local regulations more easily than we can, which would adversely
affect our competitive position. We also face intense competition in obtaining capital for
drilling and acquisitions and are at a competitive disadvantage compared with larger
companies, which may have a material adverse effect upon the results of operations of the
Company. Our ability to acquire additional properties and to discover reserves in the
future will be dependent upon our ability to evaluate and select suitable properties and
to consummate transactions in a highly competitive environment. In addition, because we
have fewer financial and human resources than many companies in our industry, we may be at
a disadvantage in bidding for exploratory prospects and producing oil and natural gas
properties.

Government
Regulation

The
production and sale of oil and gas are subject to various federal, state and local
governmental regulations, which may be changed from time to time in response to economic
or political conditions and can have a significant impact upon overall operations. Matters
subject to regulation include drilling permits, discharge permits for drilling operations,
drilling bonds, reports concerning operations, the spacing of wells, unitization and
pooling of properties, taxation, abandonment and restoration and environmental protection.
These laws and regulations are under constant review for amendment or expansion. From time
to time, regulatory agencies have imposed price controls and limitations on production by
restricting the rate of flow of oil and gas wells below actual production capacity in
order to conserve supplies of oil and gas. Changes in these regulations could require us
to expend significant resources to comply with new laws or regulations or changes to
current requirements and could have a material adverse effect on the company. The
regulatory burden on the oil and gas industry increases the cost of doing business in the
industry and consequently affects profitability. We are also subject to changing and
extensive tax laws, the effects of which cannot be predicted. Further, SDG is subject to
the jurisdiction of various federal, state and local agencies.

Oil
& Gas Regulation

The
governmental laws and regulations which could have a material impact on the oil and gas
exploration and production industry are as follows.

Drilling
and Production

Our
operations are subject to various types of regulation at federal, state and local levels.
These types of regulation include requiring permits for the drilling of wells, drilling
bonds and reports concerning operations. Most states, and some counties and municipalities
in which we operate, also regulate one or more of the following:

17

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| |  | The
location of wells;
| | - | ----------------------

| |  | The
method of drilling and casing wells;
| | - | ----------------------------------------

| |  | The
rates of production or "allowables";
| | - | ----------------------------------------

| |  | The
surface use and restoration of properties upon which wells are drilled; and
| | - | -------------------------------------------------------------------------------

| |  | The
plugging and abandoning of wells; and notice to surface owners and other third parties.
| | - | -------------------------------------------------------------------------------------------

State
laws regulate the size and shape of drilling and spacing units, or proration units,
governing the pooling of oil and natural gas properties. Some states allow forced pooling
or integration of tracts to facilitate exploration, while other states rely on voluntary
pooling of lands and leases. In some instances, forced pooling or unitization may be
implemented by third parties and may reduce our interest in the unitized properties. In
addition, state conservation laws establish maximum rates of production from oil and
natural gas wells, generally prohibit the venting or flaring of natural gas and impose
requirements regarding the ratability of production. These laws and regulations may limit
the amount of natural gas and oil we can produce from our wells or limit the number of
wells or the locations at which we can drill. Moreover, each state generally imposes a
production or severance tax with respect to the production and sale of oil, natural gas
and natural gas liquids within its jurisdiction.

Natural
Gas Sales Transportation

Historically,
federal legislation and regulatory controls have affected the price of the natural gas we
produce and the manner in which we market our production. The Federal Energy Regulatory
Commission (FERC) has jurisdiction over the transportation and sale for resale
of natural gas in interstate commerce by natural gas companies under the Natural Gas Act
of 1938 and the Natural Gas Policy Act of 1978.

FERC
also regulates interstate natural gas transportation rates and service conditions, which
affects the marketing of natural gas that we produce, as well as the revenues we receive
for sales of our natural gas. Commencing in 1985, FERC promulgated a series of orders,
regulations and rule-makings that significantly fostered competition in the business of
transporting and marketing gas. Today, interstate pipeline companies are required to
provide nondiscriminatory transportation services to producers, marketers and other
shippers, regardless of whether such shippers are affiliated with an interstate pipeline
company. Under FERCs current regulatory regime, transmission services must be
provided on an open-access, non-discriminatory, basis at cost-based rates or at
market-based rates if the transportation market at issue is sufficiently competitive.

18

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Mineral
Act

The
Mineral Leasing Act of 1920 (Mineral Act) prohibits direct or indirect
ownership of any interest in federal onshore oil and gas leases by a foreign citizen of a
country that denies similar or like privileges to citizens of the United
States. Such restrictions on citizens of a non-reciprocal country include
ownership or holding or controlling stock in a corporation that holds a federal onshore
oil and gas lease. If this restriction is violated, the corporations lease can be
canceled in a proceeding instituted by the United States Attorney General. Although the
regulations of the Bureau of Land Management (which administers the Mineral Act) provide
for agency designations of non-reciprocal countries, there are presently no such
designations in effect.

Environmental
Regulation

Our
activities will be subject to existing federal, state and local laws and regulations
governing environmental quality and pollution control. Our operations will be subject to
stringent environmental regulation by state and federal authorities, including the
Environmental Protection Agency (EPA). Such regulation can increase the cost
of such activities. In most instances, the regulatory requirements relate to water and air
pollution control measures.

Waste
Disposal

The
Resource Conservation and Recovery Act (RCRA) and comparable state statutes
affect oil and gas exploration and production activities by imposing regulations on the
generation, transportation, treatment, storage, disposal and cleanup of hazardous
wastes and on the disposal of non-hazardous wastes. Under the auspices of the EPA,
the individual states administer some or all of the provisions of RCRA, sometimes in
conjunction with their own, more stringent, requirements. Drilling fluids, produced waters
and most of the other wastes associated with the exploration, development and production
of crude oil, natural gas or geothermal energy constitute solid wastes, which
are regulated under the less-stringent non-hazardous waste provisions, but there is no
guarantee that the EPA or the individual states will not adopt more stringent requirements
for the handling of non-hazardous wastes or categorize some non-hazardous wastes as
hazardous for future regulation.

CERCLA

The
federal Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) imposes joint and several liability for costs of investigation and
remediation and for natural resource damages, without regard to fault or the legality of
the original conduct, on certain classes of persons with respect to the release into the
environment of substances designated under CERCLA as hazardous substances (Hazardous
Substances). These classes of persons or potentially responsible parties include the
current and certain past owners and operators of a facility or property where there is or
has been a release or threat of release of a Hazardous Substance and persons who disposed
of or arranged for the disposal of the Hazardous Substances found at such a facility.
CERCLA also authorizes the EPA and, in some cases, third parties to take actions in
response to threats to the public health or the environment and to seek to recover the
costs of such action. Although CERCLA generally exempts petroleum from the definition of
Hazardous Substances in the course of operations, we may in the future generate wastes
that fall within CERCLAs definition of Hazardous Substances. We may also in the
future become an owner of facilities or properties on which Hazardous Substances have been
released by previous owners or operators. We may in the future be responsible under CERCLA
for all or part of the costs to clean up facilities or property at which such substances
have been released and for natural resource damages.

19

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Air
Emissions

Our
operations are subject to the Federal Clean Air Act, and associated state laws and
regulations, regulate emissions of various air pollutants through the issuance of permits
and the imposition of other requirements. In addition, EPA has developed, and continues to
develop, stringent regulations governing emissions of toxic air pollutants at specified
sources. Major sources of air pollutants are subject to more stringent, federally imposed
permitting requirements. Administrative enforcement actions for failure to comply strictly
with air pollution regulations or permits are generally resolved by payment of monetary
fines and correction of any identified deficiencies. Alternatively, regulatory agencies
could require us to forego construction, modification or operation of certain air emission
sources.

Clean
Water Act

The
Clean Water Act (CWA) imposes restrictions and strict controls regarding the
discharge of wastes, including produced waters and other oil and natural gas wastes, into
waters of the United States, a term broadly defined. Permits must be obtained to discharge
pollutants into federal waters. The CWA provides for civil, criminal and administrative
penalties for unauthorized discharges of oil, hazardous substances and other pollutants.
It imposes substantial potential liability for the costs of removal or remediation
associated with discharges of oil or hazardous substances. State laws governing discharges
to water also provide varying civil, criminal and administrative penalties and impose
liabilities in the case of a discharge of petroleum or its derivatives, or other hazardous
substances, into state waters. In addition, the EPA has promulgated regulations that may
require us to obtain permits to discharge storm water runoff. In the event of an
unauthorized discharge of wastes, we may be liable for penalties and costs.

We
believe that we are in substantial compliance with current applicable environmental laws
and regulations.

As
the operator of Slater Dome Field, the North Slater Dome Prospect, the Weitzel Prospect
and the Flattops Prospect, the Company is responsible for obtaining all permits and
government permission necessary to operate these properties and permits to drill wells.
Further, the Company, as the General Partner of SDG is responsible for maintaining
easements or other arrangements with owners of the land over which the Gas Gathering
Pipeline is built, as well as operating and maintaining the Gas Gathering Pipeline.

20

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Research and Development
Activities

No
research and development expenditures have been incurred, either on our account or
sponsored by customers, during the past two years.

Employees

We
currently have eight employees, including Paul G. Laird, our President and Chief Executive
Officer and Les Bates, our Chief Financial Officer, Principal Accounting and Financial
Officer, Secretary and Treasurer. Our executive officers devote such time, as each officer
deems necessary to perform his duties to the Company and are subject to conflicts of
interest. None of our employees is subject to a collective bargaining agreement, and we
consider our relations with our employees to be excellent.

From
time to time, we use the services of clerical and accounting personnel on a part-time
basis and the services of geologists, engineers, landmen and other professionals on a
contract basis as may be necessary for our oil and gas operations.

# Available Information

Our
Internet website address is www.nfeinc.com. We make available, free of charge, all filings
with the SEC and all press releases on this site. Information on our website is not
incorporated by reference into this Form 10-K and should not be considered a part of this
document.

# Item 1A. Risk Factors

Investing
in our securities involves risk. In evaluating the Company, careful consideration should
be given to the following risk factors, in addition to the other information included or
incorporated by reference in this annual report. Each of these risk factors could
materially adversely affect our business, operating results or financial condition, as
well as adversely affect the value of an investment in our common or preferred stock. In
addition, the Forward-Looking Statements located in this Form 10-K, and the
forward-looking statements included or incorporated by reference herein describe
additional uncertainties associated with our business.

# Risks Related To Our
Business

We
have a limited operating history.

We
were formally organized in January 2000 and did not commence operation in the oil and gas
industry until February 2001. We began producing gas in June 2005. As a result, there is a
limited history of production or generating revenue against which to compare our revenues
during the year ended February 28, 2009.

21

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The
Slater Dome Field is the primary oil and gas property where most of our capital resources
have been employed and we are substantially dependent upon this one property, which causes
our risk to be concentrated.

Our
plan of operation includes efforts to further develop the Slater Dome Field. If the
development of this property is not successful, we will be forced to seek additional
opportunities. Substantially all of our current capital investment has been spent on the
development of the Slater Dome Field. If we are unable to further develop the Slater Dome
Field, assuming we have sufficient capital resources, we will be forced to seek additional
investments. Investigating and locating suitable properties for acquisition is expensive
and time-consuming. Even if we are successful in identifying one or more additional
properties for acquisition, there is no assurance that we can obtain such properties at
reasonable prices or that we will have sufficient capital to finance the acquisitions. As
a result of our dependence on a single property, we may be disproportionately exposed to
the impact of delays or interruptions of production from these wells or increased expenses
caused by significant governmental regulation, transportation capacity constraints, the
availability and capacity of compression and gas processing facilities, curtailment of
production or interruption of transportation of natural gas produced from the Slater Dome
Field. Our substantial dependence on a single property for cash flow increases the risk of
our future success.

We
have incurred losses from operations and negative cash flow that is likely to continue
until we can economically produce oil or natural gas.

We
have a history of losses from operations and negative cash flow that is likely to continue
until we economically produce oil or natural gas. A significant portion of our cash flow
since inception has come from equity and debt investments. Unless we economically produce
oil and gas in the future, these losses will continue. If we continue to experience losses
from operations and negative cash flow as we have in the past, there can be no assurance
that we will be able to continue operations as anticipated, if at all. Further, the price
of our Common Stock may be adversely affected.

We
will need to raise additional capital to continue operations, and we may not be able to
raise capital on terms acceptable to us or at all.

The
continued operation of our business will require an immediate capital infusion and we will
need to seek additional capital, likely through debt or equity financings, to continue
operations. The oil and natural gas industry is capital intensive. We have made and,
subject to the receipt of financing, expect to continue to make substantial capital
expenditures in our business and operations for the exploration for and development,
production and acquisition of oil and natural gas reserves. To date, we have financed
capital expenditures primarily with sales of our equity securities, debt financing and
cash generated by operations. To accomplish our plan of operations, we will be required to
seek additional financing. There can be no assurance as to the availability or terms of
any additional financing.

Even
if additional capital is needed, we may not be able to obtain debt or equity financing on
terms favorable to us, or at all. The failure to obtain additional financing could result
in a curtailment of our operations, which in turn could lead to a possible loss of
properties and a decline in our natural gas and oil reserves and may result in us having
to cease operations.

22

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The
Companys Independent Auditors have issued a Going Concern opinion for our February
28, 2009 financial statements.

The
independent auditors report accompanying the Companys audited February 28,
2009 consolidated financial statements contain an explanatory paragraph expressing
substantial doubt about the Companys ability to continue as a going concern. The
audited February 28, 2009 consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
that the Company will realize its assets and satisfy its liabilities and commitments in
the ordinary course of business. There can be no assurance that the Company will be able
to generate sufficient positive cash flow from operations to address all of its cash flow
needs, and to continue as a going concern. If the Company does not continue as a going
concern, it will have to cease operations and you would likely lose all of your investment
in the Company.

We
have not obtained a reserve report of oil and gas reserves for the fiscal year ended
February 28, 2009 and no assurance of the accuracy of the estimates of oil and gas
reserves for the fiscal years ended February 29, 2008 and February 28, 2007.

At
February 28, 2009, there were no recoverable reserves from the Companys wells due to
the existing economic and operating, conditions, i.e. prices and costs as of February 28,
2009. We obtained a report on the estimated reserves on our leases on the Slater Dome
Field during the fiscal years ended February 29, 2008 and February 28, 2007. Reserve
estimates are based upon various assumptions, including assumptions relating to oil and
gas prices, drilling and operating expenses, production levels, capital expenditures,
taxes and availability of funds. No one can measure underground accumulations of oil and
natural gas in an exact way. As a result, estimated quantities of proved reserves,
projections of future production rates and the timing of development expenditures may be
incorrect. Any significant variance from these assumptions to actual figures could greatly
affect our estimates of reserves, the economically recoverable quantities of oil and
natural gas attributable to any particular group of properties, the classifications of
reserves based on risk of recovery and estimates of the future net cash flows.

Further,
the present value of future net cash flows from our proved reserves is not necessarily the
same as the current market value of our estimated oil and natural gas reserves. Actual
future net cash flows from our oil and natural gas properties also will be affected by
factors such as:

| |  | Actual
prices we receive for oil and natural gas;
| | - | -------------------------------------------------

| |  | The
amount and timing of actual production;
| | - | -------------------------------------------

| |  | Supply
of, and demand for, oil and natural gas; and
| | - | ---------------------------------------------------

| |  | Changes
in governmental regulations or taxation.
| | - | ------------------------------------------------

The
timing of both our production and our incurrence of expenses in connection with the
development and production of oil and natural gas properties will affect the timing of
actual future net cash flows from proved reserves and thus their actual present value. In
addition, the 10% discount factor used when calculating discounted future net cash flows
may not be the most appropriate discount factor based on interest rates in effect from
time to time and risks associated with us or the oil and natural gas industry in general.
Actual future production, oil and gas prices, revenues, taxes, development expenditures,
operating expenses and quantities of recoverable oil and gas reserves will most likely
vary from those estimates, and any significant variance could have a material adverse
effect on our future results from operations.

23

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We
cannot predict the future price of oil and natural gas and an extended decline in prices
could hurt our profitability, financial condition and ability to grow.

Our
revenues, profitability and liquidity, future rate of growth and carrying value of our oil
and gas properties are heavily dependent upon prevailing prices for natural gas and oil,
which can be extremely volatile and in recent years have been depressed by excess total
domestic and imported supplies. Prices in the Rocky Mountain region of the Unites States,
and in particular Colorado, have been more adversely affected by the market volatility
than other regions of the country, due to insufficient pipeline capacity and the resulting
excess supply. Prices also are affected by actions of federal, state and local agencies,
the United States and foreign governments, international cartels, levels of consumer
demand, weather conditions, and the price and availability of alternative fuels. In
addition, sales of oil and natural gas are seasonal in nature, leading to substantial
differences in cash flow at various times throughout the year. These external factors and
the volatile nature of the energy markets make it difficult to estimate future prices of
oil and natural gas. Any substantial or extended decline in the price of oil and/or
natural gas would have a material adverse effect on our financial condition and results of
operations.

| | Declining
economic conditions could negatively impact our business.
| | -------------------------------------------------------------------

Our
operations are affected by local, national and worldwide economic conditions. The
consequences of a potential or prolonged recession may include a lower level of economic
activity and uncertainty regarding energy prices and the capital and commodity markets. A
lower level of economic activity might result in a decline in energy consumption, which
may adversely affect our revenues and future growth. Instability in the financial markets,
as a result of recession or otherwise, also may affect the cost of capital and our ability
to raise capital.

Unless
we replace our oil and natural gas reserves, our reserves and production will decline,
which would adversely affect our business, financial condition and results of operations.

Producing
oil and natural gas reservoirs generally are characterized by declining production rates
that vary depending upon reservoir characteristics and other factors. If and when we drill
additional wells at the Slater Dome Field, the rate of decline of these reserves may
increase substantially. Thus, our future oil and natural gas reserves and production and,
therefore, our cash flow and income are highly dependent on our success in efficiently
developing and exploiting our current reserves as well as finding or acquiring additional
economically recoverable reserves. We may not be able to develop, find or acquire
additional reserves to replace our current and future production at acceptable costs or
have the capital resources to pursue such additional reserves.

24

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Prospects
that we acquire may not yield natural gas or oil in commercially viable quantities.

We
describe some of our current prospects and our plans to explore those prospects in this
Annual Report. See Business. A prospect is a property on which we have
identified what we believe, based on available seismic and geological information, to be
indications of natural gas or oil. However, the use of seismic data and other technologies
will not enable us to know conclusively prior to drilling and testing whether natural gas
or oil will be present or, if present, whether natural gas or oil will be present in
sufficient quantities to recover drilling or completion costs or to be economically
viable. If we drill wells that we identify as dry holes in our current and future
prospects, our drilling success rate may decline and materially harm our business. In sum,
the cost of drilling, completing and operating any well is often uncertain and new wells
may not be productive.

We
are dependent upon the operation of the Gas Gathering Pipeline to transport our natural
gas from the Slater Dome Field to a Questar transportation line in Baggs, Wyoming.

We
are entirely dependent upon the operation of the Gas Gathering Pipeline to transport gas
produced at the Slater Dome Field to the Questar transportation line. If the Gas Gathering
Pipeline was not available for any reason to transport gas produced at the Slater Dome
Field, it would have an immediate direct and material adverse effect upon the Company and
our results from operations.

We
are dependent upon transportation and storage services provided by third parties.

In
addition to our dependence on the Gas Gathering Pipeline, we are dependent on the
transportation and storage services offered by various interstate and intrastate pipeline
companies for the marketing of, delivery and sale of our gas supplies. Both the
performance of transportation and storage services by interstate pipelines and the rates
charged for such services are subject to the jurisdiction of FERC or state regulatory
agencies. An inability to obtain transportation and/or storage services at competitive
rates can hinder our processing and marketing operations and/or affect our sales margins,
which would have a material adverse effect upon our results from operations.

We
may be required to take write-downs of the carrying values of our oil and natural gas
properties and the Gas Gathering Pipeline.

During
the fiscal year ended February 28, 2009, we incurred impairment of our oil and gas
properties in the amount of $7,500,000. Accounting rules require that we review
periodically the carrying value of our oil and natural gas properties and the Gas
Gathering Pipeline for possible impairment. Based on specific market factors and
circumstances at the time of the prospective impairment reviews, and the continuing
evaluation of development plans, production data, rate of flow of gas through the
pipeline, economics and other factors, we may be required to write down the carrying value
of our oil and natural gas properties or the Gas Gathering Pipeline. A write-down
constitutes a non-cash charge to earnings. We may incur further impairment charges in the
future, which could have a material adverse effect on our results of operations in the
periods taken.

25

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Drilling
for and producing natural gas is governed by a number of federal, state and local laws and
regulations, including environmental regulations, which are beyond our control.

Many
aspects of gathering, processing, marketing and transportation of natural gas are subject
to federal, state and local laws and regulations, which can have a significant impact upon
overall operations. Both transportation and storage of natural gas by interstate pipelines
and the rates charged for such services are subject to the jurisdiction of FERC or state
regulatory agencies. The construction and operation of gathering lines, plants and other
facilities are subject to environmental laws and regulations that could affect the
financial position or results of operations and may be subject to FERC.

The
production and sale of oil and gas are subject to various federal, state and local
governmental regulations, which may be changed from time to time in response to economic
or political conditions, and we are unable to predict the ultimate cost of compliance.
Matters subject to regulation include discharge permits for drilling operations, drilling
bonds, reports concerning operations, the spacing of wells, unitization and pooling of
properties, taxation and environmental protection. From time to time, regulatory agencies
have imposed price controls and limitations on production by restricting the rate of flow
of oil and gas wells below actual production capacity in order to conserve supplies of oil
and gas. Changes in these regulations or non-compliance could have a material adverse
effect upon our operations and financial condition.

Our
coalbed methane exploration and production activities does and will result in the
discharge of large volumes of produced groundwater into adjacent lands and waterways. The
ratio of methane gas to produced water varies over the life of the well. The environmental
soundness of discharging produced groundwater pursuant to water discharge permits has come
under increased scrutiny. Moratoriums on the issuance of additional water discharge
permits or more costly methods of handling these produced waters, may affect future well
development. Compliance with more stringent laws or regulations, more vigorous enforcement
policies of the regulatory agencies, difficulties in negotiating required surface use
agreements with land owners or receiving other governmental approvals could delay our
exploration and production activities in the Slater Dome Field and in our other prospects
and/or require us to make material expenditures for the installation and operation of
systems and equipment for pollution control and/or remediation, all of which could have a
material adverse effect on our financial condition or results of operations.

26

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Our
drilling activities and prices received from the sale of oil and gas may be impacted
adversely by new taxes.

The
federal, state and local governments in which we operate impose taxes on the oil and gas
products we sell and may impose taxes on our drilling activities. Recently, there has been
a significant amount of discussion by legislators concerning a variety of energy tax
proposals. In addition, many states have raised state taxes on energy sources and
additional increases may occur. Any significant increase in taxes on our oil and gas
products may have a material adverse effect upon our drilling activities, oil and natural
gas prices and our results from operations.

We
are responsible for all permits and government permits necessary for our operations in the
fields and prospects in which we are the operator and for the Gas Gathering Pipeline.

As
the operator of Slater Dome Field, the Weitzel Prospect and the Flattops Prospect, we are
responsible for obtaining all permits and government permission necessary to operate these
properties and to obtain permits for any new wells that are drilled. Further, the Company,
as the General Partner of SDG is responsible for maintaining easements or other
arrangements with owners of the land over which the Gas Gathering Pipeline is built, as
well as operating and maintaining the Gas Gathering Pipeline. While we do not expect that
such permits or other regulations will be a material impediment to the operation of our
business, there can be no assurance that we will obtain the necessary permits and
easements. The failure to do so would have a material adverse effect upon our operations
and financial condition.

Our
results of operations are dependent upon market prices for oil and natural gas, which
fluctuate widely and are beyond our control.

Our
operations are affected by future oil and natural gas prices that fluctuate widely, and
low prices could have a material adverse effect on our operations. Our success is
dependent largely on the prices received for natural gas and oil production. Prices
received also affect the amount of future cash flow available for capital expenditures and
may affect the ability to raise additional capital. Lower prices may also affect the
amount of natural gas and oil that can be economically produced from reserves either
discovered or acquired. Further, it could affect the amount of natural gas that is
transported through the Gas Gathering Pipeline owned by SDG, in which we own 82.76% of the
Limited Partnership Interests and the General Partnership Interest which is equal to 25%
of the Percentage Interests (as defined in SDGs Limited Partnership Agreement).
Further, prices for natural gas and oil fluctuate widely. For example, natural gas and oil
prices have declined significantly since July 2009.

Factors
that can cause price fluctuations include, but are not limited to:

| |  | The
level of consumer product demand;
| | - | -------------------------------------

| |  | Weather
conditions;
| | - | -------------------

| |  | Domestic
and foreign governmental regulations;
| | - | ----------------------------------------------

| |  | The
price and availability of alternative fuels;
| | - | ------------------------------------------------

27

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| |  | Political
conditions in natural gas and oil-producing regions;
| | - | --------------------------------------------------------------

| |  | The
domestic and foreign supply of natural gas and oil;
| | - | -------------------------------------------------------

| |  | The
price of foreign imports; and
| | - | ---------------------------------

| |  | Overall
economic conditions.
| | - | ----------------------------

The
availability of a ready market for our oil and gas depends upon numerous factors beyond
our control, including the extent of domestic production and importation of oil and gas,
the relative status of the domestic and international economies, the capacity of the gas
transportation systems, the marketing of other competitive fuels, fluctuations in seasonal
demand and governmental regulation of production, refining, transportation and pricing of
oil, natural gas and other fuels, each of which could have a material adverse effect upon
our results of operations.

The
oil and gas industry in which we operate involves many operating risks that can cause
substantial losses.

Drilling
and production of oil and natural gas involves a variety of operating risks, including but
not limited to:

| |  | Fires;
| | - | ------

| |  | Explosions;
| | - | -----------

| |  | Blow-outs
and surface cratering;
| | - | --------------------------------

| |  | Uncontrollable
flows of underground natural gas, oil or formation water;
| | - | ------------------------------------------------------------------------

| |  | Natural
disasters;
| | - | ------------------

| |  | Pipe
and cement failures;
| | - | -------------------------

| |  | Casing
collapses;
| | - | -----------------

| |  | Embedded
oilfield drilling and service tools;
| | - | ---------------------------------------------

| |  | Abnormal
pressure and geological formations;
| | - | --------------------------------------------

| |  | Environmental
hazards such as natural gas leaks, oil spills, pipeline ruptures; and
| | - | -----------------------------------------------------------------------------------

| |  | discharges
of toxic gases.
| | - | --------------------------

28

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If any of these events occur, we
could incur substantial losses as a result of:

| |  | Injury
or loss of life;
| | - | -----------------------

| |  | Severe
damage to and destruction of property, natural resources or equipment;
| | - | -----------------------------------------------------------------------------

| |  | Pollution
and other environmental damage;
| | - | -----------------------------------------

| |  | Clean-up
responsibilities;
| | - | --------------------------

| |  | Regulatory
investigation and penalties;
| | - | ---------------------------------------

| |  | Suspension
of our operations; and
| | - | ---------------------------------

| |  | Repairs
necessary to resume operations.
| | - | ---------------------------------------

Further,
the occurrence of any of these events may impact third parties, including our employees or
employees of our contractors, and lead to injury or death or property damage. If we were
to experience any of these problems, it could affect well bores, gathering systems and
processing facilities, any one of which could adversely affect our ability to conduct
operations. We may be affected by any of these events more than larger companies, since we
have limited working capital. We currently maintain $1 million per incident, $2 million
per policy term of liability insurance. However, for some risks, we may not obtain
insurance if we believe the cost of available insurance is excessive relative to the risks
presented. In addition, pollution and environmental risks generally are not fully
insurable. If a significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect operations. Moreover, we cannot provide assurance
that we will be able to maintain adequate insurance in the future at rates considered
reasonable.

Any
of these risks can cause substantial losses, including personal injury or loss of life,
damage to or destruction of property, natural resources and equipment, pollution,
environmental contamination or loss of wells and other regulatory penalties.

Seasonal
weather conditions adversely affect our ability to conduct drilling activities.

Oil
and natural gas operations in the Rocky Mountains are adversely affected by seasonal
weather conditions and wildlife restrictions on our federal leases and our easement to the
Focus Ranch Unit. In the Slater Dome Field, certain drilling and other oil and natural gas
activities can only be conducted during limited times of the year, typically during the
summer months. This limits our ability to operate in this area and can intensify
competition during those times for drilling rigs, oil field equipment, services, supplies
and qualified personnel, which may lead to periodic shortages. These constraints and the
resulting shortages or high costs could delay our operations and materially increase our
operating and capital costs, which could have a material adverse effect upon the Company
and its results of operations.

29

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There
can be no assurance that any of our wells will become profitable.

Our
wells may become uneconomic in the event water or other deleterious substances are
encountered which impair or prevent the production of oil and/or gas from the wells or if
the price of natural gas remains low. The production of coal bed methane gas requires
dewatering for the coal gas to be extracted, which results in water being produced in
large volumes, especially in the early stages of production. Our ability to remove and
economically dispose of sufficient quantities of water from the coal seam will determine
whether or not we can produce coalbed methane gas in commercial quantities. In addition,
production from any well may be unmarketable if it is impregnated with water or other
deleterious substances. The failure of our wells as a result of these or other events that
impair the production of gas will have a material adverse effect upon our results of
operations.

Our
competitors may have greater resources than we have, and we may not have the resources
necessary to successfully compete with them.

Competition
in the oil and gas industry is intense. Our competitors include major oil companies and
other independent operators, most of which have financial resources, staffs and facilities
substantially greater than ours. We also face intense competition in obtaining capital for
drilling and acquisitions and are at a competitive disadvantage compared with larger
companies, which may have a material adverse effect upon the results of operations of the
Company.

We
may be unable to retain key employees or recruit additional qualified personnel.

Due
to the current demand for employees in the oil and gas industry, our remote location in
Colorado and our extremely limited number of employees means that we could be required to
spend significant sums of money to locate and train new employees if we require additional
employees in the future or if any of our existing employees resign or depart for any
reason. Due to our limited operating history, financial resources and familiarity with our
operations, we have a significant dependence on the continued service of our existing
officers, Paul G. Laird and Les Bates. We do not carry key man life insurance on either
Mr. Laird or Mr. Bates. We may not have the financial resources to hire a replacement if
one or both of our officers were unavailable for any reason. The loss of service of either
of these individuals could, therefore, significantly and adversely affect our operations.

Our
officers may be subject to conflicts of interest.

Mr. Laird
and Mr. Bates, the Companys executive officers, devote such time as           each
officer deems necessary to perform his duties to the Company and are           subject to
conflicts of interest. Generally, Messrs Laird and Bates each           dedicate
approximately 40 to 50 hours per week for Company business. However,           each
officer also devotes other time to other business endeavors and has
          responsibilities to other entities. Because of these relationships, such
          individuals will be subject to conflicts of interest. Such conflicts include
          deciding how much time to devote to our affairs, as well as what business
          opportunities should be presented to the Company. As an example of these
          potential conflicts, our President, Paul G. Laird, is affiliated with a company
          called NRG. His position as an officer, director and principal shareholder of
          NRG, and officer and director of the Company creates a potential conflict with
          regard to his duties to each entity. Each of our officers and directors has
          agreed that any business opportunity that comes to their attention in the
future           shall first be presented to the Company. Nonetheless, these
relationships           present conflicts, which may exist for the foreseeable future.

30

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Colorado
law and our Articles of Incorporation may protect our directors from certain types of
lawsuits.

Colorado
law provides that our directors will not be liable to us or our stockholders for monetary
damages for all but certain types of conduct as directors. Our Articles of Incorporation
permit us to indemnify our directors and officers against all damages incurred in
connection with our business to the fullest extent provided or allowed by law. The
exculpation provisions may have the effect of preventing stockholders from recovering
damages against our directors caused by their negligence, poor judgment or other
circumstances. The indemnification provisions may require us to use our limited assets to
defend our directors and officers against claims, including claims arising out of their
negligence, poor judgment or other circumstances.

Sales
of a substantial number of shares of our Common Stock into the public market may result in
significant downward pressure on the price of our Common Stock and could affect the
ability of our stockholders to realize the current trading price of our Common Stock.

We
have a large number of shares eligible for future sale.Sales of a substantial
number of shares of our Common Stock in the public market could cause a reduction in the
market price of our Common Stock. As of May 8, 2009, there were 13,441,884 shares of our
Common Stock issued and outstanding, 19,040 shares of our $0.001 par value Series B 12%
Cumulative Convertible Preferred Stock (Series B) issued and outstanding and
216,000 shares of our 2.5% Series C Cumulative Convertible Preferred Stock (Series C
Preferred Stock) issued and outstanding. If all of the Companys Series B
Preferred Stock, Series C Preferred Stock, warrants and options to acquire shares of our
Common Stock we currently have outstanding were converted into shares of Common Stock or
were exercised, we would have to issue an additional 67,630,328 shares of our Common Stock
for a then total of 81,072,212 shares of our Common Stock issued and outstanding. Further,
as of May 8, 2009, our officers and directors own 382,720 shares of our Common Stock, or
2.8% of our currently outstanding shares of Common Stock that may be sold pursuant to Rule
144. Further, the Company may issuance of up to 10,000,000 shares of the Companys
Common Stock under its 2007 Plan Omnibus Long Term Incentive Plan. As a result, a
substantial number of our shares of Common Stock may be issued and may be available for
immediate resale, which could have an adverse effect on the price of our Common Stock.

The
trading price of our Common Stock on the Over-The-Counter Bulletin Board has fluctuated,
and may continue to fluctuate significantly.

Since
June 4, 2004, our Common Stock has traded as low as $0.15 and as high as $3.25. In
addition, the trading volume in our common stock may fluctuate and cause significant price
variations to occur. In addition to the volatility associated with Over-The-Counter
Bulletin Board securities in general, the value of your investment could decline due to
the impact of any of the following factors upon the market price of our Common Stock:

31

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| |  | Changes
in the world wide price for oil or natural gas;
| | - | -------------------------------------------------------

| |  | Disappointing
results from our discovery or development efforts;
| | - | ----------------------------------------------------------------

| |  | Failure
to meet our revenue or profit goals or operating budget;
| | - | ----------------------------------------------------------------

| |  | Decline
in demand for our Common Stock;
| | - | ---------------------------------------

| |  | Changes
in general market conditions;
| | - | -------------------------------------

| |  | Lack
of funding for continued operations;
| | - | -----------------------------------------

| |  | Investor
perception of our industry or our prospects; or
| | - | --------------------------------------------------------

| |  | General
economic trends.
| | - | ------------------------

In
addition, stock markets have experienced extreme price and volume fluctuations, and the
market prices of securities have been highly volatile. These fluctuations are often
unrelated to operating performance and may adversely affect the market price of our Common
Stock.

We
will require additional capital in the immediate future, which may result in substantial
dilution to your stock holdings.

The
continued operation of our business will require an immediate capital infusion and we will
need to seek additional capital, likely through debt or equity financings, to continue
operations. There can be no assurance that such capital will be available in sufficient
amounts or on terms acceptable to us, if at all. Any sale of a substantial number of
additional shares will cause dilution to your investment and could also cause the market
price of our Common Stock to decline.

Issuances
of additional shares of our stock in the future could dilute existing shareholders
holdings and may adversely affect the market price of our Common Stock. As of May 8, 2009,
we have the authority to issue, without stockholder approval, up to 500,000,000, shares of
Common Stock (of which, as of May 8, 2009, 13,441,884 shares were outstanding) and
25,000,000 shares of preferred stock (of which, as of May 8, 2009, 19,040 shares of our
Series B Preferred Stock and 216,000 shares of our Series C Preferred Stock were
outstanding) and to issue options and warrants to purchase shares of our Common Stock.
Because our Common Stock is traded on the Over-The-Counter Bulletin Board and is not
listed on an exchange, we are not required to solicit shareholder approval prior to
issuing large blocks of our stock. Any such future issuances could be at values
substantially below the price paid for our Common Stock by our current shareholders. In
addition, we could issue large blocks of our Common Stock to fend off unwanted tender
offers or hostile takeovers without further stockholder approval. The issuance of our
stock may have a disproportionately large impact on its price compared to larger
companies.

32

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Our
Common Stock is classified as a penny stock under SEC rules which limits the
market for our Common Stock.

Since
inception of trading in June 2004, our Common Stock has not traded at $5 or more per
share. Because our stock is not traded on a stock exchange or on the NASDAQ National
Market or the NASDAQ Small Cap Market, if the market price of the Common Stock is less
than $5 per share, the Common Stock is classified as a penny stock. SEC Rule
15g-9 under the Exchange Act imposes additional sales practice requirements on
broker-dealers that recommend the purchase or sale of penny stocks to persons other than
those who qualify as an established customer or an accredited
investor. This includes the requirement that a broker-dealer must make a
determination that investments in penny stocks are suitable for the customer and must make
special disclosures to the customers concerning the risk of penny stocks. Many
broker-dealers decline to participate in penny-stock transactions because of the extra
requirements imposed on those transactions. Application of the penny-stock rules to our
Common Stock reduces the market liquidity of our shares, which in turn affects the ability
of holders of our Common Stock to resell the shares they purchase, and they may not be
able to resell at prices at or above the prices they paid.

The
Series B and Series C Convertible Preferred Stock that we have issued adversely affects
the right of the Common Stockholders.

Our
Series B Preferred Stock pays cumulative preferred dividends equal to 12% per year,
provides a preference in payment of dividends, redemption and liquidation over the Common
Stock and Series C Preferred Stock and will, upon conversion, have all of the rights of
our Common Stock. Our Series C Preferred Stock pays cumulative preferred dividends equal
to 2.5% per year, provides a preference in payment of dividends, redemption and
liquidation over the Common Stock and will, upon conversion, have all of the rights of our
Common Stock. Our Board of Directors has the authority to issue additional preferred
stock, which could discourage potential takeover attempts or could delay or prevent a
change in control through a merger, tender offer, proxy contest or otherwise by making
these attempts more difficult or costly to achieve.

Two
of our shareholders that are controlled by the same individual collectively own 13% of our
outstanding Common Stock and have beneficial ownership of approximately 18.4% of our Common
Stock.

As
of May 8, 2009, the Apollo Trust and Echos Voice LLC had beneficial ownership of our
common stock of 10.2% and 8.1%, respectively. Helen De Bove, Trustee of the Apollo Trust
and manager of Echos Voice LLC exercises voting and dispositive power of the
securities owned by these entities and has beneficial ownership of approximately 18.4%.
The Apollo Trust and Echos Voice LLC and Ms. De Bove, if they convert and exercise
the securities they own or over which they have voting and dispositive power into shares
of our Common Stock, may be able to influence the outcome of all matters submitted to our
shareholders for approval, regardless of the preferences of the minority shareholders.

33

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Two
of Our Series C Shareholders Will Acquire a Significant Number of Shares of Our Common
Stock in the Next Fiscal Year.

On
December 1, 2006 and in a subsequent closing on January 16, 2007, the Company held a
closing on the sale of an aggregate of 260 investment units (the Units) to
Iris Energy Holding Corp. and 100 Units to the Vision Opportunity Master Fund, LP. Each
Unit consists of: (i) $50,000 of 2.5% Series C Cumulative Convertible Preferred Stock, par
value $0.001 (the Series C Preferred), convertible into 47,619 shares of the
Companys $0.001 par value common stock (the Common Stock) at a price of
$1.05 per share (the Conversion Price); (ii) a three-year warrant to purchase
47,319 shares of Common Stock at an exercise price of $1.50 per share (the AC
Warrants); and (iii) a three year warrant to purchase 23,810 shares of Common Stock
at an exercise price of $2.00 per share (the BC Warrants). The Series C
Preferred Stock automatically converts into shares of Common Stock on December 1, 2009, at
which time, if not sooner, Iris Energy Holding Corp. and Vision Opportunity Master Fund,
LP will acquire a significant number of shares of our common stock (12,380,940) and
(4,761,900), respectively, not including the AC and BC warrants that they own and may
exercise that may increase their ownership of our Common Stock to 30,796,480 and
11,844,800, respectively and will be in a position to influence the outcome of all matters
submitted to our shareholders for approval, regardless of the preferences of the minority
shareholders and will result in a change of control of the Company.

# Item 1B. Unresolved
Staff Comments

The
Company has no unresolved comments from the SEC Staff regarding periodic or current
reports under the Exchange Act.

# Item 3. Legal Proceedings

Focus
Ranch Litigation

In
connection with the amendment to the Farmout Agreement with Clayton Williams, whereby the
Company would act as an independent contractor to test the Federal 12-1 well, on or about
September, 2008, the Company became a co-plaintiff in a cause of action against a
landowner over an easement for access to the Focus Ranch Federal 12-1 well. (Federal
District Court of Colorado Civil Case. NO 07CV02393, Clayton Williams Energy, Inc and New
Frontier Energy, Inc. v. Stull Ranches, LLC)(the Focus Ranch Litigation).

On
May 15, 2009, the Company, Clayton William and Stull Ranches, LLC agreed to settlement the
Focus Ranch Litigation. As of the date of this Annual Report, the formal settlement
agreement has not been prepared or executed. Pursuant to the anticipated terms of the
settlement agreement, among other things, Stull Ranches, LLC agreed to consent to Clayton
Williams assignment of the easement to the Company; said easement will remain in
full force and effect and the Company agreed to pay Stull Ranches, LLCs attorney
fees. The amount of attorneys fees are to be determined by an arbitrator. The Company
agreed to limited access along the easement during various big game hunting seasons.

34

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Aspen
Drilling Litigation

On
March 26, 2009, the Company brought an action for breach of contract against Aspen
Drilling, LLC, a drilling contractor, to recover an unused drilling deposit (Arapahoe
County District Court, 2009CV689, New Frontier Energy, Inc. v. Aspen Drilling, LLC). The
Company is seeking to recover the deposit in the amount of $217,200, which is reserved in
full at February 28, 2009. As of the date of this Annual report, the outcome of this
matter cannot be determined.

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

During
the quarter ended February 28, 2009, there were no matters submitted to a vote of security
holders.

# PART II

Item 5.   Market for Common Equity
and Related Stockholder Matters and Issuer Purchase of Equity Securities.

Shares
of our Common Stock are traded on the Over-the-Counter Bulletin Board under the symbol
NFEI.OB.

The
market for our Common Stock is limited, volatile and sporadic. The following table sets
forth the high and low sales prices relating to our Common Stock for the last two fiscal
years on a quarterly basis, as quoted by NASDAQ. These quotations reflect inter-dealer
prices without retail mark-up, markdown or commissions and may not reflect actual
transactions.

|Quarter Ended     |  | High Bid |  | Low Bid | 
|----------------- |  | -------- |  | ------- | 
|February 28, 2009 |  |          |  | $0.57   | 
|November 30, 2008 |  |          |  | $0.95   | 
|August 31, 2008   |  |          |  | $1.28   | 
|May 31, 2008      |  |          |  | $1.38   | 
|February 29, 2008 |  |          |  | $1.22   | 
|November 30, 2007 |  |          |  | $1.29   | 
|August 31, 2007   |  |          |  | $1.38   | 
|May 31, 2007      |  |          |  | $1.40   | 

# Holders

On
May 21, 2009, the closing price of our Common Stock was $0.30. As of May 8, 2009, we had
approximately 1,705 shareholders of record, which does not include shareholders whose
shares are held in street or nominee names. We believe that as of May 8, 2009, there are
approximately 2,240 beneficial owners of our Common Stock.

# Dividend Policy

We
have not declared or paid cash dividends on our Common Stock in the preceding two fiscal
years. We currently intend to retain all future earnings, if any, to fund the operation of
our business, and, therefore, do not anticipate paying dividends in the foreseeable
future. Future cash dividends, if any, will be determined by our board of directors.

35

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# Securities Authorized
For Issuance Under Compensation Plans

The
table set forth below presents the securities authorized for issuance with respect to the
2003 Plan and the 2007 Plan (each as defined below) under which equity securities are
authorized for issuance as of February 28, 2009.

|Plan Category                      |  | Number of securities
to be issued
upon exercise
of outstanding
options, warrants and rights |  | Weighted-average    
exercise price of   
outstanding options,
warrants and rights |     | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the 1st
column) |     
|---------------------------------- |  | ------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- | --- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ----
|
|                                   |  |                                                                                             | 
|Equity Compensation Plans approved |  |                                                                                             |  |                                                                                    |     |                                                                                                                                                 |     
|by security holders                |  |                                                                                             |  | 584,333                                                                            |     | $                                                                                                                                               | 0.89
|                                   |  |                                                                                             | 
|Equity Compensation Plans not      |  |                                                                                            
|approved by security holders       |  |                                                                                             |  | 8,150,000                                                                          | (1) | $                                                                                                                                               | 1.13
|                                   |  |                                                                                             |  |                                                                                    |     |                                                                                                                                                
|Total                              |  |                                                                                             |  | 8,734,333                                                                          |     | $                                                                                                                                               |    
|                                   |  |                                                                                             |  |                                                                                    |     |                                                                                                                                                

(1)    
          On November 10, 2006, the Company granted certain officers, directors, employees
          and agents of the Company an aggregate of 3,950,000 options (of which 3,950,000
          have vested) to acquire shares of the Companys Common Stock which are
          exercisable at a price of $1.25. These stock options vest at a rate of 12.5%
          each fiscal quarter ending November 30, February 28, May 31 and August 31
          through November 30, 2008 and 2,250,000 expire November 10, 2011 and 1,700,000
          expire on November 30, 2016. These options are non-qualified options and were
          not granted pursuant to any stock option plan. On July 23, 2008,  the
          Company granted certain employees and agents of the Company an aggregate of
          4,200,000 options to acquire shares of the Companys Common Stock, which
          are exercisable at a price of $1.01 (the Non-Qualified Stock
          Options). Options representing 1,950,00 of the Non-Qualified Stock Options
          vest at a rate of 12.5% each fiscal quarter ending August 31, November 30,
          February 28, May 31 through November 30, 2010 and expire on July 23, 2018.
          Options representing 2,250,000 of the Non-Qualified Stock Options have a five
          year life and vest quarterly over three years commencing with the quarter ending
          May 31, 2009. For additional details on options granted to the Companys
          officers and directors, see Item 10. Executive Compensation.

36

---



# Recent Sales of
Unregistered Securities

The
Company has no recent sales of unregistered securities that have not been previously
disclosed.

# Item 6.   Selected
Financial Data

The
following selected financial data should be read in conjunction with the financial
statements and related notes thereto appearing elsewhere in this Form 10-K. The selected
financial data as of February 28, 2009, February 29, 2008, and February 28, 2007, and for
each of the fiscal years then ended, have been derived from our financial statements which
have been audited by our independent auditors and included elsewhere in this Form 10-K.
The selected financial data provided below is not necessarily indicative of our future
results of operations or financial performance.

|                                             | Fiscal Year Ended |  |  
|-------------------------------------------- | ----------------- |  | -
|
|Revenue                                      |                   |  | $
|(Loss) from operations                       |                   |  | $
|Other income (expense), net                  |                   |  | $
|Net loss attributable to common shareholders |                   |  | $
|Weighted average shares outstanding          |                   |  | $
|                                             |                   |  |  
|Basic and diluted net loss per share         |                   |  | $
|                                             |                   |  |  

|                           | As of | 
|-------------------------- | ----- | 
|
|Working capital            |       | 
|Current assets             |       | 
|Total assets               |       | 
|Current liabilities        |       | 
|Long-term liabilities      |       | 
|Total liabilities          |       | 
|Total Shareholders' equity |       | 

Item 7.   Management's Discussion
and Analysis of Financial Condition and Results of Operation

# Business Overview

The
following discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this Annual
Report, particularly in the section entitled Risk Factors. Our consolidated
audited financial statements are stated in United States Dollars and are prepared in
accordance with United States Generally Accepted Accounting Principles.

37

---



The
following discussion and analysis covers our plan of operation for the next twelve months.
It discusses our financial condition at February 28, 2009, and changes in our financial
condition since February 29, 2008, the end of the prior fiscal year. It also covers our
results of operation for the fiscal years ended February 28, 2009, and February 29, 2008.
The following discussion and analysis should be read in conjunction with the audited
financial statements and the related notes included elsewhere in this Form 10-K.

We
were incorporated as Storagefinders.com under the laws of the State of Colorado on January
7, 2000. In March 2001, we changed our name to New Frontier Energy, Inc. and commenced
operations in the oil and gas industry through the acquisition of all of the outstanding
shares of Skyline Resources, Inc. Skyline was operated as our subsidiary through the close
of business on February 28, 2005, at which time it was merged into the Company.

We
explore for, produce and gather oil and natural gas. During the fiscal year ended February
28, 2009, we had an interest in five principal properties, (i) the Slater Dome Field,
located in northwest Colorado and south central Wyoming, (ii) the Flattops Prospect, (iii)
the Gibraltar Peaks, (iv) the North Slater Dome Prospect located in south central Wyoming,
and (v) the Weitzel Prospect located in northeast Colorado in the Denver Julesburg Basin.
The Flattops, North Slater Dome, Gibralter Peaks, and Weitzel Prospect are, undeveloped,
which means they do not currently produce any oil or natural gas. The Company is the
operator of the Slater Dome Field, the Weitzel Prospect, the North Slater Dome Prospect
and the Flattops Prospect.

At
February 28, 2009, there were no recoverable reserves from the Companys wells due to
the existing economic and operating, conditions, i.e. prices and costs as of February 28,
2009. The Company did not drill any wells during the fiscal year ended February 28, 2009.
At February 29, 2008 our estimated proved reserves in the Slater Dome Field totaled
15,561MCF of gas to our interest. The Company drilled eight wells in the Slater Dome Field
during the fiscal year ended February 28, 2008 with no dry holes. At February 28, 2007,
our estimated proved reserves in the Slater Dome Field totaled 12,114 MCF of gas to our
interest. The Company did not drill any wells during the fiscal year ended February 28,
2007.

During
the fiscal year ended February 28, 2009, the Slater Dome Field produced 229,629 MCF of
gas, of which 38,939 MCF was used in operations and 190,690 MCF was sold. We do not intend
to drill any additional wells in the Slater Dome Field during the next fiscal year ending
February 28, 2010.

During
the fiscal year ended February 28, 2009, we incurred impairment of our oil and gas
properties in the amount of $7,500,000. Accounting rules require that we review
periodically the carrying value of our oil and natural gas properties and the Gas
Gathering Pipeline for possible impairment. Based on specific market factors and
circumstances at the time of the prospective impairment reviews, and the continuing
evaluation of development plans, production data, rate of flow of gas through the
pipeline, economics and other factors, we may be required to further write down the
carrying value of our oil and natural gas properties or the Gas Gathering Pipeline in the
future.

38

---



On
September 1, 2008, the Company further amended the Farmout Agreement with Clayton
Williams, whereby the Company would act as an independent contractor to test the Federal
12-1 well. Pursuant to the Amendment, upon the completion of the testing or 45 days after
the commencement of testing of the 12-1, Clayton Williams shall assign 99% of its interest
in the underlying leases in the Focus Ranch Federal Unit. At the time of the assignment of
the Focus Ranch Unit to the Company, Clayton Williams shall resign as the operator of the
Focus Ranch Unit and agrees to vote for the Company as the successor operator. Further, in
the Amendment, the Company agreed to intervening and joining the civil action against
Stull Ranches, LLC over an easement through the Federal Focus Ranch Unit. Clayton Williams
agreed not to assign the Stull Ranch easement agreement without first having obtained the
consent of Stull Ranches, LLC. On May 15, 2009, the Company entered into a settlement
agreement with Clayton Williams and Stull Ranches, LLC whereby the Stull Ranch easement
agreement will be assigned to the Company. See Item 3. Legal Proceedings. The
Focus Ranch Unit is in the process of being assigned to the Company, but as of the date of
this Annual Report, it had not been assigned to the Company. .

During
the fiscal year ending February 28, 2010, subject to the receipt of adequate financing,
our plan of operation is to further complete the testing of the Niobrara and Frontier
formations in the Focus Ranch Federal 12-1 well in the Focus Ranch Unit.

# Results of Operation

# Year Ended February 28,
2009 Compared to the Year Ended February 29, 2008

Our
oil and gas sales increased from $622,442 during the fiscal year ended February 29, 2008
to $1,219,565 during the fiscal year ended February 28, 2009, an increase of $597,123 or
95.93%. The increase in oil and gas revenues is primarily attributable to the increased
production from the Slater Dome Field together with increased sale prices. We sold 190,690
MCF in the fiscal year ended February 28, 2009 compared to 139,973 MCF in the fiscal year
ended February 28, 2008, an increase of 50,717 MCF or 36.23% The average sales price of
the natural gas for the fiscal year ended February 28, 2009 was $5.61 compared with $3.98
in the fiscal year ended February 29, 2008, an increase of $1.63 or 40.95%. The increase
in production is principally related to a full year of production of 6 wells drilled
during the fiscal year ended February 29, 2008 that were in production less than three
months of in the fiscal year ended February 29, 2008. The increase in price of natural gas
is a function of the general market conditions for natural gas.

During
the fiscal year ended February 28, 2009, SDGs gathering fees from the Gas Gathering
Pipeline were $136,117 as compared to $135,297 during the fiscal year ended February 29,
2008, an increase of $820 or 0.61%. The increase in the gas gathering fees is primarily
the result of the increase in production offset buy the increase in the Companys
ownership in the line.

39

---



Exploration
costs were $221,841 during the fiscal year ended February 28, 2009 as compared to $249,848
during the fiscal year ended February 29, 2008, a decrease of $28,007 or 11.21%.
Geological consulting decreased due to decreased exploration by the Company. Geophysical
and maps decreased because we did not purchase any seismic lines during the fiscal year
ended February 28, 2009. The increase in delay rentals is considered normal in the
ordinary course of business. The major components and the changes in exploration expenses
are summarized as follows.

|                      | 2009 |  | 2008 |         | Increase
(Decrease) |  
|--------------------- | ---- |  | ---- | ------- | ------------------- | -
|Geological consulting |      |  | $    | 68,750  |                     | $
|Geophysical & maps    |      |  |      | 112,003 |                     |  
|Delay rentals         |      |  |      | 41,088  |                     |  
|                      |      |  |      |         |                     |  
|                      |      |  |     
|Total                 |      |  | $    | 221,841 |                     | $
|                      |      |  |      |         |                     |  

Lease
operating expenses were $1,198,538 during the fiscal year ended February 28, 2009 as
compared to $1,498,829 during the fiscal year ended February 29, 2008, a decrease of
$300,291 or 20.04%. Lease operating expenses decreased in the fiscal year ended February
28, 2009 as compared with the fiscal year ended February 29, 2008 and is primarily the
result of (i) a decrease in direct well costs of $25,654 offset by increases in gas sales
costs of $10,000 (because the sales agent was paid for a full 12 months in 2009 as
compared with 7 months in 2008) together with an increase in the cost of bonding
operations of $32,581 (because we were the operator of the Slater Dome for a full 12
months in 2009 as compared with 4 months in 2008). In the fiscal year ended February 28,
2009 we decreased costs associated with reworking our producing wells as compared to the
same period in 2008 because the primary expense in 2008 related to reworking the existing
12 wells after we took over operations in November 2007 to increase production in the
normal course of business. Lease operating expenses at the Focus Ranch decreased because
of the decreased activity in the fiscal year ended February 28, 2009 as compared to the
same period in the fiscal year ended February 29, 2008. Production tax increases are
directly proportional to the increase in production revenues in the fiscal year ended
February 28, 2009 as compared with the same period in the fiscal year ended February 29,
2008. The major components and the changes in lease operating expenses are summarized as
follows:

|                                      | 2009 |  | 2008 |           | Increase
(Decrease) |  
|------------------------------------- | ---- |  | ---- | --------- | ------------------- | -
|Lease operating expenses              |      |  | $    | 1,036,573 |                     | $
|Rework expenses                       |      |  |      | 69,201    |                     |  
|Lease operating expenses, Focus Ranch |      |  |      | 3,511     |                     |  
|Production taxes                      |      |  |      | 89,253    |                     |  
|                                      |      |  |      |           |                     |  
|                                      |      |  | $    | 1,198,538 |                     | $
|                                      |      |  |      |           |                     |  

Gas
gathering costs amounted to $656 during the fiscal year ended February 28, 2009 as
compared to $833 during the fiscal year ended February 29, 2008, a decrease of $177 or
21.28%. The fluctuation is considered normal in the ordinary course of business.

General
and administrative expenses were $2,212,157 during the fiscal year ended February 28, 2009
as compared to $2,222,795 during the fiscal year ended February 29, 2008, a decrease of
$10,638 or 4.48%. The major components and the changes in general and administrative
expenses are summarized as follows.

40




|                                    | 2009 |  | 2008 |           | Increase
(Decrease) |  
|----------------------------------- | ---- |  | ---- | --------- | ------------------- | -
|Employee compensation               |      |  | $    | 767,753   |                     | $
|Financial public relations          |      |  |      | 294,618   |                     |  
|Professional fees                   |      |  |      | 467,824   |                     |  
|Payroll taxes and employee benefits |      |  |      | 172,364   |                     |  
|Provision for bad debts             |      |  |      | 217,200   |                     |  
|Repairs and maintenance             |      |  |      | 58,013    |                     |  
|Management fees  SDG                |      |  |      |          |                     |  
|Insurance                           |      |  |      | 51,893    |                     |  
|Travel                              |      |  |      | 48,864    |                     |  
|Property taxes                      |      |  |      | 20,137    |                     |  
|Miscellaneous other costs           |      |  |      | 113,491   |                     |  
|                                    |      |  |      |           |                     |  
|                                    |      |  |     
|                                    |      |  | $    | 2,212,157 |                     | $
|                                    |      |  |      |           |                     |  

Employee
compensation decreased $170,364 in the year ending in 2009 compared with 2008 primarily as
a result of a decrease in executive bonuses and compensation of $228,333, increases in
employee salaries of $57,969. Financial public relations decreased by $330,178 during the
fiscal year ended February 28, 2009 compared with fiscal year ended February 29, 2008; as
a result of the decreased public relations activities and related costs associated with
presenting the Company to the financial community. Professional fees increased $201,600
during the fiscal year ended February 28, 2009 compared with fiscal year ended February
29, 2008; legal fees increased $183,564 principally arising from the litigation associated
with the Focus Ranch Unit, landman fees and related costs increased $41,955 as a result of
leasing activity and title work, engineering fees decreased $22,053 principally because
the valuation of the general partners interest in SDG was not required during the
fiscal year ended February 28, 2009 and accounting fees decreased by $1,866. Payroll taxes
and employee benefits increased $17,288 during the fiscal year ended February 28, 2009
compared with fiscal year ended February 29, 2008and such fluctuation is considered normal
in the ordinary course of business. The provision for bad debts increased $217,200 during
the fiscal year ended February 28, 2009 compared with fiscal year ended February 29, 2008
and is a result of a drilling contractors inability to return advanced funds from
the fiscal 2008 drilling program. Repairs and maintenance increased $30,569 during the
fiscal year ended February 28, 2009 compared with fiscal year ended February 29, 2008; the
increase principally arises from a software maintenance agreement. Management fees
incurred by SDG decreased by $8,176 because the Company acquired the general partnership
interest in December 2007 and accordingly, management fees to the third party general
partner is not present in the fiscal year ended February 28, 2009. The decrease in
insurance of $3,261 during the fiscal year ended February 28, 2009 compared with fiscal
year ended February 29, 2008 is considered normal in the ordinary course of business.
Travel expense increased $10,585 during the fiscal year ended February 28, 2009 compared
with fiscal year ended February 29, 2008and is considered normal in the ordinary course of
business. Property taxes increased $14,771 during the fiscal year ended February 28, 2009
compared with fiscal year ended February 29, 2008 and is considered normal in the ordinary
course of business. Miscellaneous other costs increased $9,328 during the fiscal year
ended February 28, 2009 compared with fiscal year ended February 29, 2008 and is
considered normal in the ordinary course of business.

41

---



Issuance
of common stock warrants decreased $617,900 or 26.74% during the fiscal year ended
February 28, 2009 compared with fiscal year ended February 29, 2008. The components of the
change are summarized as follows:

|                                                                        | 2009 |  | 2008 |           | Increase
(Decrease) |  
|----------------------------------------------------------------------- | ---- |  | ---- | --------- | ------------------- | -
|Financial public relations firms                                        |      |  | $    |          |                     | $
|Employee stock options                                                  |      |  |      |          |                     |  
|Amortization of non-qualified stock options and restricted stock awards |      |  |      | 1,693,100 |                     |  
|                                                                        |      |  |      |           |                     |  
|                                                                        |      |  | $    | 1,693,100 |                     | $
|                                                                        |      |  |      |           |                     |  

The
decreases in expenses associated with issuing warrants and options to financial public
relations firms and employees in the amount of $184,100 and $64,700 respectively is
because no warrants or options were granted during the fiscal year ended February 28,
2009. The amortization of non-qualified stock options decreased $470,100 and is directly
related to the vesting schedule associated with the issuance of 3,950,000 and 4,200,000
non-qualified common stock options to employees and certain employees and agents of the
Company, plus $101,000 of restricted stock awards. The decrease of $470,100 is comprised
of a decrease associated with vesting the options granted in July 2008 in the amount of
$1,031,100 offset by an increase of $561,100 from options granted in July 2008.

The
increase in impairment of oil and gas properties in the amount of $7,500,000 arises from
the assessment of the Companys oil and gas properties in as compared to the
estimated expected undiscounted future net revenue associated with the properties
considering the current estimated revenue potential and the cost of production.

Depreciation,
depletion and amortization increased $214,897 or 29.36% during the fiscal year ended
February 28, 2009 compared with fiscal year ended February 29, 2008. The components of the
increase are summarized in the following table:

|                                 | 2009 |  | 2008 |         | Increase
(Decrease) |  
|-------------------------------- | ---- |  | ---- | ------- | ------------------- | -
|Producing oil and gas properties |      |  | $    | 682,400 |                     | $
|                                 |      |  |     
|Slater Dome Gathering, LLLP      |      |  |      | 130,492 |                     |  
|Other depreciable assets         |      |  |      | 133,840 |                     |  
|                                 |      |  |      |         |                     |  
|                                 |      |  | $    | 946,732 |                     | $

The increase in producing oil and gas
properties is attributable to increased production during the fiscal year ended February
28, 2009 compared with fiscal year ended February 29, 2008 and the increase in
depreciating other assets is because the Company purchased additional property and
equipment during the fiscal year ended February 28, 2009.

42

---



Interest
income decreased from $362,719 during the fiscal year ended February 29, 2008 to $66,166
during the fiscal year ended February 28, 2009, a decrease of $296,553 or 81.76% because
of the decrease in the amount of cash balances held by the Company.

Interest
expense decreased $1,983 or 2.38% in the year ending in 2009 compared with 2008. The
components of the increase are summarized in the following table:

|                                  | 2009 |  | 2008 |        | Increase
(Decrease) |  
|--------------------------------- | ---- |  | ---- | ------ | ------------------- | -
|Notes payable                     |      |  | $    | 64,816 |                     | $
|Notes payable, affiliates         |      |  |      | 16,373 |                     |  
|Convertible debentures            |      |  |      |       |                     |  
|Convertible debenture, affiliates |      |  |      |       |                     |  
|                                  |      |  |      |        |                     |  
|                                  |      |  | $    | 81,189 |                     | $
|                                  |      |  |      |        |                     |  

Notes payable interest increased
because an obligation for the field facility was incurred in June 2007 and accordingly,
only 8 months of interest was incurred during the fiscal year ended February 29, 2008.
Notes payable affiliates, increased because the Company acquired the general partners
interest in SDG in December 2007 and accordingly, the Company only incurred 2 months of
interest during the fiscal year ended February 29, 2008. The convertible debentures
interest decreased because the debentures were converted to common stock or paid on July
23, 2007. The convertible debenture to affiliates interest decreased because the Company
paid the convertible debenture in full in December 2007.

Debt
issuance costs for the year ending February 28, 2009 and February 29, 2008 was $0 and
$363,517 respectively. The change in debt issuance cost arises because the underlying
instruments matured on July 23, 2007 and the amortization period was completed in the
fiscal year ending February 29, 2008.

The
minority interest in the income of the consolidated subsidiary decreased $21,635 from
$58,631 to $36,996 or 36.90%. This fluctuation relates to the change in activity in SDG
for the respective periods together with a decrease in the minority interest during the
fiscal year ended February 28, 2009 because the Company acquired the general partnership
interest in December 2007; such fluctuation is considered normal in the ordinary course of
business.

During
the fiscal year ended February 28, 2009, the Company charged dividends on the Series B and
C Convertible Preferred Stock in the amount of $261,457 and $543,570 respectively,
together with distributions to the SDG minority interests in the amount of $73,529 to the
loss attributable to common shares compared with Series B dividends of $324,182, Series C
dividends of $554,892 together with distributions to the SDG minority interest of $85,305
during the fiscal year ended February 29, 2008, a decrease of $82,823 or 8.62%. The
decrease in dividends on the Series B and C Preferred Stock is because of conversions of
outstanding shares of the Series B and C Preferred Stock during the fiscal year ended
February 28, 2009 as compared to during the fiscal year ended February 29, 2008. The
decrease in distributions to the SDG minority interests in the amount of $8,776 is because
SDG made a smaller distribution to minority interest owners during the fiscal year ended
February 28, 2009. The following summarizes the components of the change.

43

---



|                                    | 2009 |  | 2008 |         | Increase
(Decrease) |   |        
|----------------------------------- | ---- |  | ---- | ------- | ------------------- | - | -------
|Series B convertible preferred      |      |  | $    | 261,457 |                     | $ | 324,182
|Series C convertible preferred      |      |  |      | 543,570 |                     |   | 554,892
|Slater Dome Gathering distributions |      |  |      | 73,529  |                     |   | 82,305 
|                                    |      |  |      |         |                     |  
|                                    |      |  | $    | 878,556 |                     | $ | 961,379
|                                    |      |  |      |         |                     |  

As
a result of the above, we generated a net loss attributable to common shareholders of
$13,347,917 during the fiscal year ended February 28, 2009 as compared to a net loss of
$7.363.381 during the fiscal year ended February 29, 2008, an increased net loss of
$5,984,536 or 81.27%.

# Liquidity and Capital
Resources.

The
independent auditors report accompanying the Companys audited February 28,
2009 consolidated financial statements contain an explanatory paragraph expressing
substantial doubt about the Companys ability to continue as a going concern. The
audited February 28, 2009 consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
that the Company will realize its assets and satisfy its liabilities and commitments in
the ordinary course of business.

Our
audited financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should we be unable to continue as a going concern. We
have not generated positive cash flows from operating activities.

The
continued operation of our business will require an immediate capital infusion and we will
need to seek additional capital, likely through debt or equity financings, to continue
operations. We can give no assurance that we will be able to raise such capital on such
terms and conditions we deem reasonable, if at all. We have limited
financial resources until such time that we are able to generate such additional
financing or additional cash flow from operations. Our ability to achieve profitability
and positive cash flow is dependent upon our ability to exploit our oil and gas
properties, generate revenue from our business operations and control our costs. 
Should we be unable to raise adequate capital or to meet the other above objectives, it is
likely that we would have to substantially curtail our business activity or cease
operating, and that our investors would incur substantial losses of their investment.

The
primary sources of capital have been from sales and other issuances of equity and debt
securities. Our primary use of capital has been for the acquisition, development and
exploration of oil and gas properties. Our working capital requirements are expected to
increase in line with the growth of our business. We have no lines of credit or other bank
financing arrangements. We believe our capital requirements will continue to be met with
additional issuance of equity or debt securities and to a lesser extent, with revenues
from operations. Additional issuances of equity or convertible debt securities will result
in dilution to our current Common Stockholders holdings.

44

---



Our
plan of operations for the fiscal year ending February 28, 2010 call for us to complete
the testing the Niobrara and Frontier formations at the Focus Ranch Unit. We believe that
the plan of operations for the fiscal year ending February 28, 2010 will require capital
of approximately $5,000,000. To the extent that additional opportunities present
themselves to the Company, the Company may require additional sources of capital to
participate in these opportunities.

We
expect that working capital requirements will be funded through a combination of our
existing funds, cash flow from operations, issuance of equity and debt securities.
Management believes that current cash balances plus cash flow from operations will not be
sufficient to fund our capital and liquidity needs for the next twelve months.

The
following summarizes the Companys capital resources at February 28, 2009, compared
with February 29, 2008:

|                                        | February 28, 2009 |  | February 29, 2008 |            | Increase
(Decrease) |   | Increase
(Decrease) |  
|--------------------------------------- | ----------------- |  | ----------------- | ---------- | ------------------- | - | ------------------- | -
|Cash                                    |                   |  | $                 | 856,475    |                     | $ | 3,602,939           |  
|Current assets                          |                   |  | $                 | 1,673,526  |                     | $ | 4,881,911           |  
|Total Assets                            |                   |  | $                 | 16,782,892 |                     | $ | 26,209,623          |  
|Current liabilities                     |                   |  | $                 | 4,507,088  |                     | $ | 3,535,934           |  
|Working capital                         |                   |  | $                 | (2,833,562 | )                   | $ | 1,345,977           |  
|Net cash (used) in operating activities |                   |  | $                 | (1,723,756 | )                   | $ | (3,048,539          | )
|Net cash used in investing activities   |                   |  | $                 | (2,228,386 | )                   | $ | (5,653,729          | )
|Net cash provided by (used in)          |                   | 
|financing activities                    |                   |  | $                 | 1,205,678  |                     | $ | (419,027            | )
|                                        |                   |  |                   |           

The
decrease in cash, current assets and working capital arises, principally, because of the
Companys development of the Slater Dome Field and the Companys corporate
activities.The changes in cash are summarized as follows:

|                                                  | 
|------------------------------------------------- | 
|Proceeds from revenues                            | 
|Proceeds from exercising warrants                 | 
|Proceeds from exercising placement agent warrants | 
|Operating costs billed to non-affiliates          | 
|Purchase of property and equipment                | 
|Deposits                                          | 
|Principal payments on notes payable               | 
|Preferred stock dividends                         | 
|Distributions to SDG minority interests           | 
|Operating expenses and other                      | 
|                                                  | 
|                                                  | 
|                                                  | 
|                                                  | 

45

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# Cash Flow from Operating
Activities

As
of February 28, 2009, we had a cash balance of $856,475. We used $1,723,756 in operating
activities during the fiscal year ended February 28, 2009 as compared to $3,048,539 during
the fiscal year ended February 29, 2008.

# Capital Expenditures

Cash
flows used in investing activities consisted primarily of the purchase of property and
equipment. During the fiscal year ended February 28, 2009, the Company used a net of
$2,228,386, after a return of a security deposit of $33,300, in investing activities as
compared to $5,563,729 during the fiscal year ended February 29, 2008. The Company
expended $1,121,182 in developing the infrastructure at the Slater Dome Field, $487,151
was used to increase its undeveloped acreage position at the Slater dome Field, $321,836
was spent testing the Focus Ranch Federal 12-1 well, and $270,821 was used to increase the
undeveloped acreage position in the Denver Julesburg Basin and $60,696 in other property
and equipment purchases.

# Financing Activities

During the fiscal year ended February
28, 2009, financing activities provided the Company $1,205,678 in financing activities as
compared to $419,027 used in financing activities during the fiscal year ended February
29, 2008. During the fiscal year ended February 28, 2009, the Company received $1,712,469
from common stock warrant conversions, received $269,749 from the exercise of the
placement agent warrant to purchase Units of Series B Convertible Preferred Stock, paid
$403,125 in note payable principal payments to affiliates, made $34,273 in principal
payments on notes payable, paid $327,001 in preferred stock dividends, paid $24,455 in
connection with issuing equity, made distributions of $73,529 to minority interest holders
in the consolidated subsidiary and minority interest in the consolidated subsidiary
increased by $85,840.

# Off-Balance Sheet
Arrangements

We
do not have any off-balance sheet financing arrangements or special purpose entities as of
February 28, 2009. Accordingly, we are not materially exposed to any financing, liquidity,
market or credit risk that could arise from these transactions if we had engaged in such
financing arrangements.

# Contractual Obligations

The
following table sets forth information with respect to our contractual obligations as of
February 28, 2009.

46

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|                                     | Payments Due By Period | 
|------------------------------------ | ---------------------- | 
|
|                                     |                        | 
|Paul G. Laird Employment Contract(1) |                        | 
|                                     |                        | 
|Les Bates Employment Contract(2)     |                        | 
|Steamboat Mortgage (3)               |                        | 
|NRGG Promissory Note (4)             |                        | 

| | (1) | Mr.
Lairds employment agreement expires on December 31, 2009; however, it
               is automatically renewable on an annual basis for additional one-year
               increments.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Mr.
Bates employment agreement expires on December 31, 2009; however, it
               is automatically renewable on an annual basis for additional one-year
               increments.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The
Steamboat Mortgage requires equal monthly payments during the term of the
               mortgage in the amount of $8,255.86, with the balance of $807,337 due on
               September 15, 2009.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | See
Item 13. Certain Relationships and Related Party Transactions.
| | --- | --------------------------------------------------------------------

# Critical Accounting
Policies and Estimates.

We
believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our financial statements.

Reserve
Estimates.

Estimates
of oil and natural gas reserves, by necessity, are projections based on geological and
engineering data, and there are uncertainties inherent in the interpretation of such data,
as well as the projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that are difficult to measure. The accuracy of any
reserve estimate is a function of the quality of available data, engineering and
geological interpretation and judgment. Estimates of economically recoverable oil and
natural gas reserves and future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area compared
with production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions governing future oil and natural gas prices, future
operating costs, severance and excise taxes, development costs and work-over and remedial
costs, all of which may in fact vary considerably from actual results. For these reasons,
estimates of the economically recoverable quantities of oil and natural gas attributable
to any particular group of properties, classifications of such reserves based on risk of
recovery, and estimates of the future net cash flows expected there from may vary
substantially. Any significant variance in the assumptions could materially affect the
estimated quantity and value of the reserves, which could affect the carrying value of our
oil and gas properties and/or the rate of depletion of the oil and gas properties. Actual
production, revenues and expenditures with respect to our reserves will likely vary from
estimates, and such variances may be material.

Many factors will affect actual net
cash flows, including:

| |  | The
amount and timing of actual production;
| | - | -------------------------------------------

| |  | Supply
and demand for natural gas;
| | - | ----------------------------------

| |  | Curtailments
or increases in consumptions by natural gas purchasers; and
| | - | ------------------------------------------------------------------------

| |  | Changes
in governmental regulation or taxation.
| | - | -----------------------------------------------

47

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Revenue
Recognition

We
record revenues from the sales of natural gas and oil when in the month that delivery to
the customer has occurred and title has transferred. This occurs when natural gas or oil
has been delivered to a pipeline or a tank lifting has occurred. We receive payment from
one to three months after delivery. At the end of each month, we estimate the amount of
production delivered to purchasers and the price we will receive. Variances between our
estimated revenue and actual payment are recorded in the month the payment is received.
However, differences have been insignificant.

Oil
and Gas Properties, Equipment, and Depreciation.

We
follow the successful-efforts method of accounting for oil and gas properties. Under this
method, all productive costs incurred in connection with the exploration for, and
development of, oil and gas reserves are capitalized. These capitalized costs include
lease acquisition, geological and geophysical work, delay rentals, and drilling,
completing and equipping oil and gas wells, including salaries, benefits and other
internal salary related costs directly attributable to these activities. Costs associated
with production and general corporate activities are expensed in the period incurred.
Interest costs related to unproved properties and properties under development also are
capitalized to oil and gas properties. If the net investment in oil and gas properties
exceeds an amount equal to the sum of (1) the standardized measure of discounted future
net cash flows from proved reserves and (2) the lower of cost or fair market value of
properties in process of development and unexplored acreage, the excess is charged to
expense as additional depletion. Normal dispositions of oil and gas properties are
accounted for as adjustments of capitalized costs, with no gain or loss recognized. As a
result, we are required to estimate our proved reserves at the end of each quarter, which
is subject to the uncertainties described above.

# Recently Issued
Accounting Pronouncements

In
July 2006, the FASB released FASB Interpretation No. 48Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No 109 (FIN 48). FIN 48
clarifies the accounting and reporting for uncertainties in income taxes recognized in an
enterprises financial statements in accordance with Statement of Financial
Accounting Standards No 109Accounting for Income Taxes (SFAS 109) and
prescribes a recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 is effective for fiscal years beginning after December 15, 2006 with the
impact of adoption to be reported as a cumulative effect of an accounting change. The
Company adopted FIN 48 effective March 1, 2007. The adoption of this accounting principle
did not have an effect on the Companys financial position, results of operations or
cash flows.

48

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In
February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities, including an
amendment of FASB Statement No. 115. (SFAS 159) SFAS 159 permits
companies to choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate comparisons between
companies that choose different measurement attributes for similar types of assets and
liabilities. The provisions of SFAS 159 will become effective as of the beginning of the
fiscal year that begins March 1, 2008. The adoption of these new requirements is not
expected to have a material effect on the Companys financial position, results of
operations, or cash flows.

In
December 2007 the FASB issued SFAS No. 141R (Revised 2007), Business
Combinations (SFAS No. 141R), which replaces FASB Statement No. 141.
SFAS No. 141R will change how business acquisitions are accounted for and will impact
financial statements on both the acquisition date and in subsequent periods. SFAS No. 141R
is effective as of the beginning of an entitys fiscal year that begins after
December 15, 2008. The Company is in the process of evaluating the impacts, if any, of
adopting this pronouncement.

In
December 2007 the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS
No. 160 will change the accounting and reporting for minority interests, which, will be
recharacterized as non-controlling interests and classified as a component of equity. This
statement is effective as of the beginning of an entitys first fiscal year beginning
after December 15, 2008. The Company is in the process of evaluating the impacts, if any,
of adopting this pronouncement.

In
February 2008, FASB Staff Position (FSP) FSP No. 157-2,
Effective Date of FASB Statement No. 157 (FSP No. 157-2) was
issued. FSP No. 157-2 defers the effective date of SFAS No. 157 to fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years, for
all non-financial assets and liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually). Examples
of items within the scope of FSP No. 157-2 are non-financial assets and non-financial
liabilities initially measured at fair value in a business combination (but not measured
at fair value in subsequent periods), and long-lived assets, such as property, plant and
equipment and intangible assets measured at fair value for an impairment assessment under
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. The Company is currently assessing the impact, if any, of adopting this
standard.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities. The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced disclosures to
enable investors to better understand their effects on an entitys financial
position, financial performance, and cash flows. It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The Company has not yet determined the impact, if any, of
SFAS 161 on its consolidated financial statements.

49

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In
April 2008, the FASB issued Staff Position No. 142-3, Determination of Useful
Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets (SFAS 142). The
intent of this FSP is to improve the consistency between the useful life of a recognized
intangible asset under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS No 141(R), Business Combinations
(SFAS No. 141(R)), and other U.S. Generally Accepted Accounting
Principles. FSP FAS 142-3 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years.
Early adoption is prohibited. The guidance for determining the useful life of a recognized
intangible asset should be applied prospectively to intangible assets acquired after the
effective date. The disclosure requirements should be applied prospectively to all
intangible assets recognized as of, and subsequent to, the effective date. The Company
will apply the requirements of FSP FAS 142-3 upon its adoption on January 1, 2009 and
it currently does not expect the adoption of FSP FAS 142-3 to have a material impact on
its financial position and results of operations.

In
May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement)", or FSP No. APB 14-1. FSP No. APB 14-1 clarifies
that convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14
Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.
Additionally, the FSP specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the entitys
nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.
FSP No. APB 14-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. The
implementation of this standard will not have an impact on our consolidated financial
position or results of operations.

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the
sources of accounting principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted
accounting principles (GAAP) in the United States (the GAAP
hierarchy). This Statement is effective 60 days following the Security and Exchange
Commissions approval of the Public Company Accounting Oversight Board amendments to
AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The Company currently adheres to the GAAP hierarchy as
presented in SFAS No. 162, and therefore does not expect its adoption will have a material
impact on its consolidated results of operations and financial condition.

50

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In
June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). FSP EITF 03-6-1 applies to the calculation of
earnings per share (EPS) described in paragraphs 60 and 61 of FASB
Statement No. 128, Earnings per Share for share-based payment awards with
rights to dividends or dividend equivalents. It states that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years. Early adoption is prohibited. All prior-period EPS data
presented shall be adjusted retrospectively to conform to the provisions of this FSP. The
Company will apply the requirements of FSP EITF 03-6-1 upon its adoption on
January 1, 2009 and it currently does not expect the adoption of FSP EITF 03-6-1
to have a material impact on its financial position and results of operations.

In
September 2008, the FASB issued FSP FAS No. 133-1 and FIN 45-4, Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement
No. 161 (FSP FAS No. 133-1 and FIN 45-4). FSP FAS No. 133-1 and
FIN 45-4 requires enhanced disclosures about credit derivatives and guarantees. The FSP is
effective for financial statements issued for reporting periods ending after
November 15, 2008. The adoption of FSP FAS No. 133-1 and FIN 45-4 did not have a
material impact on the Companys consolidated financial statements.

In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active (FSP FAS 157-3), to help
constituents measure fair value in markets that are not active. FSP FAS 157-3 is
consistent with the joint press release the FASB issued with the Securities and Exchange
Commission (SEC) on September 30, 2008, which provides general
clarification guidance on determining fair value under SFAS No. 157 when markets are
inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. The adoption of FSP 157-3 did not have a
material impact on the Companys consolidated financial statements.

In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 Disclosures by Public
Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities (FSP FAS 140-4 and FIN 46R-8). FSP FAS 140-4 and FIN 46R-8
require additional disclosures about transfers of financial assets and involvement with
variable interest entities. The requirements apply to transferors, sponsors, servicers,
primary beneficiaries and holders of significant variable interests in a variable interest
entity or qualifying special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for
financial statements issued for reporting periods ending after December 15, 2008. FSP
FAS 140-4 and FIN 46R-8 affect only disclosures and therefore did not have a material
impact on the Partnerships consolidated financial statements.

On
December 31, 2008, the Securities and Exchange Commission (SEC) adopted major
revisions to its rules governing oil and gas company reporting requirements. These include
provisions that permit the use of new technologies to determine proved reserves and that
allow companies to disclose their probable and possible reserves to investors. The current
rules limit disclosure to only proved reserves. The new disclosure requirements also
require companies to report the independence and qualifications of the person primarily
responsible for the preparation or audit of reserve estimates, and to file reports when a
third party is relied upon to prepare or audit reserves estimates. The new rules also
require that oil and gas reserves be reported and the full-cost ceiling value calculated
using an average price based upon the prior 12-month period. The new oil and gas reporting
requirements are effective for annual reports on Form 10-K for fiscal years ending on
or after December 31, 2009, with early adoption not permitted. We are in the process
of assessing the impact of these new requirements on our financial position, results of
operations and financial disclosures.

51

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# Item 7A.   Quantitative and
Qualitative Disclosure About Market Risk

Oil
and Gas Price Risk

Our
primary market risk exposure is in the pricing applicable to our natural gas and oil
production. Realized pricing is primarily driven by the prevailing worldwide price for
crude oil and spot market prices applicable to our U.S. natural gas production. Pricing
for natural gas and oil production has been volatile and unpredictable for several years,
and we expect this volatility to continue in the future. The prices we receive for
production depend on many factors outside of our control including volatility in the
differences between product prices at sales points and the applicable index price. These
factors include, but are not limited to: changes in market demands, the general state of
the economy, weather, pipeline activity and capacity and inventory storage levels. We are
not currently using derivatives at this time to mitigate the risk of adverse changes in
commodity prices, however, we may consider using them in the future.

# Item 8.   Financial
Statements and Supplementary Data.

The
information required by this item is included in Item 15, Exhibits.

# Item 9.   Changes In and
Disagreements With Accountants On Accounting and Financial Disclosure

None.

# Item 9A(T).   Controls and
Procedures

Management's
Report on Internal Control over Financial Reporting

Management
is responsible for establishing and maintaining adequate internal control over financial
reporting. A companys internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

52

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Management,
including the Chief Executive Officer and Chief Financial Officer, has conducted an
evaluation of the effectiveness of the Companys internal control over financial
reporting as of February 28, 2009, based on the criteria for effective internal control
described in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its assessment, management
concluded that the Companys internal control over financial reporting was effective
as of February 28, 2009.

This
Annual Report does not include an attestation report of the Companys independent
registered public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys independent
registered public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only managements report in this Annual Report.

This
report shall not be deemed to be filed for purposes of Section 18 of the Securities
Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not
incorporated by reference into any filing of the Company, whether made before or after the
date hereof, regardless of any general incorporation language in such filing.

Changes
in Internal Control over Financial Reporting

There
was no change in our internal control over financial reporting during the quarter ended
February 28, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

# Item 9B.   Other
Information

None.

# PART III

# Item 10:   Directors,
Executive Officers and Corporate Governance.

Our
directors and executive officers, their ages, positions held are as follows:

|Name                |  | Age |  | Position with the Company | 
|------------------- |  | --- |  | ------------------------- | 
|Paul G. Laird       |  |     |  | 53                        | 
|Les Bates           |  |     |  | 65                        | 
|Samyak Veera        |  |     |  | 34                        | 
|Mukund Krishnaswami |  |     |  | 33                        | 
|David Kelley, II    |  |     |  | 51                        | 
|Lazar G. Schafran   |  |     |  | 70                        | 

53

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All of
our directors hold office until the next annual general meeting of the shareholders or
until their successors are elected and qualified. Our officers are appointed by our board
of directors and hold office until their earlier death, retirement, resignation or
removal.

The
following information summarizes the business experience of our officers and directors:

Paul
G. Laird has been the President, Chief Executive Officer and a director of the Company
since April 2003. Mr. Laird was previously a director of Skyline from June 2003 to
February 2005. He is currently the president of NRG, a privately-held oil and gas
exploration and development company, a position he has held since 1997. Prior to that, he
was the vice president of land operations for Western Alliance Petroleum Corporation and
land manager for Canterra Petroleum, Inc., both private oil and gas companies. During this
time, he was active in oil and gas exploration and development in the states of Montana,
North Dakota, Colorado, Nebraska, Wyoming and Utah. Mr. Laird was a founder of
International Marketing Corporation of Colorado, a private company engaged in the
restaurant business. Mr. Laird is also a manager of NRGG, the former general partner of
SDG. He received a Bachelor of Science in business with an emphasis in petroleum, land and
real estate management from the University of Colorado in 1980.

Les
Bates has been the Chief Financial Officer, Principal Accounting and Financial Officer,
Secretary, Treasurer and a director of the Company since April 2003. Mr. Bates was
previously the Secretary and a director of Skyline from June 2003 to February 2005. Mr.
Bates established Les Bates & Associates, Inc. in 1974 after five years of working
with two of what were then known as Big 10 accounting firms. Les Bates &
Associates, Inc. has provided a broad range of auditing, accounting and tax services to
public and private corporations, consisting of oil and gas companies, oil and gas drilling
and development programs, mining and mineral exploration entities, light manufacturing
companies, real estate developers, contractors, alternative energy companies and private
individuals. Mr. Bates has taught oil and gas accounting classes as an adjunct professor
at the University of Colorado  Denver and for the American Institute of Bankers,
Denver chapter.

Lazar
G. Schafran has extensive experience in the financial markets and corporate governance and
is a member of the Board of Directors of several other publicly-traded companies. Since
July 2003, Mr. Schafran has served as a Managing Director of Providence Capital, Inc., a
private New York City based activist investment firm. From 1999 through 2002, Mr. Schafran
served as Trustee, Chairman/Interim-CEO/President and Co- Liquidating Trustee of the
Special Liquidating Trust of Banyan Strategic Realty Trust. He also currently serves in
the following roles: Director, Audit Committee Chairman and a member of the Compensation
Committee of SulphCo, Inc., RemoteMDx, Inc., Tarragon Corporation, Natl Patent
Development Corp.,  and PubliCARD, Inc.; Director and Audit Committee
member of Electro-Energy Inc. Since July 2008, Mr. Schafran has served as a director,
audit committee chairman and a member of the compensation committee of two companies based
in the United Kingdom, Taurex, Inc., formerly known as Cardinal Resources, PLC, a London based oil and gas drilling
company and DollarDays International, Inc., an online wholesaler and closeout company. Mr.
Schafran received a Bachelor of Arts in Finance and a Masters in Business Administration
from the University of Wisconsin.

54

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Mukund
Krishnaswami has served as a Partner and the President of Lighthouse Funds, LLC, a private
equity fund since September 2003. Mr. Krishnaswami has also served as a Partner and the
Secretary of RCG Management, LLC, a company engaged in investment research since April
2000. Mr. Krishunaswami received a Bachelor of Science in Economics and Computer Science
from the University of Pennsylvania and a Masters in Business Administration from the
Wharton School of Business.

David
P. Kelley has served as the Managing Director of ICA, an investment bank, since October
1998. Mr. Kelley has also served as a Managing Director of Zenith Capital Partners, an
investment bank since October 2006. Mr. Kelley is a director of the Apex Greater China Fund
and Apex Capital Management Ltd. Mr. Kelley received a Bachelor of Arts degree from Emory
University, his Juris Doctorate from Temple University School of Law and an LLM in
Taxation from New York University.

Samyak
Veera was elected as Chairman of the Board in March of 2009, and has been a director since
January 2009. Since 2004, Mr. Veera has provided investment consultancy services, with a
specialty in non-traditional asset classes, to select high net worth individuals and
family offices. Since 2006, Mr. Veera has provided investment consultancy services for a
family office that invests in a wide range of non-traditional investment, including
private equity, venture capital, and real estate. From 2004 to 2006, Mr. Veera was a
consultant to a family owned boutique investment firm that specialized in the acquisition
of privately held companies. Mr. Veera previously worked at Morgan Stanley & Co. Inc
in the fixed income group and at Goldman Sachs and Co. Inc., in the equity division. Mr.
Veera is currently a director of Roselabs Finance Ltd., a publicly traded Non-Banking
Finance Company in India. Mr. Veera is a summa cum laude graduate of Harvard college with
a concentration in Applied Mathematics.

There
are no family relationships among directors or executive officers. Messrs. Krishnaswami
and Kelley were appointed directors of the Company by Iris Energy Holding Corp. pursuant to
a certain Agreement to Appoint Directors dated effective December 1, 2006 between the
Corporation and Iris Energy. Effective December 12, 2008, the Company and Iris Energy
Holding Corp. agreed to appoint Lazar G. Schafran as a member of the Board of Directors
and to terminate the Agreement to Appoint Directors.

Except
as discussed above, there are no arrangements or understandings between any director and
any other person pursuant to which any director was elected as such. The present term of
office of each director will expire at the next annual meeting of stockholders.

Our
executive officers are elected annually at the first meeting of our Board of Directors
held after each annual meeting of stockholders. Each executive officer holds office until
his successor is duly elected and qualified, until his resignation or until removed in the
manner provided by our bylaws.

55

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# Website and Code of
Business Conduct and Ethics

Our
website address is http://www.nfeinc.com. Our website includes a link to access our forms
filed with the Commission. Upon written request, we will make available free of charge our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
and all amendments to those reports as soon as reasonably practicable after such material
is electronically filed with or furnished to the SEC.

On
May 17, 2007, the Board of Directors adopted a Code of Ethics that applies to its
principal executive officer, principal financial officer and principal accounting officer.
A copy of the code of ethics applicable to our principal executive officer, principal
financial officer and principal accounting officer is attached to our Annual Report on
Form 10-KSB as exhibit 14.1 filed on May 23, 2007. Additionally, our Code of Ethics is
available in print free of charge to any stockholder who requests it. Requests should be
sent by mail to our corporate secretary at our principal office at 1789 W. Littleton
Blvd., Littleton, Colorado 80120.

# Involvement in Certain
Legal Proceedings

During
the past five years, none of our directors, executive officers or persons that may be
deemed promoters is or has been involved in any legal proceeding concerning (i) any
bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years
prior to that time; (ii) any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor offenses); (iii)
been subject to any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business, securities
or banking activity; or (iv) been found by a court, the SEC or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities law (and
the judgment has not been reversed, suspended or vacated).

# Compliance With Section
16(a) of the Exchange Act

Section
16(a) of the Exchange Act generally requires the Companys directors and executive
officers and persons who own more than 10% of a registered class of the Companys
equity securities (10% owners) to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity securities
of the Company. Directors and executive officers and 10% owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they file. To the
Companys knowledge, based solely on review of copies of such reports furnished to us
and verbal representations that no other reports were required to be filed during the
fiscal year ended February 29, 2008, all Section 16(a) filing requirements were met except
that Larry Schafran, Mukund Krishnaswami, David P. Kelley II and Samyak Verra each failed
to timely file a Form 3 upon becoming directors of the Company. Each of the directors
subsequently filed a Form 5 disclosing their respective initial reports of ownership.

56

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# Corporate Governance

Committees

The
Company does not have an audit committee, compensation committee, nominating committee, or
other committee of the board that performs similar functions. The entire board of
directors of the Company, of which none of our directors are considered
independent as defined in Section 121 of the NYSE Alternext US LLC listing
standards, perform the roles of these committees. Consequently the Company has not
designated an audit committee financial expert.

# Item 11.   Executive
Compensation

# Compensation Discussion
and Analysis

Our
executive compensation program for the named executive officers (NEOs) is
administered by the Companys Board of Directors. We do not have a compensation
committee.

# Compensation Objectives

We
believe that the compensation programs for our NEOs should reflect our performance
and the value created for the Companys stockholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values of the
Company, and should reward individual contributions to the Companys success. We
believe that the structure of the compensation programs for our executives reflects these
objectives. Our compensation programs consist of three basic components: base salary,
short-term compensation and long-term compensation.

# Elements of Compensation

The
elements of our compensation program include: (1) base salary, (2) short term
compensation, and (3) long term compensation.

Base
Salary.   Each of the Companys NEOs is paid a base salary. Base salaries for the
NEOs are established based on the scope of their performance, responsibilities,
professional qualifications and the other elements of the executives compensation.
The Companys NEOs base salary is subject to review and amendment at any time
by the board of directors, in its sole and absolute discretion.

Short-term
Compensation.   Short-term compensation consists primarily of cash bonuses. The Company does
not have a formal plan for the determination of short-term compensation. The short-term
components are designed to reward the contributions of the NEOs toward the
Companys annual financial, operational and strategic goals and reward individual
performance.

Long-term
Compensation.   Long-term compensation is comprised of various forms of equity compensation.
The long-term elements are designed to assist the Company in long-term retention of key
personnel and further align the interests of our NEOs with our shareholders.

57

---



The
determination of each element of compensation to the NEOs are entirely in the
discretion of the Board. We do not currently use any specific benchmarks or performance
goals in determining the elements of and the size of awards and compensation.

# Equity Award Practices

All
equity awards are approved before or on the date of grant. The exercise price of
at-the-money stock options and the grant price of all full-value awards is the closing
price on the date of grant.

Our
equity award approval process specifies the individual receiving the grant, the number of
units or the value of the award, the exercise price or formula for determining the
exercise price and the date of grant. The Company has no program, plan or practice to the
timing of its option grants.

# Summary Compensation
Table

The
following table summarizes the compensation of Paul G. Laird and Les Bates, the
Companys NEOs for the fiscal years ended February 28, 2009 and February 29, 2008.

|Name and
Principal Position                |  | Fiscal Year |      | Salary |  | Bonus |          | Stock
Awards |  | Option Awards |  | All other
Compensation |         | Total ($) |             
|------------------------------------------ |  | ----------- | ---- | ------ |  | ----- | -------- | ------------ |  | ------------- |  | ---------------------- | ------- | --------- | ------------
|Paul G. Laird                              |  |             | 2009 |        |  |       | $220,333 |              |  | $19,000       |  |                        | $50,500 |           | $325,000 (2)
|Chief Executive Officer and President      |  |             | 2008 |        |  |       | $158,500 |              |  | $180,000      |  |                        | $0      |           | $652,595 (2)
|                                           |  |            
|                                           |  |            
|Les Bates                                  |  |             | 2009 |        |  |       | $184,833 |              |  | $19,000       |  |                        | $50,500 |           | $260,000 (2)
|Principal Accounting and Financial Officer |  |             | 2008 |        |  |       | $150,500 |              |  | $180,000      |  |                        | $  0    |           | $522,076 (2)
|                                           |  |            
|                                           |  |            

(1)    
          Represents accrued management fees from March 1, 2007 to December 31, 2007 paid
          to Natural Resource Group Gathering LLC, the general partner of SDG
          (NRGG) prior to the sale of the General Partnership Interest to the
          Company. Paul G. Laird is a Manager of NRGG. (2)    
          Awards to Messrs. Laird and Bates were made on November 10, 2006. The aggregate
          number of options granted to Mr. Laird was 1,250,000 which had a SFAS No. 123(R)
          value of $1,300,000 or $1.04 per share and the aggregate number of options
          granted to Mr. Bates was 1,000,000 and had a SFAS No. 123(R) of $1,040,000 or
          $1.04 per share. The amounts recorded in this table are based upon the
          compensation cost recognized by the Company for the fiscal year ended February
          29, 2008 and February 28, 2007. The options are exercisable at an exercise price
          of $1.25 per share. The fair value of the options was estimated on the date of
          the grant utilizing the Black-Scholes option pricing model with the following
          assumptions: expected life of the options is 10 years, expected volatility of
          81%, risk free interest rate of 4.73% and no dividend yield. The Company
          accounts for employee stock options under the modified-prospective.
          Under the modified-prospective method, compensation cost is
          recognized in the financial statements beginning with the effective date, based
          on the requirements of SFAS No. 123(R) for all share-based payments granted
          after that date, and based on the requirements of SFAS No. 123 for all unvested
          awards granted prior to the effective date of SFAS No. 123(R). (3)    
          Represents payments for overriding royalty interests granted in connection with
          the Companys royalty pool arrangement.

58

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# Narrative Disclosure to
Summary Compensation Table and Grants of Plan-Based Awards Table

# Individual Arrangements and
Employment Agreements

The
following is a description of the individual arrangements that we have made with Messrs.
Laird and Bates with respect to their compensation. Messrs. Laird and Bates were each paid
during the fiscal year ended February 28, 2009 in accordance with their respective
employment agreements dated July 1, 2008 with us. As discussed below, effective March 1,
2009, Messrs. Laird and Bates existing employment agreements were canceled and they
entered into new employment agreements with the Company. In addition, Messrs. Laird and
Bates also have a payment that is described in the Potential Payments Upon
Termination below.

# Paul G. Laird 
Chief Executive Officer and President

Paul
G. Laird has been the President, Chief Executive Officer and a director of the Company
since April 2003. On July 31, 2008, the Company and Paul G. Laird agreed to cancel his
employment agreement and enter into a new employment agreement, effective July 1, 2008.
Pursuant to Mr. Lairds employment agreement (the Laird July 2008 Employment
Agreement), Mr. Laird shall be paid a base salary of $250,000 per year, adjusted
annually at the rate of inflation as measured by the federal Consumer Price Index, or
$10,000, whichever is greater. The Laird July 2008 Employment Agreement was to expire on
June 30, 2011.

Effective
March 1, 2009, Mr. Lairds existing employment agreement was cancelled and he entered
into a new employment agreement with the Company (the New Laird Employment
Agreement). Pursuant to the New Laird Employment Agreement, Mr. Laird will receive
base salary compensation in the amount of $160,000 per annum and the New Laird Employment
Agreement will expire on December 31, 2009; however, it is automatically renewable on an
annual basis for additional one-year increments. Mr. Lairds base salary compensation
is adjusted annually at the rate of inflation as measured by the federal Consumer Price
Index, or $6,000, whichever is greater. The compensation is subject to annual escalations
based on cost-of-living and merit increases approved by the Board of Directors. Mr. Laird
is also eligible for bonuses, to be determined by the Board of Directors in its sole
discretion. The board of directors does not currently have a formula in place to determine
the amount of bonus compensation to be paid to Mr. Laird.

On
July 23, 2008, the Company granted Les Bates 1,250,000 non-qualified stock options to
acquire shares of the Companys Common Stock under the Companys Omnibus Plan
(as defined below), which are exercisable at a price of $1.01 per share that expire in
2018 and vests 100,000 shares each fiscal quarter ending August 31, November 30, February
28 and May 31 through November 30, 2010.

59

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In
connection with the New Laird Employment Agreement, the expiration date of all stock
options previously granted to Mr. Laird was reduced to five years from the date of grant
with the exception of the stock options granted to Mr. Laird in July 2008. The expiration
date of the stock options granted to Mr. Laird in July 2008 was reduced from July 23, 2018
to March 1, 2012 and the vesting schedule was revised to provide that the options will
vest on a pro-rata basis quarterly from March 1, 2009 until March 1, 2012.

In
his position as President and Chief Executive Officer, Mr. Laird exercises detailed
supervision over the operations of the Company and is ultimately responsible for the
operations of the Company, including but not limited to land acquisitions and exploration
and development of the Companys properties. Mr. Laird further performs all duties
incident to the title of Chief Executive Officer and President and such other duties as
from time to time may be assigned to him by the Board of Directors. Mr. Bates is
responsible for all duties incident to the title of Principal Accounting and Financial
Officer, Secretary and Treasurer. The board of directors has considered these factors and
Mr. Lairds increased responsibilities as the President and Chief Executive Officer
of the Company in compensating Mr. Laird as compared to Mr. Bates. During the fiscal year
ended February 28, 2009, Mr. Laird was compensated $35,500 more in Base Salary compared to
Mr. Bates.

# Les Bates 
Principal Accounting and Financial Officer and Secretary and Treasurer

Les
Bates has been the Chief Financial Officer, Principal Accounting and Financial Officer,
Secretary, Treasurer and a director of the Company since April 2003. On July 31, 2008, the
Company and Les Bates agreed to cancel his employment agreement and enter into a new
employment agreement, effective July 1, 2008. Pursuant Mr. Bates employment agreement (the
Bates July 2008 Employment Agreement), Mr. Bates shall be paid a base salary
of $200,000 per year, adjusted annually at the rate of inflation as measured by the
federal Consumer Price Index, or $10,000, whichever is greater. The Bates July 2008
Employment Agreement was to expire on June 30, 2011.

Effective
March 1, 2009, Mr. Bates existing employment agreement was cancelled and he entered
into a new employment agreement with the Company (the New Bates Employment
Agreement). Pursuant to the New Bates Employment Agreement, Mr. Bates will receive
base salary compensation in the amount of $150,000 per annum and the New Bates Employment
Agreement will expire on December 31, 2009; however, it is automatically renewable on an
annual basis for additional one-year increments. Mr. Bates base salary compensation
is adjusted annually at the rate of inflation as measured by the federal Consumer Price
Index, or $6,000, whichever is greater. The compensation is subject to annual escalations
based on cost-of-living and merit increases approved by the Board. Mr. Bates is also
eligible for bonuses, to be determined by the Board, in its sole discretion. The board of
directors does not currently have a formula in place to determine the amount of bonus
compensation to be paid to Mr. Bates.

On
July 23, 2008, the Company granted Les Bates 1,000,000 non-qualified stock options to
acquire shares of the Companys Common Stock under the Companys Omnibus Plan
(as defined below), which are exercisable at a price of $1.01 per share that expire in
2018 and vests 100,000 shares each fiscal quarter ending August 31, November 30, February
28 and May 31 through November 30, 2010.

60

---



In
connection with the New Bates Employment Agreement, the expiration date of all stock
options previously granted to Mr. Bates was reduced to five years from the date of grant
with the exception of the stock options granted to Mr. Bates in July 2008. The expiration
date of the stock options granted to Mr. Bates in July 2008 was reduced from July 23, 2018
to March 1, 2012 and the vesting schedule was revised to provide that the options will
vest on a pro-rata basis quarterly from March 1, 2009 until March 1, 2012.

Messrs.
          Laird and Bates are also officers, directors and principal shareholders of
          Natural Resources Group, Inc., a Colorado corporation (NRGI). NRGI
          is an inactive company that was previously engaged in the business of the
          acquisition and sale of oil and gas prospects. Due to the inactive status of
          NRGI, Messrs. Laird and Bates do not believe that there is any conflict of
          interest in connection with their positions with NRGI. Messrs Laird and Bates
          each dedicate approximately 40 to 50 hours per week for Company business.

On
August 29, 2008, the Company granted 50,000 shares of its restricted common stock to
Messrs Laird and Bates, which vested immediately on that date as compensation for
services. The Companys Common Stock closed at $1.01 on that day.

# Outstanding Equity
Awards at Fiscal Year End

The
following table sets forth information concerning options awards to Messrs. Laird and
Bates at May 21, 2009.

|              | Option Awards |  |                  
|------------- | ------------- |  | -----------------
|
|Paul G. Laird |               |  | July 23,2008     
|              |               |  | May 13, 2005     
|              |               |  | November 10, 2006
|              |               |  | June 1, 2004     
|              |               |  | October 25, 2004 
|              |               |  |                  
|Les Bates     |               |  | July 23,2008     
|              |               |  | May 13, 2005     
|              |               |  | November 10, 2006
|              |               |  | June 1, 2004     
|              |               |  | October 25, 2004 

|(1) | As
a result of Mr. Laird and Mr. Bates new employment agreements, these
               stock options will vest on a pro-rata basis quarterly from March 1, 2009
until                March 1, 2012.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

61

---



# Option Exercises During
Fiscal Year

There
were no options exercised by the NEOs during the year ended February 28, 2009.

# Potential Payments Upon
Termination

Cash Compensation.

Messrs.       
          Laird and Bates employment agreements contain provisions under which the
          Company will be obligated to pay Mr. Laird and Mr. Bates certain compensation
          upon their termination. The following tables set forth the details of the
          estimated payments and benefits that would be provided to Mr. Laird and Mr.
          Bates in the event that their employment with us is terminated.

|Paul G. Laird              |  | Termination by
Mutual
Agreement |   | Death or
Disability |  | With
cause |      | Without
cause |   | For Good
Reason |  | For No
Reason |        | Termination in
connection
with a change
in control |  
|-------------------------- |  | ------------------------------- | - | ------------------- |  | ---------- | ---- | ------------- | - | --------------- |  | ------------- | ------ | -------------------------------------------------- | -
|Cash Compensation          |  |                                 | $ | 0                   |  | $          | 0    |               | $ | 0               |  | $             | 40,000 |                                                    | $
|Unvested Stock Options (2) |  |                                 |   | None                |  |            | None |               |   | None            |  |               | None   |                                                    |  
|                           |  |                                

(1)    
          Upon termination without cause, the Company shall (i) make cash payments to Mr.
          Laird, within 10 days after termination is effective of an amount equal to (1)
          Mr. Lairds base salary accrued to the date of termination; (2)
          unreimbursed expenses accrued to the date of termination; (3) an amount equal to
          three months salary paid monthly over the three months following the
          termination. (2)    
          For purposes of this table, we have assumed Mr. Lairds termination on
          February 28, 2009. (3)    
          Mr. Lairds unvested stock options granted on July 23, 2008 are exercisable
          at a price of $1.01 per share, which exceeded the closing price of the
          Companys common stock on February 28, 2009, which was $0.32 per share.

62

---



|Les Bates                  |  | Termination by
Mutual
Agreement |   | Death or
Disability |  | With
cause |      | Without
cause |   | For Good
Reason |  | For No
Reason |        | Termination in
connection
with a change
in control |  
|-------------------------- |  | ------------------------------- | - | ------------------- |  | ---------- | ---- | ------------- | - | --------------- |  | ------------- | ------ | -------------------------------------------------- | -
|Cash Compensation          |  |                                 | $ | 0                   |  | $          | 0    |               | $ | 0               |  | $             | 37,500 |                                                    | $
|Unvested Stock Options (2) |  |                                 |   | None                |  |            | None |               |   | None            |  |               | None   |                                                    |  
|                           |  |                                

(1)    
          Upon termination without cause, the Company shall (i) make a lump sum cash
          payment to Mr. Bates within 10 days after termination is effective of an amount
          equal to (1) Mr. Bates base salary accrued to the date of termination; (2)
          unreimbursed expenses accrued to the date of termination; (3) a n amount equal
          to three months salary paid monthly over the three months following the
          termination. (2)    
          For purposes of this table, we have assumed Mr. Bates termination on
          February 28, 2009. (3)    
          Mr. Bates unvested stock options granted on July 23, 2008 are exercisable
          at a price of $1.01 per share, which exceeded the closing price of the
          Companys common stock on February 28, 2009, which was $0.32 per share

# Effects of Termination
Events or Change in Control on Unvested Equity Awards

All
unvested stock option awards granted to Messrs. Laird and Bates provide that upon a change
of control, the unvested stock options shall immediately vest and be exercisable
immediately.

# Director Compensation.

During
the fiscal year ended February 28, 2009, we paid our directors $100 for a meeting of the
board of directors held in December 2008.

# Liability Insurance.

The
Company has provided liability insurance for its directors and officers since April 13,
2005. St. Paul Mercury Insurance Company is the underwriter of the current coverage, which
extends until April 13, 2010. The annual cost of this coverage is approximately $25,000.

Stock Option and Stock
Grant Plan

On
June 6, 2003, we adopted the New Frontier Energy, Inc. Stock Option and Stock Grant Plan
(the 2003 Plan). The 2003 Plan allows for the issuance of incentive
(qualified) options, non-qualified options and the grant of stock or other equity
incentives to our employees, consultants, directors and others providing service of
special significance to our company. The 2003 Plan is administered by a committee to be
appointed by our Board of Directors, or in the absence of that appointment, by the Board
itself. The 2003 Plan provides for the issuance of up to 625,000 shares or options.

Incentive
stock options may be granted only to statutory employees. Non-qualified options and stock
grants may be made to employees, consultants, directors and other individuals or entities
determined by the committee. Incentive and non-qualified options may be granted to the
same individual, in the discretion of the committee. The terms of the options or the
grants, including the number of shares covered by the option or award, the exercise price,
vesting schedule, and term, are determined in the sole discretion of the committee, except
that incentive options must satisfy the requirements of the Internal Revenue Code
applicable to incentive options. No option may be exercised more than ten years from the
date of grant. The 2003 Plan expires in 2013.

63

---



As
of May 8, 2009, we had granted 625,000 options to acquire shares of our common stock
pursuant to the 2003 Plan and there were no options to acquire shares of our common stock
available for grant under the 2003 Plan.

# 2007 Omnibus Long Term
Incentive Plan

On
June 11, 2007, the shareholders of the Company approved and ratified the Companys
2007 Omnibus Long Term Incentive Plan (the 2007 Plan), which authorizes the
issuance of up to 10,000,000 shares of the Companys Common Stock that may be issued
under the 2007 Plan.

The
purposes of the 2007 Plan are to provide those who are selected for participation in the
2007 Plan with added incentives to continue in the long-term service of the Company and to
create in such persons a more direct interest in the future success of the operations of
the Company by providing such persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Company. The 2007 Plan is
also designed to provide a financial incentive that will help the Company attract, retain
and motivate the most qualified employees, consultants and advisors. The 2007 Plan is
administered by a committee of the members of the board of directors, or in the absence of
appointment of a committee, by the entire Board of Directors.

Pursuant
to the terms of the 2007 Plan, the committee may grant incentive stock options
(Incentive Options) within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the Code), non-qualified stock options
(Non-Qualified Options), restricted stock awards, stock grants and stock
appreciation rights (collectively the Awards) to Eligible Employees and
Eligible Consultants, each as defined in the 2007 Plan. Eligible Consultants are those
consultants and advisors to the Company who are determined, by the committee, to be
individuals whose services are important to the Company and who are eligible to receive
Awards, other than Incentive Options, under the Plan. The number of Eligible Consultants
will vary from time to time.

Stock
options granted under the 2007 Plan may be either Incentive Options or Non-Qualified
Options. The exercise price of a stock option granted under the 2007 Plan will be
determined by the committee at the time the option is granted, the exercise price may or
may not be the fair market value of our Common Stock. Stock options are exercisable at the
times and upon the conditions that the committee may determine, as reflected in the
applicable option agreement. The committee will also determine the maximum duration of the
period in which the option may be exercised, which may not exceed ten years from the date
of grant. All of the shares available for issuance under the Plan may be made subject to
Incentive Options.

The
option exercise price must be paid in full at the time of exercise, and is payable (in the
discretion of the committee) by any one of the following methods or a combination thereof:

64

---



| |  | in
cash or cash equivalents,
| | - | ----------------------------

| |  | the
surrender of previously acquired shares of our Common Stock,
| | - | ----------------------------------------------------------------

| |  | authorization
for us to withhold a number of shares otherwise payable pursuant to the exercise of an
option, or
| | - | ---------------------------------------------------------------------------------------------------------------

| |  | to
the extent permitted by applicable law, through any other procedure acceptable to the
committee.
| | - | ---------------------------------------------------------------------------------------------------

The
2007 Plan provides for awards of our Common Stock that are subject to restrictions on
transferability imposed under the 2007 Plan and other restrictions that may be determined
by the committee in its discretion. Such restrictions will lapse on terms established by
the committee. Except as may be otherwise provided under the award agreement relating to
the restricted stock, a participant granted restricted stock will have all the rights of a
stockholder.

The
2007 Plan provides that the committee, in its discretion, may award Stock Appreciation
Rights (SARs), either in tandem with stock options or freestanding and
unrelated to options. From time to time during the duration of the 2007 Plan, the
committee may, in its sole discretion, adopt one or more incentive compensation
arrangements for Participants pursuant to which the Participants may acquire shares of
Stock, whether by purchase, outright grant, or otherwise.

The
maximum number of shares of Common Stock that are authorized for issuance under the 2007
Plan is 10,000,000.

The
Board of Directors may modify or terminate the 2007 Plan or any portion of the 2007 Plan
at any time (subject to participant consent where such change would adversely affect an
award previously granted to the participant), except that an amendment that requires
stockholder approval in order for the 2007 Plan to continue to comply with any law,
regulation or stock exchange requirement will not be effective unless approved by the
requisite vote of our stockholders. In addition, the 2007 Plan or any outstanding option
may not be amended to effectively decrease the exercise price of any outstanding option
unless first approved by the stockholders. No awards may be granted under the 2007 Plan
after the day prior to the tenth anniversary of its adoption date, but awards granted
prior to that time can continue after such time in accordance with their terms.

As
of May 21, 2009, 100,000 shares of restricted common stock has been issued or granted
under the 2007 Plan and 9,900,000 shares are available for issuance.

# Royalty and Working
Interest Plan

On
May 17, 2007, the Board of Directors adopted the Companys Royalty and Working
Interest Plan effective as of October 31, 2006. Pursuant to the Royalty and Working
Interest Plan, a committee consisting of members of the board of directors shall
administer the Plan and may select an overriding royalty or similar interest of an
exploratory or development property or property for distribution to the participants of
the Plan. The selection of properties is to be determined by the Board of Directors or a
committee thereof, and it will be based upon all relevant factors such as sound corporate
management and existing royalty burdens on the properties. The participants in the plan
and the total overriding royalty or similar interest set aside for distribution to the
participants in a property shall be determined by the Committee.

65

---



On
May 12, 2008, the Board of Directors granted an aggregate of 2% in overriding royalty
interests in the eight wells drilled on the Slater Dome Field in the fiscal year ended
February 29, 2008, including 0.50% to Buffalo Resources, LLC, an affiliate of Paul G.
Laird and Wolverine Resources, LLC, an affiliate of Les Bates During the fiscal year ended
February 28, 2009, Buffalo Resources, LLC and Wolverine Resources, LLC were each paid
overriding royalties in the amount of $2,773.

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

The
following table sets forth, as of May 8, 2009, certain information with respect to the
beneficial ownership of our Common Stock by each stockholder known by us to be the
beneficial owner of more than 5% of our Common Stock and by each of our current directors
and executive officers. Each person has sole voting and investment power with respect to
the shares of Common Stock, except as otherwise indicated. Beneficial ownership consists
of a direct interest in the shares of Common Stock, except as otherwise indicated.

[REMAINDER OF THIS PAGE
LEFT BLANK INTENTIONALLY]

66




|Name and Address of
Beneficial Owner     |  | Amount of Beneficial Ownership |  | Percent of Beneficial
Ownership
|---------------------------------------- |  | ------------------------------ |  | -------------------------------
|Paul G. Laird (1)                        |  |                                |  | 1,764,818                      
|1789 W. Littleton Blvd.                  |  |                               
|Littleton, Colorado 80120                |  |                               
|                                         |  |                               
|Les Bates (2)                            |  |                                |  | 1,474,953                      
|1789 W. Littleton Blvd.                  |  |                               
|Littleton, Colorado 80120                |  |                               
|                                         |  |                               
|Samyak Veera                             |  |                                |  | 0                              
|Ubi Techpark 07-95A                      |  |                               
|10 Ubi Crescent                          |  |                               
|Singapore 408564                         |  |                               
|                                         |  |                               
|Mukund Krishnaswami                      |  |                                |  | 0                              
|45 Rockefeller Plaza, 20th Floor         |  |                               
|New York, NY 10111                       |  |                               
|                                         |  |                               
|David Kelley, II                         |  |                                |  | 0                              
|One Bryant Park 37th Floor               |  |                               
|New York, NY 10036                       |  |                               
|                                         |  |                               
|Lazar G. Schafran                        |  |                                |  | 0                              
|115 East 69th Street                     |  |                               
|New York, NY 10021                       |  |                               
|                                         |  |                               
|Officers & Directors as a Group          |  |                                |  | 3,239,771                      
|                                         |  |                               
|5% or greater shareholders               |  |                               
|                                         |  |                               
|John D. McKey, Jr. and Candace McKey (3) |  |                                |  | 993,307                        
|7737 S.E. Loblolly Bay Dr.               |  |                               
|Hobe Sound, FL 33455                     |  |                               
|                                         |  |                               
|Grant Gaeth (4)                          |  |                               
|1789 W. Littleton Blvd.                  |  |                                |  | 886,501                        
|Littleton, Colorado 80120                |  |                               
|                                         |  |                               
|Jubal Terry (5)                          |  |                                |  | 1,313,700                      
|1789 W. Littleton Blvd.                  |  |                               
|Littleton, Colorado 80120                |  |                               
|                                         |  |                               
|Echo's Voice LLC (6)                     |  |                                |  | 1,126,450                      
|1535 Falmouth Ave.                       |  |                               
|New Hyde Park, NY 16040                  |  |                               

67




|Name and Address of
Beneficial Owner    |  | Amount of Beneficial Ownership |  | Percent of Beneficial
Ownership
|--------------------------------------- |  | ------------------------------ |  | -------------------------------
|Apollo Trust (7)                        |  |                                |  | 1,418,117                      
|1535 Falmouth Ave.                      |  |                               
|New Hyde Park, NY 16040                 |  |                               
|                                        |  |                               
|Aviel Faliks (8)                        |  |                                |  | 1,413,370                      
|24 Rozmus Ct.                           |  |                               
|Allendale, NJ 07401                     |  |                               
|                                        |  |                               
|Robert and Laura Hill (9)               |  |                                |  | 1,399,690                      
|700 High Street                         |  |                               
|Denver, Colorado 80218                  |  |                               
|                                        |  |                               
|Helen De Bove (10)                      |  |                                |  | 2,310,431                      
|1535 Falmouth Ave.                      |  |                               
|New Hyde Park, NY 16040                 |  |                               
|                                        |  |                               
|Iris Energy Holding Corp. (11)          |  |                                |  | 1,490,000                      
|L/2 Maxkar Bldg. PO Box 1225            |  |                               
|Apia, Samoa                             |  |                               
|                                        |  |                               
|Vision Opportunity Master Fund, LP (12) |  |                                |  | 1,490,000                      
|20 West 55th Street 5th Floor           |  |                               
|New York, NY 10019                      |  |                               
|                                        |  |                               
|Roger May (13)                          |  |                                |  | 940,698                        
|12970 West 20th Ave., Unit D            |  |                               
|Golden, Colorado 80403                  |  |                               

---

|(1) | Includes
(i) 191,100 shares of Common Stock, (ii) options to acquire 25,000 shares of
Common Stock from the Company at a price of $1.00, expiring on May 31, 2009,
(iii) options to acquire 100,000 shares of Common Stock from the Company at a
price of $0.75, expiring on October 25, 2009, (iv) options to acquire 75,000
shares of Common Stock from the Company at a price of $1.15, expiring on May 12,
2010, (v) options to acquire 1,250,000 shares of Common Stock from the Company
at a price of $1.25, which expire on November 10, 2011, (vi) and options to
acquire 104,167 shares of Common Stock from the Company at a price of $1.01,
which expire on March 1, 2012, and (vii) 19,551 shares owned by Natural Resources
Group, Inc., of which Mr. Laird is an officer, director and principal
shareholder.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
(i) 172,069 shares of Common Stock, (ii) options to acquire 25,000                shares
of Common Stock from the Company at a price of $1.00, expiring on May 31,
               2009, (iii) options to acquire 100,000 shares of Common Stock from the
Company                at a price of $0.75, expiring on October 25, 2009, (iv) options to
acquire                75,000 shares of Common Stock from the Company at a price of
$1.15, expiring on                May 12, 2010, (v) options to acquire 1,000,000 shares
of Common Stock from the                Company at a price of $1.25, which expire on
November 10, 2011, (vi) options to                acquire 83,333 shares of Common Stock
from the Company at a price of $1.01,                which expire on March 1, 2012 and
(vii) 19,551 shares owned by Natural Resources                Group, Inc., of which Mr.
Bates is an officer.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes
(i) 793,307 shares owned directly by the McKeys and (ii) 200,000                warrants
to acquire shares of our Common Stock at a price of $2.00 per share.
Candace McKey disclaims beneficial ownership of the shares held by her husband and John McKey disclaims the beneficial ownership of
the shares held by his wife.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes
(i) 57,617 shares of Common Stock owned directly by Mr. Gaeth or entities in
which Mr. Gaeth has voting and dispositive power over the shares of the Company
owned by such entities, (ii) options to acquire 59,333 shares of Common Stock
from the Company at a price of $0.75, expiring in 2014, (iii) options to acquire
500,000 shares of Common Stock from the Company at a price of $1.25, which
expire on November 10, 2016, (v) options to acquire 250,000 shares of Common
Stock from the Company at a price of $1.01, which expire on July 28, 2018, and
(iv) 19,551 shares owned by Natural Resources Group, Inc., of which Mr. Gaeth is
an officer.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

68

---



|(5) | Includes
(i) 13,500 shares of Common Stock owned directly by Mr. Terry, (ii) options to
acquire 100,000 shares of Common Stock from the Company at a price of $0.75,
expiring in 2014, (iii) options to acquire 800,000 shares of Common Stock from
the Company at a price of $1.25, which expire on November 10, 2016, and (iv)
options to acquire 400,000 shares of Common Stock from the Company at a price of
$1.01, which expire on July 28, 2018.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes
(i) 726,450 shares of Common Stock held by Echos Voice, LLC and                (ii)
400,000 shares of Common Stock underlying shares of our Series B Preferred
               Stock. Helen Del Bove, manager of Echos Voice LLC, exercises
dispositive                and voting power with respect to the shares of Common Stock
owned by Echos                Voice LLC.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes
(i) 1,018,117 shares of Common Stock held by Apollo Trust and (ii)                400,000
shares of Common Stock underlying shares of our Series B Preferred                Stock.
Helen Del Bove, Trustee of the Apollo Trust, exercises dispositive and
               voting power with respect to the shares of Common Stock owned by the
Apollo                Trust.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes
(i) 698,370 shares of Common Stock held by Mr. Faliks, (ii) 240,000 shares of
Common Stock underlying shares of our Series B Preferred Stock, and (iii)
475,000 shares of Common Stock underlying shares of our Series C Preferred
Stock. Does not include certain shares of common stock underlying our Series C
Preferred Stock, and shares underlying our AC Warrants or BC Warrants due to
conversion cap limitations on these securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes:
(i) 833,500 shares of Common Stock held directly by Robert and Laura                Hill,
Mr. Hills family foundation over which Mr. and Ms. Hill have voting
               and dispositive power and shares of Common Stock held by Mr. and Ms. Hill
as                custodians, (ii) 238,095 shares of common stock underlying our Series C
               Preferred Stock, 238,095 shares of common stock underlying our AC warrants
and                90,000 shares of Common stock underlying our BC Warrants. Does not
include                certain shares of common stock underlying our BC Warrants due to
conversion cap                limitations on these securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Includes
(i) 726,450 shares of Common Stock held by Echos Voice, LLC, (ii)
               400,000 shares of Common Stock underlying shares of our Series B Preferred
Stock                held by Echos Voice, LLC, (iii) 1,018,117 shares of Common
Stock held by                Apollo Trust and (iv) 400,000 shares of Common Stock
underlying shares of our                Series B Preferred Stock held by the Apollo
Trust. Helen Del Bove, as manager of                Echos Voice LLC and Trustee of
the Apollo Trust, exercises dispositive and                voting power over these shares
of Common Stock.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes
1,016,790 shares of Common Stock to be offered upon conversion of the
               shares of Series C Preferred Stock. Mr. Michel Escher, the owner of
Private                Structured Investment Company Ltd., the director of Iris Energy
and Mr. Sean                Browne exercises dispositive and voting power with respect to
the shares of                Common Stock owned by Iris Energy. Does not include certain
shares of common                stock underlying our Series C Preferred Stock, and shares
underlying our AC                Warrants or BC Warrants due to conversion cap
limitations on these securities.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes
101,799 shares of common stock and 1,388,201 shares of Common Stock to                be
offered upon conversion of the shares of Series C Preferred Stock. Adam
               Benowitz exercises dispositive and voting power with respect to the shares
of                Common Stock owned by the Vision Opportunity Master Fund, LP. Does not
include                certain shares of common stock underlying our Series C Preferred
Stock, and                shares underlying our AC Warrants or BC Warrants due to
conversion cap                limitations on these securities.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Represents
(i) 321,650 shares of Common Stock owned by Mr. May or in investment accounts in
which he controls or by entities in which he has voting and dispositive power,
 (ii) 500,000 options to acquire shares of Common Stock from the Company at a
price of $2.00 per share that expire on December 28, 2009,
(iii) 47,619 shares of common stock underlying our Series C Preferred Stock, (iv) 47,619 shares of
common stock underlying our AC Warrants and (v) 23,810 shares of Common Stock underlying our BC Warrants
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

69

---



# Changes In Control

The
Series C Preferred Stock automatically converts into shares of Common Stock on December 1,
2009, at which time, if not sooner, Iris Energy Holding Corp. and Vision Opportunity
Master Fund, LP will acquire a significant number of shares of our common stock
(30,796,480) and (11,844,800), respectively and will be in a position to influence the
outcome of all matters submitted to our shareholders for approval, regardless of the
preferences of the minority shareholders and will result in a change of control of the
Company.

Except
as discussed above, we know of no arrangements, including the pledge of our securities by
any person, that might result in a change in control, other than the conversion of our
outstanding 12% Series B Preferred Stock or 2.5% Series C Cumulative Convertible Preferred
Stock or exercise of outstanding warrants in certain circumstances.

# Item 13.   Certain
Relationships and Related Party Transactions

We
lease on a month to month basis approximately 1,600 square feet of office space located at
1789 W. Littleton Blvd., Littleton, Colorado 80120, for approximately $2,667 per month.
The prior lease expired on December 31, 2008. The lease is with Spotswood Properties, LLC,
(Spotswood) a Colorado limited liability company and an affiliate of Paul G.
Laird, President and Chief Executive Officer of the Company. The lease is on terms that
the Board of Directors, which includes Mr. Laird, believe are no less favorable than those
that may be obtained from third parties. Under the lease, Spotswood was paid $32,000 and
$32,000 during the fiscal years ended February 28, 2008 and February 29, 2008,
respectively.

The
Company paid GeoEx, Ltd., a corporation in which Grant Gaeth, a former director of the
Company, is an officer, directors and principal shareholder for geologic consulting
$68,750 and $85,000 during the fiscal years ended February 28, 2009 and February 29, 2008,
respectively.

Prior
to our purchase of the general partnership interests in SDG, during the year ended
February 29, 2008, SDG accrued management fees in the amount of $8,176 to NRGG, an entity
partially controlled by Paul G. Laird, President and Chief Executive Officer of the
Company.

Paul
Laird, President and Chief Executive Officer of the Company, is an officer, director and
principal shareholder of NRG and a manager of the General Partner, as defined above, of
SDG, the partnership organized for the construction of the Gas Gathering Pipeline from the
Companys Slater Dome Prospect, in which the Company owns 82.76% of the limited
partnership interests in SDG. The Company will receive 74.48% of SDG cash distributions
until the limited partners have received cash distributions equal to their initial capital
contributions and 62.07% of cash distributions thereafter (see Item 1 
Business for a description of the distributions to be allocated according to the
Partnership Agreement). The General Partner will have a 10% carried interest in the Gas
Gathering Pipeline from the Companys Slater Dome Prospect until the limited partners
have received cash distributions equal to their original contribution and 25% of cash
distributions thereafter. Further, we have agreed to pay NRG a fee of $0.50 per MCF of gas
transported through the Gas Gathering Pipeline until the costs of the Gas Gathering
Pipeline are recovered and $0.25 thereafter and to dedicate our gas to the Gas Gathering
Pipeline.

70

---



On
May 10, 2006, the Company increased its investment in SDG by acquiring additional Limited
Partnership Interests from NRGG, resulting in an additional 20.51% of SDG cash
distributions until the limited partners in SDG have received cash distributions equal to
their initial capital contributions and 17.10% of cash distributions thereafter, in
exchange for a subordinated convertible debenture in the amount of $608,194 bearing 2.5%
interest and due January 1, 2008. Paul Laird, our President and Chief Executive Officer is
a manager of NRGG, the general partner of SDG. In March 2007, the Company repaid $306,072
of the convertible debenture issued to NRGG and the balance was repaid on January 1, 2008.

Effective
October 30, 2006, the Company issued a convertible promissory note in the principal amount
of $600,000 (the Note) to Aviel Faliks, a 10% shareholder of the Company. On
January 16, 2007, Mr. Faliks converted the principal amount of the Note and all accrued
and unpaid interest in the aggregate amount of $612,500 into units sold in the
Companys offering of our Series C Preferred Stock.

On
December 26, 2007, the Company entered into a Partnership Interest Purchase Agreement with
Natural Resource Group Gathering, LLC (NRGG) to acquire NRGGs general
partnership interest (the General Partnership Interest) in Slater Dome
Gathering, LLLP (SDG). The purchase price for the General Partnership Interest
was $1,075,000 (the Purchase Price), which will be paid $268,750 in cash and
the issuance by the Company of a promissory note in the principal amount of $806,250 (the
Note). On December 24, 2008, the Note was modified to extend the maturity date
of the Note from December 31, 2008 to December 31, 2009. The Corporation made payments on
the Note on August 5, 2008, in the amount of $213,877.14 and on December 24, 2008 in the
amount of $207,443.71, including interest in the amount of $12,315 and $5,881,
respectively. The Note bears interest at a rate of 2.5% per annum. As of February 28,
2009, the balance due on the note is $403,125. The Corporation may prepay the Note at any
time without penalty, and at the option of the Corporation, the quarterly payments may be
deferred until the Maturity Date. Paul Laird, the Companys President, Chief
Executive Officer and a member of the board of directors is a manager of and owns 50% of
the membership interests of NRGG.

# Item 14.   Principal
Accountant Fees and Services

The
Company currently has no audit committee of the Board of Directors and is not required to
maintain such a committee since its stock is not quoted on NASDAQ or traded on any
national securities exchange. Accordingly, all material decisions affecting the
Companys audited financial statements, periodic disclosure with the SEC and its
relationship with its auditors are addressed by the entire Board. The Board currently has
no policies and procedures relating to the pre-approval of audit and audit related
services.

# Audit Fees

The
Company estimates that it will pay Stark Winter Schenkein & Co., LLP, an aggregate of
$32,000 for an audit of its fiscal year ended February 28, 2009 financial statements.
During the fiscal year ended February 28, 2009, Stark Winter Schenkein & Co., LLP
billed the Company an aggregate of $31,300 for an audit of its 2008 financial statements.

71

---



# Audit-Related Fees

During
the fiscal year ended February 29, 2008, Stark Winter Schenkein & Co., LLP billed the
Company an aggregate of $61,800 and during the fiscal year ended February 28, 2009, Stark
Winter Schenkein & Co., LLP billed the Company $26,800 in fees for review of its
quarterly financial statements.

# All Other Fees

During
the fiscal year ended February 28, 2009, Stark Winter Schenkein & Co., LLP billed the
Company an aggregate of $4,200 in connection with Registration Statements on Form SB-2 and
S-1 filed with the SEC. During the fiscal year ended February 28, 2008, Stark Winter
Schenkein & Co., LLP billed the Company an aggregate of $6,350 in fees in connection
with Registration Statements on Form SB-2 filed with the SEC during the fiscal year ended
February 29, 2008.

Item 15.   Exhibits

|(a) | Financial
Statements
|--- | --------------------

| | Audit Report
of Independent Registered Public Accounting Firm | F-1
| | ------------------------------------------------------------- | ---

| | Balance Sheet | F-2
| | ------------- | ---

| | Statement of Operations | F-3
| | ----------------------- | ---

| | Statement of Cash Flows | F-4
| | ----------------------- | ---

| | Statements of Stockholders' Equity | F-5
| | ---------------------------------- | ---

| | Notes to Financial Statements  y | F-6
| | -------------------------------- | ---

|(b) | Exhibits
|--- | --------

The
following is a list of exhibits filed or incorporated by reference into this Report:

| | Exhibit | No.
               Description
| | ------- | ------------------------------

| | 31.1 | Certifications
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934,
                                    as amended.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certifications
pursuant to Rule 13a-14(a) or 15d-14(a)                                     under the
Securities Exchange Act of 1934, as amended.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

72

---



# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

| |                           |                         
| | ------------------------- | ------------------------
| |                           |                         
| | NEW FRONTIER ENERGY, INC. |                         
| |                           |                         
| | By:                       | /s/ Paul G. Laird       
| |                           | Paul G. Laird, President
| |                           |                         

In
accordance with the requirements of the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the dates
indicated.

|                   |                                                                                        
|------------------ | ---------------------------------------------------------------------------------------
|                   |                                                                                        
|Date: May 29, 2009 | /s/ Paul G. Laird                                                                      
|                   | Paul G. Laird, President, CEO and Director                                             
|                   |                                                                                        
|Date: May 29, 2009 | /s/ Les Bates                                                                          
|                   | Les Bates, Secretary/Treasurer, Principal Accounting and Financial Officer and Director
|                   |                                                                                        
|Date: May 29, 2009 | /s/ Samyak Veera                                                                       
|                   | Samyak Veera,  Chairman and Director                                                   
|                   |                                                                                        
|Date: May 29, 2009 | /s/ Lazar G. Schafran                                                                  
|                   | Lazar G. Schafran,  Director                                                           
|                   |                                                                                        
|Date: May 29, 2009 | /s/ David Kelley II                                                                    
|                   | David Kelley II, Director                                                              
|                   |                                                                                        
|Date: May 29, 2009 | /s/ Mukund Krishnaswamid                                                               
|                   | Mukund Krishnaswami, Director                                                          
|                   |                                                                                        
|                   |                                                                                        
|                   |                                                                                        

73

---



# NEW FRONTIER ENERGY,
INC.

# CONSOLIDATED FINANCIAL
STATEMENTS

# FOR THE YEARS ENDED
FEBRUARY 28, 2009, AND FEBRUARY 29, 2008

# TABLE OF CONTENTS

|                                                        | Page | 
|------------------------------------------------------- | ---- | 
|Report of Independent Registered Public Accounting Firm |      | 
|                                                        |      | 
|Consolidated Financial Statements                       |      | 
|                                                        |      | 
|Balance Sheets                                          |      | 
|                                                        |      | 
|Statements of Operations                                |      | 
|                                                        |      | 
|Statement of Changes in Stockholders' Equity            |      | 
|                                                        |      | 
|Statements of Cash Flows                                |      | 
|                                                        |      | 
|Notes to Consolidated Financial Statements              |      | 

---



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of
Directors

New Frontier Energy, Inc.

We have audited the accompanying
consolidated balance sheets of New Frontier Energy, Inc. as of February 28, 2009, and
February 29, 2008, and the related consolidated statements of operations,
stockholders equity, and cash flows for the years ended February 28, 2009, and
February 29, 2008. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States of
America). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Companys internal control over financial reporting. Accordingly, we express
no such opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of New Frontier Energy, Inc. as of February 28, 2009, and February 29,
2008 and the results of its operations, and its cash flows for the years ended February
28, 2009, and February 29, 2008, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has incurred significant
losses from operations and has a working capital deficiency. These factors raise
substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to this matter are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Stark Winter Schenkein & Co., LLP

Denver, Colorado

May 20, 2009

F-1

---



# NEW FRONTIER ENERGY,
INC.                          CONSOLIDATED BALANCE SHEETS

|                                                                                | February 28,
2009 |  | February 29,
2008 |            
|------------------------------------------------------------------------------- | ----------------- |  | ----------------- | -----------
|ASSETS                                                                          |                   |  |                   |            
|CURRENT ASSETS                                                                  |                   | 
|Cash                                                                            |                   |  | $                 | 856,475    
|Accounts receivable, trade                                                      |                   |  |                   | 583,628    
|Prepaid expenses                                                                |                   |  |                   | 233,423    
|                                                                                |                   |  |                   |            
|Total current assets                                                            |                   |  |                   | 1,673,526  
|                                                                                |                   |  |                   |            
|PROPERTY AND EQUIPMENT,  NET OF ACCUMULATED DEPRECIATION                        |                   | 
|AND DEPLETION OF $2,289,466 and $1,342,731 as of February 28, 2009              |                   | 
|and February 29, 2008 respectively                                              |                   |  |                   | 14,949,366 
|                                                                                |                   |  |                   |            
|OTHER ASSETS                                                                    |                   | 
|Deposits                                                                        |                   |  |                   | 160,000    
|                                                                                |                   |  |                   |            
|                                                                                |                   |  | $                 | 16,782,892 
|                                                                                |                   |  |                   |            
|LIABILITIES AND STOCKHOLDERS' EQUITY                                            |                   | 
|CURRENT LIABILITIES                                                             |                   | 
|Accounts payable                                                                |                   |  | $                 | 862,248    
|Notes payable, affiliates                                                       |                   |  |                   | 403,125    
|Notes payable, current portion                                                  |                   |  |                   | 825,898    
|Dividends payable                                                               |                   |  |                   | 1,999,083  
|Accrued expenses                                                                |                   |  |                   | 376,133    
|Accrued interest                                                                |                   |  |                   | 2,459      
|Accrued interest, affiliates                                                    |                   |  |                   | 1,712      
|Accounts payable, affiliates                                                    |                   |  |                   | 36,430     
|                                                                                |                   |  |                   |            
|Total current liabilities                                                       |                   |  |                   | 4,507,088  
|                                                                                |                   |  |                   |            
|LONG TERM LIABILITIES                                                           |                   | 
|                                                                                |                   | 
|Long term debt                                                                  |                   |  |                   |           
|Asset retirement obligation                                                     |                   |  |                   | 290,000    
|                                                                                |                   | 
|MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY                                    |                   |  |                   | 416,516    
|                                                                                |                   | 
|STOCKHOLDERS' EQUITY                                                            |                   | 
|Preferred stock, $.001 par value, 25,000,000 shares authorized:                 |                   | 
|Series A Convertible, 100,000 shares authorized                                 |                   | 
|none issued and outstanding                                                     |                   |  |                   |           
|Series B Convertible, 36,036 shares authorized                                  |                   | 
|19,040 and 24,675  issued and outstanding as of February 28, 2009               |                   | 
|and February 29,  2008 respectively                                             |                   |  |                   | 20         
|Series C Convertible, 230,000 shares authorized                                 |                   | 
|216,000 and 219,500 issued and outstanding as of February 28, 2009              |                   | 
|and February 29, 2008 respectively                                              |                   |  |                   | 216        
|Common stock, $.001 par value, 500,000,000 shares authorized,                   |                   | 
|13,441,884 and 10,178,078 shares issued and outstanding as of February 28, 2009 |                   | 
|and February 29, 2008 respectively                                              |                   |  |                   | 13,441     
|Additional paid in capital                                                      |                   |  |                   | 43,460,402 
|Accumulated (deficit)                                                           |                   |  |                   | (31,904,791
|                                                                                |                   |  |                   |            
|                                                                                |                   |  |                   | 11,569,288 
|                                                                                |                   |  |                   |            
|                                                                                |                   |  | $                 | 16,782,892 
|                                                                                |                   |  |                   |            

See accompanying notes
to the consolidated financial statements.

F-2

---



# NEW FRONTIER ENERGY,
INC.                   CONSOLIDATED STATEMENTS OF OPERATIONS

|                                               | Fiscal Year Ended | 
|---------------------------------------------- | ----------------- | 
|
|Operating revenues                             |                   | 
|Oil and gas sales                              |                   | 
|Gathering fees                                 |                   | 
|                                               |                   | 
|                                               |                   | 
|                                               |                   | 
|Operating expenses                             |                   | 
|Exploration costs, including dry holes         |                   | 
|Lease operating expenses                       |                   | 
|Cost of gas gathering                          |                   | 
|General and administrative                     |                   | 
|Issuance of common stock warrants              |                   | 
|Impairment of oil and gas properties           |                   | 
|Depreciation, depletion and amortization       |                   | 
|                                               |                   | 
|Total operating expenses                       |                   | 
|                                               |                   | 
|(Loss) from operations                         |                   | 
|                                               |                   | 
|Other income (expense)                         |                   | 
|Interest income                                |                   | 
|Gain (loss) on sale of assets                  |                   | 
|Interest expense                               |                   | 
|Debt issuance costs, non-cash                  |                   | 
|                                               |                   | 
|Other income (expense), net                    |                   | 
|                                               |                   | 
|(Loss) before income taxes                     |                   | 
|                                               |                   | 
|Income taxes                                   |                   | 
|Current                                        |                   | 
|Deferred                                       |                   | 
|                                               |                   | 
|                                               |                   | 
|                                               |                   | 
|Minority interest in net (income) of           |                   | 
|consolidated subsidiary                        |                   | 
|                                               |                   | 
|Net (loss)                                     |                   | 
|                                               |                   | 
|Preferred stock dividends and distributions    |                   | 
|to minority interests                          |                   | 
|                                               |                   | 
|Net (loss) attributable to common shareholders |                   | 
|                                               |                   | 
|Net (loss) per common share                    |                   | 
|Basic and diluted                              |                   | 
|                                               |                   | 
|Weighted average shares outstanding            |                   | 
|Basic and diluted                              |                   | 
|                                               |                   | 

See accompanying notes
to the consolidated financial statements.

F-3

---



|                                                             | Series A Preferred
$.001 Par Value |  | Series B Preferred
$.001 Par Value |   | Series C Preferred
$.001 Par Value |   | Common Stock
$.001 Par Value |  | Additional
Paid-in |        | Accumulated |  
|------------------------------------------------------------ | ---------------------------------- |  | ---------------------------------- | - | ---------------------------------- | - | ---------------------------- |  | ------------------ | ------ | ----------- | -
|
|Balance February 28, 2007                                    |                                    |  |                                    |  |                                    | $ |                             |  |                    | 28,490 |             | $
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |            
|Conversion of Series B Preferred to common stock             |                                    |  |                                    |   |                                    |   |                              |  |                    | (4,335 | )           |  
|Exercise Series B Common Stock warrants                      |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Conversion of Series C Preferred to common stock             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Conversion of convertible debt and interest  to common stock |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Issuance  of common stock warrants                           |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Exercise placement agent warrants                            |                                    |  |                                    |   |                                    |   |                              |  |                    | 520    |             |  
|Less Series C preferred stock issuance costs                 |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Minority interest in consolidated subsidiary                 |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Timing differences due to subsidiary year end                |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Preferred stock dividends                                    |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Distribution from consolidated entity (Note 1)               |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Net (loss) for the year                                      |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Balance February 29, 2008                                    |                                    |  |                                    |  |                                    |   |                             |  |                    | 24,675 |             |  
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |            
|Conversion of Series B Preferred to common stock             |                                    |  |                                    |   |                                    |   |                              |  |                    | (8,333 | )           |  
|Conversion of Series C Preferred to common stock             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Exercise Series B Preferred placement agent warrants         |                                    |  |                                    |   |                                    |   |                              |  |                    | 2,698  |             |  
|Exercise Series B Common Stock warrants                      |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Timing differences due to subsidiary year end                |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Issuance  of common stock warrants                           |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Issuance  of common stock awards                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Issuance of common stock for Series C Preferred dividends    |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Less stock  issuance costs                                   |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Preferred stock dividends                                    |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Distribution from consolidated entity (Note 1)               |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Net (loss) for the year                                      |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|Balance February 28, 2009                                    |                                    |  |                                    |  |                                    | $ |                             |  |                    | 19,040 |             | $
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |             |  
|                                                             |                                    |  |                                    |   |                                    |   |                              |  |                    |        |            

See accompanying notes
to the consolidated financial statements.

F-4

---



# NEW FRONTIER ENERGY,
INC.                 CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                          | Fiscal Year Ended | 
|------------------------------------------------------------------------- | ----------------- | 
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                     |                   | 
|Net (loss)                                                                |                   | 
|Adjustments to reconcile net (loss) to net cash                           |                   | 
|(used in) operating activities:                                           |                   | 
|Depreciation, depletion and amortization                                  |                   | 
|Debt issuance costs, noncash                                              |                   | 
|Minority interest in net income  (loss) of consolidated subsidiary        |                   | 
|Stock option expenses, amortization and grants                            |                   | 
|Issuance of restricted stock awards                                       |                   | 
|Bad debt expense                                                          |                   | 
|Impairment of oil and gas properties                                      |                   | 
|(Increase) decrease in assets:                                            |                   | 
|Accounts receivable, trade                                                |                   | 
|Prepaid expense                                                           |                   | 
|Increase (decrease) in liabilities:                                       |                   | 
|Accounts payable                                                          |                   | 
|Accrued expenses                                                          |                   | 
|                                                                          |                   | 
|Net cash (used in) operating activities                                   |                   | 
|                                                                          |                   | 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                     |                   | 
|                                                                          |                   | 
|(Increase) decrease in other assets                                       |                   | 
|Purchase of property and equipment                                        |                   | 
|                                                                          |                   | 
|Net cash (used in) investing activities                                   |                   | 
|                                                                          |                   | 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                     |                   | 
|                                                                          |                   | 
|Payment of  convertible debentures                                        |                   | 
|Payment of  convertible debentures affiliate                              |                   | 
|Payment of notes payable                                                  |                   | 
|Payment of notes payable, affiliate                                       |                   | 
|Proceeds from common stock warrant conversions                            |                   | 
|Proceeds from issuance of preferred stock                                 |                   | 
|Proceeds from exercise of placement agent warrants                        |                   | 
|Preferred stock dividends paid                                            |                   | 
|Issuance of common stock                                                  |                   | 
|Cost of issuance of equity for cash                                       |                   | 
|Purchase of minority interest                                             |                   | 
|Minority interest in subsidiary                                           |                   | 
|Distributions to minority interest holders in consolidated subsidiary     |                   | 
|                                                                          |                   | 
|Net cash provided (used) by financing activities                          |                   | 
|                                                                          |                   | 
|(DECREASE) IN CASH                                                        |                   | 
|                                                                          |                   | 
|BEGINNING BALANCE                                                         |                   | 
|                                                                          |                   | 
|ENDING BALANCE                                                            |                   | 
|                                                                          |                   | 
|Cash paid for income taxes                                                |                   | 
|                                                                          |                   | 
|Cash paid for interest                                                    |                   | 
|                                                                          |                   | 
|Supplemental schedule of non-cash investing and                           |                   | 
|financing activities:                                                     |                   | 
|                                                                          |                   | 
|Series A, B and C preferred stock converted to common stock               |                   | 
|Conversion of convertible debentures and accrued interest to common stock |                   | 
|Issuance of common stock in connection with a cashless exercise           |                   | 
|Purchase of general partnership interest in subsidiary                    |                   | 
|Purchase of property and equipment with a note payable                    |                   | 

See accompanying notes
to the consolidated financial statements.

F-5

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|1. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

| | Organization
| | ------------

| | New
Frontier Energy, Inc. (or the Company) was incorporated as Storage
Finders.com under the laws of Colorado on January 7, 2000. In March 2001 the Company
changed its name to New Frontier Energy, Inc. The Company is an oil and gas exploration
company operating primarily in Colorado and Wyoming.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
February 6, 2002, Wyoming Oil & Minerals, Inc. (Wyoming) completed a
share exchange with the Company. Under the terms of the share exchange, the shareholders
of the Company surrendered their shares in exchange for shares of Wyoming. The Companys
shareholders became shareholders in Wyoming, and the Company became a wholly owned
subsidiary of Wyoming until June 30, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 30, 2003, Wyomings Board of Directors approved a dividend in the form of the
common stock of its subsidiary, New Frontier. The dividend was paid in the form of one
share of New Frontier common stock for every four shares of common stock of Wyoming.
Shareholders of record of Wyoming as of the close of business on June 30, 2003, the
record date, were issued a certificate representing one share of New Frontier for each
four shares of Wyoming they held at that date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company owns 82.76% of the limited partnership interests (the Limited Partnership
Interests) and 100% of the general partnership interest in Slater Dome Gathering,
LLLP (SDG). SDG owns the 18-mile gas gathering line that transports the
Companys natural gas from the Slater Dome Field to the Questar transportation line
in Baggs, Wyoming. SDG is considered a variable interest entity under Financial
Accounting Standards Board (FASB) Interpretation No. 46-R, Consolidation
of Variable Interest Entities. FIN 46-R, and has been consolidated into our
financial statements, effective March 31, 2005. The gathering line was completed on June
3, 2005. The Company began selling gas in June 2005. SDG, a calendar year-end company,
was formed on September 1, 2004, and was inactive until it received its initial funding
on May 18, 2005. In December 2007, the Company purchased the general partner interests in
SDG from an affiliate. SDG is treated as an 87.07% owned subsidiary.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Principles
of Consolidation
| | ---------------------------

| | The
consolidated financial statements include the accounts of the Company and those of SDG.
All significant inter-company accounts and transactions have been eliminated.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2003, the FASB issued FIN No. 46-R, which modifies certain provisions and
effective dates of FIN No. 46, sets forth the criteria to be used in determining whether
an investment in a variable interest entity should be consolidated. These provisions are
based on the general premise that if a company controls another entity through interests
other than voting interests, that company should consolidate the controlled entity. The
Company consolidated SDG under the provisions of FIN No. 46-R through December 2007, when
SDG became an 87.07% owned subsidiary through the purchase of its entire general partner
interests (see Note 2).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SDG
has a calendar year end of December 31, which is consolidated with the Company effective
February 28, 2009 and February 29, 2008. Any timing differences are recorded as
additional paid-in capital in the accompanying financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-6

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Going
Concern
| | -------------

| | As
shown in the accompanying financial statements, we have incurred significant operating
losses since inception aggregating $31,904,791 and have negative working capital
of $2,833,562 at February 28, 2009. As of February 28, 2009, we have limited
financial resources until such time that we are able to generate positive cash
flow from operations. These factors raise substantial doubt about our ability to continue
as a going concern. Our ability to achieve and maintain profitability and positive
cash flow is dependent upon our ability to locate profitable mineral properties,
generate revenue from our planned business operations, and control exploration
cost. Management plans to fund its future operation by joint venturing, obtaining additional
financing, and attaining additional commercial production. However, there is no assurance
that we will be able to obtain additional financing from investors or private
lenders, or that additional commercial production can be attained.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
financial statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
Recognition
| | -------------------

| | The
Company records revenues from the sales of natural gas and oil when delivery to the
customer has occurred and title has transferred. This occurs when natural gas or oil has
been delivered to a pipeline or a tank lifting has occurred. The Company receives payment
from one to three months after delivery. At the end of each month, the Company estimates
the amount of production delivered to purchasers and the price to be received. Variances
between estimated revenue and actual payment are recorded in the month the payment is
received. However, differences have been insignificant.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accounts
Receivable
| | -------------------

| | The
Company uses the direct write-off method for bad debts; this method expenses
uncollectible accounts in the year they become uncollectible. Any difference between this
method and the allowance method is not material.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
and Cash Equivalents
| | -------------------------

| | The
Company considers all highly liquid investments with an original maturity of three months
or less to be cash equivalents.
| | -----------------------------------------------------------------------------------------------------------------------------

| | Net
Income (Loss) per Common Share
| | ----------------------------------

| | The
Company calculates net income (loss) per share as required by Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share. Basic
earnings (loss) per share are calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings (loss) per
share are calculated by dividing net income (loss) by the weighted average number of
common shares and dilutive common stock equivalents outstanding. During the periods when
they are anti-dilutive, common stock equivalents, if any, are not considered in the
computation.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Use
of Estimates
| | ----------------

| | The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying
notes. Estimates of oil and gas reserve quantities provide the basis for calculation of
depletion, depreciation, and amortization, and impairment, each of which represents a
significant component of the financial statements. Actual results could differ from those
estimates.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-7

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Concentration
of Credit Risk
| | ----------------------------

| | Financial
instruments that potentially subject the Company to concentrations of credit risk consist
primarily of cash equivalents. The Company places its cash equivalents with a high credit
quality financial institution. The Company periodically maintains cash balances at a
commercial bank in excess of the Federal Deposit Insurance Corporation insurance limit of
$250,000. At February 28, 2009, the Companys uninsured cash balance was $157,359.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair
Value of Financial Instruments
| | -----------------------------------

| | Fair
value estimates discussed herein are based upon certain market assumptions and pertinent
information available to management as of February 28, 2009. The respective carrying
values of certain on-balance-sheet financial instruments approximated their fair values.
These financial instruments include cash, accounts receivable, accounts payable, notes
payable and accrued expenses. Fair values were assumed to approximate carrying values for
these financial instruments because they are short term in nature, their carrying amounts
approximate fair values, or they are receivable or payable on demand. The carrying value
of the Companys long-term debt approximates its fair value based on current market
conditions for similar debt instruments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accounting
for Oil and Gas Activities
| | -------------------------------------

| | The
Company uses the successful efforts method of accounting for oil and gas producing
activities. Under this method, acquisition costs for proved and unproved properties are
capitalized when incurred. Exploration costs, including geological and geophysical costs,
the costs of carrying and retaining unproved properties, and exploratory dry hole
drilling costs are expensed. Development costs, including the costs to drill and equip
development wells and successful exploratory drilling costs that locate proved reserves
are capitalized. In addition, the Company limits the total amount of unamortized
capitalized costs to the value of future net revenues, based on current prices and costs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Unproved
oil and gas properties are periodically assessed for impairment of value, and a loss is
recognized at the time of impairment by providing an impairment allowance together with a
charge to operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenues
from the sale of oil and gas production are recognized when title passes, net of
royalties.
| | ----------------------------------------------------------------------------------------------------

| | Depreciation
and Depletion
| | --------------------------

| | Depreciation
and depletion of the capitalized costs for producing oil and gas properties are provided
by the unit-of-production method based on proved oil and gas reserves. Uncompleted wells
and equipment are reflected at the Companys incurred cost and represent costs of
drilling and equipping oil and gas wells that are not completed as of the balance sheet
date. The costs of unproved leases, which become productive, are reclassified to proved
properties when proved reserves are discovered in the property. Unproved oil and gas
interests are carried at original acquisition costs, including filing and title fees.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Real
Property and Equipment
| | ---------------------------

| | Real
property and equipment consists of furniture, fixtures and equipment and are recorded at
cost and depreciated using the straight-line method over the estimated useful lives of
five to seven years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | The
gas gathering line is recorded at cost and is being depreciated on a straight-line basis
over an estimated 20 year useful life. The useful life may be limited to the useful life
of current and future recoverable reserves serviced by the pipeline.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Maintenance
and repairs are charged to expense as incurred.
| | -----------------------------------------------------------

| | Real
property consists of the Steamboat Property and is depreciated over its estimated useful
life of 30 years
| | --------------------------------------------------------------------------------------------------------------

| | Impairment
of Long Lived Assets
| | -------------------------------

| | SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,requires
that an asset be evaluated for impairment when the carrying amount of an asset exceeds
the sum of the undiscounted estimated future cash flows of the asset. In accordance with
the provisions of SFAS No. 144, the Company reviews the carrying values of its long-lived
assets whenever events or changes in circumstances indicate that such carrying values may
not be recoverable. If, upon review, the sum of the undiscounted pretax cash flows is
less than the carrying value of the asset group, the carrying value is written down to
estimated fair value. Individual assets are grouped for impairment purposes at the lowest
level for which there are identifiable cash flows that are largely independent of the
cash flows of other groups of assets, generally on a field-by-field basis. The fair value
of impaired assets is determined based on quoted market prices in active markets, if
available, or upon the present values of expected future cash flows using discount rates
commensurate with the risks involved in the asset group. The long-lived assets of the
Company, which are subject to evaluation, consist primarily of oil and gas properties.
The Companys evaluation has resulted in a charge to operations for impairment in
fiscal 2009 in the amount of $7,500,000 and $0 in fiscal 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
Taxes
| | ------------

| | The
Company accounts for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes and FASB Interpretation No. 48Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No 109 (FIN 48), which
require the liability method of accounting for income taxes. The liability method
requires the recognition of deferred tax assets and liabilities for future tax
consequences of temporary differences between the financial statement basis and the tax
basis of assets and liabilities.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-Based
Compensation
| | ------------------------

| | The
Company accounts for stock-based compensation in accordance with SFAS No. 123(R), Share-based
Payment (SFAS No. 123R) which requires companies to measure all
stock compensation awards using a fair value method and recognize the related
compensation cost in its financial statements. This statement replaces SFAS No. 123 Accounting
for Stock Based Compensation,and supersedes ABP Opinion No. 25, Accounting
for Stock Issued toEmployees.Beginning with the Companys
quarterly period that began on March 1, 2006, The Company adopted the provisions of SFAS
No. 123R and is required to expense the fair value of employee stock options and similar
awards in the financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Major
Customers
| | ---------------

| | Sales
to two major unaffiliated customers for the year ended February 28, 2009 were $1,219,565
(89.96% of sales) and $136,117 (10.04% of Sales) respectively. Sales to three major
unaffiliated customers for the year ended February 29, 2008 were $461,700 (61% of sales),
$160,742 (21% of sales) and $135,297 (18% of sales), respectively. Accounts receivable
from two major unaffiliated customers at February 28, 2009 were $568,731 (95% of accounts
receivable) and $32,817 (5% of accounts receivable). The Company, however, believes that
it is not dependent upon any of these customers due to the nature of its product. The
terms of the sales agreement provide the Company may terminate by giving written notice
thirty days prior to the anniversary date of the agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-9

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Debt
With Detachable Warrant and/or Beneficial Conversion Feature
| | -----------------------------------------------------------------

| | The
Company accounts for the issuance of detachable stock purchase warrants in accordance
with Accounting Principles Board Opinion No. 14 (APB No. 14), whereby the
fair value of the debt and the detachable warrants are separately measured and the
proceeds from the debt are allocated on a pro-rata basis to both the debt and the
detachable warrants. The resulting discount from the fair value of the debt allocated to
the warrant, which is accounted for as paid-in capital, is amortized over the estimated
life of the debt.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
accordance with the provisions of Emerging Issues Task Force (EITF) Issue No.
98-5 and EITF No. 00-27, a portion of the proceeds received are allocated to any embedded
beneficial conversion feature, based on the difference between the effective conversion
price of the proceeds allocated to the convertible debt and the fair value of the
underlying common stock on the date the debt is issued. In addition, the detachable stock
purchase warrants proceeds are first allocated to the stock purchase warrants and the
debt, and then the resulting debt proceeds are allocated between the beneficial
conversion feature, which is accounted for as paid-in capital, and the initial carrying
amount of the debt. The discount resulting from the beneficial conversion feature is
amortized over the estimated life of the debt.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Asset
Retirement Obligations
| | ----------------------------

| | In
June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development, and normal use of the asset. The Companys asset retirement obligations
relate primarily to the retirement of oil and gas properties and related production
facilities, lines, and other equipment used in the field operations, together with the
gas gathering pipeline. SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The fair value of the liability is added
to the carrying amount of the associated asset. This additional carrying amount is then
depreciated over the life of the asset. The liability increases due to the passage of
time based on the time value of money until the obligation is settled.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company recognized $0 and $150,000 in the fiscal years ending February 28, 2009, and
February 29, 2008, respectively. Implementing SFAS No. 143 resulted in an increase of
$150,000 for the fiscal year ended February 29, 2008, in oil and gas properties reflected
in the present value of the future asset retirement obligation, and an offsetting
increase in liabilities represents the establishment of an asset retirement obligation
liability.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recent
Accounting Pronouncements
| | --------------------------------

| | In
February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities, including an amendment
of FASB Statement No. 115. (SFAS 159) SFAS 159 permits companies to
choose to measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities. The
provisions of SFAS 159 will become effective as of the beginning of the fiscal year that
begins March 1, 2008. The adoption of these new requirements did not have a material
effect on the Companys financial position, results of operations, or cash flows.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-10

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | In
December 2007 the FASB issued SFAS No. 141R (Revised 2007), Business Combinations (SFAS
No. 141R), which replaces FASB Statement No. 141. SFAS No. 141R will change how
business acquisitions are accounted for and will impact financial statements on both the
acquisition date and in subsequent periods. SFAS No. 141R is effective as of the
beginning of an entitys fiscal year that begins after December 15, 2008. The
Company is in the process of evaluating the impacts, if any, of adopting this
pronouncement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2007 the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS
No. 160 will change the accounting and reporting for minority interests, which, will be
recharacterized as non-controlling interests and classified as a component of equity.
This statement is effective as of the beginning of an entitys first fiscal year
beginning after December 15, 2008. The Company is in the process of evaluating the
impacts of adopting this pronouncement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities. The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced disclosures to
enable investors to better understand their effects on an entitys financial
position, financial performance, and cash flows. It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The Company has not yet determined the impact, if any, of SFAS 161
on its consolidated financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2008, the FASB issued Staff Position No. 142-3, Determination of Useful
Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142). The intent of
this FSP is to improve the consistency between the useful life of a recognized intangible
asset under SFAS 142 and the period of expected cash flows used to measure the fair value
of the asset under SFAS No 141(R), Business Combinations(SFAS No. 141(R)),
and other U.S. Generally Accepted Accounting Principles. FSP FAS 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. The guidance for
determining the useful life of a recognized intangible asset should be applied
prospectively to intangible assets acquired after the effective date. The disclosure
requirements should be applied prospectively to all intangible assets recognized as of,
and subsequent to, the effective date. The Company will apply the requirements of FSP FAS
142-3 upon its adoption on January 1, 2009 and it currently does not expect the
adoption of FSP FAS 142-3 to have a material impact on its financial position and results
of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement)", or FSP No. APB 14-1. FSP No. APB 14-1 clarifies
that convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14
Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.
Additionally, the FSP specifies that issuers of such instruments should separately
account for the liability and equity components in a manner that will reflect the entitys
nonconvertible debt borrowing rate when interest cost is recognized in subsequent
periods. FSP No. APB 14-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. The implementation of this standard is not expected to have an impact on our
consolidated financial position or results of operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-11

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the
sources of accounting principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted
accounting principles (GAAP) in the United States (the GAAP hierarchy). This
Statement is effective 60 days following the Security and Exchange Commissions
approval of the Public Company Accounting Oversight Board amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles. The Company currently adheres to the GAAP hierarchy as presented
in SFAS No. 162, and therefore does not expect its adoption will have a material impact
on its consolidated results of operations and financial condition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities(FSP EITF
03-6-1). FSP EITF 03-6-1 applies to the calculation of earnings per share (EPS)
described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per
Share for share-based payment awards with rights to dividends or dividend
equivalents. It states that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of EPS pursuant to the
two-class method. FSP EITF 03-6-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. Early adoption is prohibited. All prior-period EPS data presented shall be
adjusted retrospectively to conform to the provisions of this FSP. The Company will apply
the requirements of FSP EITF 03-6-1 upon its adoption on January 1, 2009 and it
currently does not expect the adoption of FSP EITF 03-6-1 to have a material impact
on its financial position and results of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September 2008, the FASB issued FSP FAS No. 133-1 and FIN 45-4, Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133
and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB
Statement No. 161 (FSP FAS No. 133-1 and FIN 45-4). FSP FAS No. 133-1
and FIN 45-4 requires enhanced disclosures about credit derivatives and guarantees. The
FSP is effective for financial statements issued for reporting periods ending after
November 15, 2008. The adoption of FSP FAS No. 133-1 and FIN 45-4 did not have a
material impact on the Companys consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active (FSP FAS 157-3), to help
constituents measure fair value in markets that are not active. FSP FAS 157-3 is
consistent with the joint press release the FASB issued with the Securities and Exchange
Commission (SEC) on September 30, 2008, which provides general
clarification guidance on determining fair value under SFAS No. 157 when markets are
inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. The adoption of FSP 157-3 did not have a
material impact on the Companys consolidated financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-12

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 Disclosures by Public
Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities (FSP FAS 140-4 and FIN 46R-8). FSP FAS 140-4 and FIN 46R-8
require additional disclosures about transfers of financial assets and involvement with
variable interest entities. The requirements apply to transferors, sponsors, servicers,
primary beneficiaries and holders of significant variable interests in a variable
interest entity or qualifying special purpose entity. FSP FAS 140-4 and FIN 46R-8 is
effective for financial statements issued for reporting periods ending after December 15,
2008. FSP FAS 140-4 and FIN 46R-8 affect only disclosures and therefore did not have a
material impact on the Partnerships consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 31, 2008, the Securities and Exchange Commission (SEC) adopted major
revisions to its rules governing oil and gas company reporting requirements. These
include provisions that permit the use of new technologies to determine proved reserves
and that allow companies to disclose their probable and possible reserves to investors.
The current rules limit disclosure to only proved reserves. The new disclosure
requirements also require companies to report the independence and qualifications of the
person primarily responsible for the preparation or audit of reserve estimates, and to
file reports when a third party is relied upon to prepare or audit reserves estimates.
The new rules also require that oil and gas reserves be reported and the full-cost
ceiling value calculated using an average price based upon the prior 12-month period. The
new oil and gas reporting requirements are effective for annual reports on Form 10-K
for fiscal years ending on or after December 31, 2009, with early adoption not
permitted. We are in the process of assessing the impact of these new requirements on our
financial position, results of operations and financial disclosures.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Reclassifications
| | -----------------

| | Certain
amounts reported in the Companys financial statements for the years ended February
29, 2008, may have been reclassified to conform to the current year presentation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | SLATER
DOME GATHERING, LLLP
|-- | ---------------------------

| | Effective
December 31, 2007 the Company entered into a Purchase and Sale Agreement with Natural
Resource Group Gathering, LLC (NRGG), whereby the Company increased its
investment in Slater Dome Gathering, LLLP (SDG) by acquiring the general
partners interest for $1,075,000 consisting of $268,750 in cash and executing a
promissory note in the amount of $806,250. The Note bears interest at a rate of 2.5% per
annum and is payable in quarterly installments of $201,563 plus interest due December 31,
2008. On December 26, 2008, the due date was extended to December 31, 2009. At the option
of the Company, quarterly payments may be deferred until the maturity date. The balance
of the note was $403,125 at February 28, 2009, and $806,250 at February 29, 2008. As a
result, the Company owns the 25% general partners interest together with 82.76% of
the Class A limited partnership interests in SDG. The Company will receive 84.487% of SDG
cash distributions until the limited partners have received cash distributions equal to
their initial capital contributions and 87.07% of cash distributions thereafter.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
purchase price was based on a valuation analysis of the gathering line by an independent
consulting firm that provides engineering project management, due diligence and expert
witness services to the oil and gas pipeline industry.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Through
December 31, 2007, SDG is considered a variable-interest entity under FIN No. 46-R and
has been consolidated in the Companys financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company executed SDGs limited liability limited partnership agreement (the Partnership
Agreement). The Partnership Agreement provides that distributions will be allocated
(i) first, to the Company as the General Partner in the amount of the Out-of-Pocket Costs
(as defined in the Partnership Agreement) to reimburse the Company as the General Partner
for such costs; (ii) second, 90% shall be distributed to the Limited Partners of SDG (pro
rata in accordance with their respective Percentage Interests), as defined in the
Partnership Agreement and 10% shall be distributed to the Company as the General Partner
until such time as the Unreturned Capital (as defined in Partnership Agreement) of
all of the Limited Partners is reduced to zero; and (iii) thereafter, 75% to the Limited
Partners (pro rata in accordance with their respective Percentage Interests) and 25% to
the Company as the General Partner. Distributions shall be distributed at such time or
times as the Company as the General Partner shall determine in its sole discretion. The
General Partnership interest has a 10% and 25% carried interest before and after payout
respectively. The Company receives 2% of gross receipts as a management fee. Further, the
Company, along with the other working interest owners at the property located at the
Slater Dome Prospect, have agreed to pay SDG a fee of $0.50 per million British Thermal
Units (MMBtu) of gas transported through the line until the costs of the
gathering pipeline are recovered and $0.25 thereafter and to dedicate their gas to the
gathering pipeline. The producers at the Slater Dome Prospect have entered into a ten
year agreement with SDG whereby each producer agrees to deliver a minimum daily quantity (MDQ)
of gas during the first five years following the date the line starts transporting gas.
The following table summarizes the MDQ requirements:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|Year |  | Minimum
Producers' Aggregate
MDQ/MMBtu Quantities | 
|---- |  | ------------------------------------------------- | 
|1    |  |                                                   | 
|2    |  |                                                   | 
|3    |  |                                                   | 
|5    |  |                                                   | 
|6    |  |                                                   | 
|7    |  |                                                   | 
|8    |  |                                                   | 
|9    |  |                                                   | 
|10   |  |                                                   | 

| | The
producers have agreed to guarantee two-thirds of the original construction costs
amounting to $2,609,841 through producers payment of gathering fees. The fees may
be increased to cover annual calculations of shortfalls from the MDQ; the fee may be
increased at the end of each of the first four years beginning June 3, 2005. If the total
gathering revenue for the preceding year is less than two-thirds of the construction
costs divided by five, SDG may increase the gathering fee for the year immediately
following the year in which the shortfall occurs by the dollar amount per MMBtu necessary
to make up the monetary equivalent of the annual shortfall. In the event the total
gathering revenue for the proceeding year is greater than two-thirds of the construction
costs divided by five, SDG will credit such excess to the following years
comparison.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | CASH
AND CASH EQUIVALENTS
|-- | -------------------------

| | For
purposes of reporting cash flows, the Company considers all short-term investments with
an original maturity of three months or less when purchased to be cash equivalents. Cash
in the amount of $400,000 is subject to an assignment agreement/security agreement
collateralizing the note payable.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | ACCOUNTS
RECEIVABLE
|-- | -------------------

| | The
Company incurred a $217,200 charge to operations in connection with a receivable from a
drilling contractor that is in collection and is fully reserved as of February 28, 2009.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-14

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|5. | PROPERTY
AND EQUIPMENT
|-- | ----------------------

| | Property
and equipment consists of the following:
| | -------------------------------------------------

|                                            | 2009 |  | 2008 |           
|------------------------------------------- | ---- |  | ---- | ----------
|Natural gas gathering line                  |      |  | $    | 2,600,163 
|Proved oil and gas properties               |      |  |      | 9,234,733 
|Unproved oil and gas properties             |      |  |      | 3,809,442 
|Office furniture and equipment              |      |  |      | 1,594,494 
|                                            |      |  |      |           
|                                            |      |  |      | 17,238,832
|                                            |      | 
|Less accumulated depreciation and depletion |      | 
|and amortization                            |      |  |      | (2,289,466
|                                            |      |  |      |           
|Net property and equipment                  |      |  | $    | 14,949,366
|                                            |      |  |      |           

| | Total
depreciation and depletion of property and equipment amounted to $946,732 and $731,835
for the years ended February 28, 2009, and February 29, 2008, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2009, the Company recorded an impairment of $7,500,000
related to its oil and gas properties.
| | --------------------------------------------------------------------------------------------------------------------------------

|6. | Notes
payable
|-- | -------------

| | On
June 15, 2007, the Company acquired a facility (the Steamboat Property) to be
used as a field office and provide lodging while Company personnel are working the Slater
Dome Field area. The purchase price for the Steamboat Property was $1,175,000. In
connection with the purchase of the Steamboat Property, the Company entered into a
five-year mortgage in the principal amount of $881,250 (the Steamboat Mortgage),
which bears interest at a rate of 7.56% per annum. The Steamboat Mortgage requires equal
monthly payments during the term of the mortgage in the amount of $8,256, with the
balance of $698,604 due on June 14, 2012. The Steamboat Mortgage can be prepaid at any
time without penalty. The Steamboat Mortgage is collateralized by the Steamboat Property.
The Steamboat Mortgage terms were modified on February 26, 2009 whereby the maturity date
was changed to September 1, 2009. The balance on the note was $825,898 and $860,171 at
February 28, 2009, and February 28, 2008, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-15

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Convertible
Debentures
| | ----------------------

| | On
July 22, 2005, the Company closed on the sale (the Offering) to accredited
investors of 92 investment units (the Units) at a purchase price of $30,000
per Unit for gross and net proceeds of $2,760,000, of which $145,200 have been converted
into shares of common stock. Each Unit consists of: (i) $30,000 of 2.5% two-year
Convertible Debentures, convertible into 25,000 shares of Common Stock, $0.001 par value
(the Common Stock) of the Company at the rate of $1.20 per share, the market
value of the shares at the date the Company entered into the Placement Agent Agreement
described below (the Debentures) and (ii) a three-year warrant to purchase
12,500 shares of New Frontier Energy Common Stock at an exercise price of $2.00 per share
(the Warrants). The original Debenture conversion rate of $1.20 was adjusted
to $1.08 and the original Warrant exercise price was adjusted from $2.00 to $1.33 on
January 16, 2007 along with an increase in the number of warrant shares to 13,861 per
unit pursuant to anti-dilution rights. On or about July 22, 2007, the holders of the
previously unconverted Debentures in the principal and interest amount of $2,706,279
converted the Debentures into 2,505,354 shares of Common Stock at a price of $1.08 per
share (the Converted Debentures). Debentures in the principal amount of
$30,000 and interest of $1,500 were paid in cash to the holders.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
June 28, 2005, the Company entered into a Placement Agent Agreement with Westminster
Securities Corporation (Westminster or the Placement Agent),
pursuant to which Westminster would act as the exclusive placement agent for the Company
with respect to the Offering. For acting as Placement Agent, Westminster or its designees
received 170,000 shares of Common Stock, or 8% of the number of Shares of Common Stock
underlying the Debentures sold by Westminster (the Placement Agent Shares).
The Placement Agent Shares were valued at $236,300, based on an average closing price of
$1.39 during the period of services. Further, Westminster or its designees received
Warrants to purchase 10% of (i) the number of Shares of Common Stock underlying the
Debentures sold by Westminster (assuming the initial conversion price of $1.20) and (ii)
the number of shares of Common Stock underlying the Warrants issued (assuming the initial
exercise price of $2.00).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Warrants were valued using the Black-Scholes option pricing model based on the market
price of the Common Stock at the commitment date. The Warrant valuation of $1,509,798 has
been allocated to additional paid-in capital. After allocating value to the Warrants, the
Company used the intrinsic value method to determine that all of the remaining proceeds
should be allocated to the embedded beneficial conversion feature which amounted to
$268,358. The total cost associated with the offering in the amount of $1,778,156 was
amortized over 24 months commencing July 22, 2005. Amortization expense amounted to
$349,673 for the year ended February 29, 2008, and is included in Debt issuance costs,
non-cash in the accompanying financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | Asset
Retirement obligations
|-- | ----------------------------

| | The
implementation of SFAS No. 143 during fiscal 2008 resulted in an increase of $150,000 in
oil and gas properties reflected in the present value of the future asset retirement
obligation, and an offsetting increase in liabilities represents the establishment of an
asset retirement obligation liability.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | A
reconciliation of the Companys asset retirement obligation liability as of February
28, 2009 and February 29, 2008 is as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------

|                                      | February 28,
2009 |  | February 29,
2008 |        
|------------------------------------- | ----------------- |  | ----------------- | -------
|Beginning asset retirement obligation |                   |  | $                 | 290,000
|Liabilities incurred                  |                   |  |                   |       
|Changes in estimates                  |                   |  |                   |       
|Accretion expense                     |                   |  |                   |       
|                                      |                   |  |                   |        
|Ending asset retirement obligation    |                   |  | $                 | 290,000
|                                      |                   |  |                   |        

|8. | Income
Taxes
|-- | ------------

| | The
Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes, which
requires use of the liability method. SFAS No. 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes, referred to as
temporary differences. Deferred tax assets and liabilities at the end of each period are
determined using the currently-enacted tax rates applied to taxable income in the periods
in which the deferred tax assets and liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the statutory
federal income tax rate to income before provision for income taxes. The Companys
estimated effective tax rate of 38.95% is offset by a reserve due to the uncertainty
regarding the realization of the deferred tax asset. It is more likely than not that the
net tax deferred benefits will not be realized.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
provision (benefit) for income taxes consists of the following components:
| | ------------------------------------------------------------------------------

|         | February 28, 2009 |  | February 29, 2008 |  
|-------- | ----------------- |  | ----------------- | -
|Current  |                   |  | $                 | 
|Deferred |                   |  |                   | 
|         |                   |  |                   |  
|         |                   |  |                   | 
|         |                   |  |                   |  

| | The
tax effects of temporary differences and carry forwards that give rise to significant
portions of deferred tax assets and liabilities consist of the following:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|                                  | February 28, 2009 |  | February 29, 2008 |           
|--------------------------------- | ----------------- |  | ----------------- | ----------
|Deferred tax assets:              |                   |  |                   |           
|Net operating loss carry forwards |                   |  |                   | 10,750,000
|                                  |                   | 
|Deferred tax liability:           |                   | 
|Property and equipment            |                   |  |                   | (2,150,000
|                                  |                   |  |                   |           
|                                  |                   |  |                   | 8,600,000 
|                                  |                   | 
|Less valuation allowance          |                   |  |                   | 8,600,000 
|                                  |                   |  |                   |           
|                                  |                   |  | $                 | 0         
|                                  |                   |  |                   |           

| | A
reconciliation of the statutory U.S. federal rate and effective rates is as follows for
the fiscal years ended February 28, 2009 and February 29, 2008:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | 
|--------------------------- | 
|Statutory U.S. federal rate | 
|State income taxes          | 
|                            | 
|                            | 
|Net operating loss          | 
|                            | 
|                            | 
|                            | 

| | The
Companys provision for income taxes differs from applying the statutory United
States federal income tax rate to income before income taxes. The primary differences
result from net operating losses.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has a consolidated tax loss carry forward of $15,866,500, which expires through
2018. However, because of the Section 382 limitation, the portion of the Companys
total net operating loss carry forward which may be utilized through expiration is not
currently known, but it is more likely than not that the tax loss carry forwards will not
be utilized before expiration. The principle difference between the operating loss for
income tax purposes and book purposes results from the income tax treatment of intangible drilling and completion costs and the tax
 method of accelerated depreciation of tangible equipment as compared with the straight line method for books.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | STOCKHOLDERS EQUITY
|-- | --------------------

| | Series
A Convertible Preferred Stock
| | ------------------------------------

| | On
March 1, 2004, we issued 50,000 shares of Series A Preferred Stock. Effective November 8,
2004, the Series A Preferred Stock Certificate of Designation was amended to provide that
the Series A Preferred Stock would rank in pari passu to the Series B Preferred Stock for
payment of dividends, redemption, and liquidation. The Series A Preferred Stock paid a
cumulative, preferential cash dividend at the rate of 18% of the $5.00 issue price per
year, payable monthly in arrears. Pursuant to the terms of the Series A Preferred Stock,
the holders of the Series A Preferred Stock could convert any or all of the shares into
shares of our Common Stock at the rate of $0.65 per share and unless previously
concerted, all of the Series A Preferred Stock will automatically convert into Common
Stock on the two-year anniversary of the issue date, or March 1, 2006. On March 1, 2006,
the Series A Preferred Stock automatically converted into 384,615 shares of the Companys
Common Stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-18

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | During
the year ended February 28, 2007, the holder converted the accrued dividends on the
Series A Preferred Stock in the amount of $7,274 to 11,191 shares of Common Stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of February 28, 2009, there are no shares of the Series A Preferred Stock outstanding.
| | -----------------------------------------------------------------------------------------

| | Series
B Convertible Preferred Stock
| | ------------------------------------

| | Effective
November 1, 2004, the board of directors of the Company approved an amendment to the
Companys Articles of Incorporation to provide for the issuance of up to 36,036
shares of Series B 12% Cumulative Convertible Preferred Stock, $0.001 par value (the
Series B Preferred Stock). The issue price of the Series B Preferred Stock is
$100.00 per share (the Series B Issue Price). The Series B Preferred Stock
ranks in pari passu with the Series A Preferred for payment of dividends, redemption, and
liquidation. Each share of Series B Preferred Stock shall be convertible, at the option
of the Holder, into that number of shares of Common Stock determined by dividing the
Series B Issue Price of the aggregate number of shares of Series B Preferred Stock being
converted plus any accrued and unpaid dividends by $.65 per share, unless otherwise
adjusted. The Series B Preferred Stock pays a cumulative, preferential cash dividend
equal to 12% of the Series B Issue Price per year and is payable quarterly in arrears.
The dividend is payable out of funds legally available for that purpose and will
accumulate during any period when it is not paid.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2005, the Company issued 32,175 shares of Series B Preferred
Stock in connection with a private placement, realizing gross proceeds of $3,217,500
offset by offering expenses in the amount of $456,524 resulting in proceeds to the
Company of $2,760,976.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Series B Preferred Stock has customary weighted-average anti-dilution rights with respect
to any subsequent issuance of Common Stock or Common Stock equivalents at a price less
than $0.65 per share, and otherwise in connection with forward or reverse stock splits,
stock dividends, recapitalizations, and the like. The anti-dilution provisions shall not
apply to certain employee stock options and shares issued in connection with certain
mergers and acquisitions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Except
as otherwise provided in the Series B Preferred Stock Certificate of Designation with
respect to matters that adversely affect the rights of the holders of the Series B
Preferred Stock, and as otherwise required by law, the Series B Preferred Stock has no
voting rights.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
any liquidation, dissolution, or winding-up of the Company, whether voluntary or
involuntary, the holders of the Series B Preferred Stock shall be entitled to receive out
of the assets of the Company, whether such assets are capital or surplus, for each share
of Series B Preferred Stock an amount equal to the stated value ($100.00) of the Series B
Preferred Stock per share plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages owing. If the assets of the Company are insufficient to pay
such amounts in full, then the entire assets to be distributed to the holders of the
Series B Preferred Stock shall be distributed among the holders of the Series B Preferred
Stock and the holders of the Series A Preferred Stock ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-19

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | On
or after February 1, 2007, and in the event the closing bid price of the Companys
Common Stock has closed for 20 consecutive trading days at a price not less than $1.30
(subject to adjustment), the Company may deliver notice to holders of the Series B
Preferred Stock of the Companys irrevocable election to redeem all or part of the
Series B Preferred Stock. The redemption price is to be an amount equal to the stated
value ($100.00) of the Series B Preferred Stock per share plus any accrued and unpaid
dividends thereon and any other fees or liquidated damages owing. The Company must
provide 30 days written notice to the holders of the Series B Preferred Stock.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the offer and sale of Series B Preferred Stock, the Company granted a
warrant to purchase 24.75 units of the Series B Preferred Stock offering at a purchase
price of $13,000 per Unit (the Placement Agent Warrant). Each Unit consists
of (i) $13,000 of Series B Preferred Stock, convertible into 20,000 shares of Common
Stock at the rate of $0.65 per Share; and (ii) a three-year warrant to purchase 27,131
shares of Common Stock at an exercise price of $1.11 per share on the same terms and
conditions as the warrants issued to the Series B Preferred Stock holders. The 18,562
outstanding Placement Agent Warrants were exercised on May 1, 2008 and the Company issued
2,698 shares of Series B Preferred Stock and received proceeds of $269,749.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2009 7,813 Series B Preferred shares were converted to
1,281,980 shares of common stock. During the year ended, February 29, 2008, 4,335 Series
B Preferred shares were converted to 666,924 shares of common stock.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of February 28, 2009, there are 19,040 shares of Series B
Preferred Stock issued and outstanding.
| | ----------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2009, the Company paid cash dividends on the Series B
Preferred Stock in the amount of $314,927. The Company recorded accrued dividends of
$261,457 as of and for the year ended February 28, 2009. During the year ended February
29, 2008, the Company paid cash dividends on the Series B Preferred Stock in the amount
of $104,710. The Company recorded accrued dividends of $324,181 as of and for the year
ended February 29, 2008.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series
C Convertible Preferred Stock
| | ------------------------------------

| | Effective
November 22, 2006, the board of directors of the Company. approved an amendment to the
Companys Articles of Incorporation to provide for the issuance of up to 230,000
shares of Series C 2.5% Cumulative Convertible Preferred Stock par value $0.001 (the
Series C Preferred Stock)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2007 the Company issued an aggregate of 444.50 investment
units (the Units). Each Unit consists of: (i) $50,000 of 2.5% Series C
Cumulative Convertible Preferred Stock, par value $0.001 (the Series C Preferred),
convertible into 47,619 shares of the Companys $0.001 par value common stock (the
Common Stock) at a price of $1.05 per share (the Conversion Price);
(ii) a three-year warrant to purchase 47,619 shares of Common Stock at an exercise price
of $1.50 per share (the AC Warrants); and (iii) a three year warrant to
purchase 23,810 shares of Common Stock at an exercise price of $2.00 per share (the BC
Warrants). In connection with the purchase of a 200 Unit block, the Company agreed
to grant that purchaser the right to appoint an equal number of members of the board of
directors that have not been appointed by that entity as are present on the Board at any
time. The Company issued 222,250 shares of Series C Preferred Stock (444.5 units)
realizing gross proceeds of $22,225,000, of which $600,000 was received in advance on a
note payable that was subsequently converted to Series C Preferred Stock, offset by
offering expenses in the amount of $401,326 resulting in proceeds to the Company of
$21,823,674.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-20

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | The
stated value and issue price of the Series C Preferred stock is $100.00 per share.
Holders of the Series C Preferred Stock are entitled to receive cumulative dividends at
the rate of 2.5% per annum, payable quarterly on January 31, April 30, July 31 and
October 31, beginning with January 31, 2007. The form of dividend payments may be, at the
Companys option, in cash or shares of the Companys $0.001 par value common
stock (the Common Stock), or a combination thereof. The Series C Preferred is
convertible into shares of Common Stock at the rate of $1.05 per share.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Series C Preferred Stock has customary weighted-average anti-dilution rights with respect
to any subsequent issuance of Common Stock or Common Stock equivalents at a price less
than $1.05 per share, and otherwise in connection with forward or reverse stock splits,
stock dividends, recapitalizations, and the like. The anti-dilution provisions shall not
apply to employee stock options and shares issued in connection with certain mergers and
acquisitions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Except
as otherwise provided in the Series C Preferred Stock Certificate of Designation with
respect to matters that adversely affect the rights of the holders of the Series C
Preferred Stock, and as otherwise required by law, the Series C Preferred Stock shall
have no voting rights.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, the holders of the Series C Preferred Stock shall be entitled to receive out
of the assets of the Company, whether such assets are capital or surplus, for each share
of Series C Preferred Stock an amount equal to the stated value ($100.00) of the Series C
Preferred Stock per share plus any accrued and unpaid dividends thereon and any other
fees or liquidated damages owing. If the assets of the Company are insufficient to pay
such amounts in full, then the entire assets to be distributed to the holders of the
Series C Preferred Stock shall be distributed among the holders of the Series C Preferred
Stock ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has the right to redeem the Series C Preferred commencing six months from a final
closing date in the event the closing bid price of the Companys Common Stock has
closed for 20 consecutive trading days at a price not less than $3.00 (subject to
adjustment) by delivering notice to holders of the Series C Preferred Stock. The maximum
aggregate number of Series C Preferred Stock which may be redeemed pursuant to any such
redemption notice in any given week shall be that number of shares of Series C Preferred
Stock for which the underlying Common Stock (together with any accrued dividends payable
in Common Stock thereon) are less than or equal to 25% of the average daily trading
volume of the Common Stock for the 20 Trading Days preceding each such redemption notice
date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the years ended February 28, 2009 and February 29, 2008, 3,500 and 2,750 Series C
Preferred shares were converted to 333,332 and 261,904 shares of common tock
respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 28, 2009, the Company paid $12,074 in cash and issued 2,479
shares of common stock for dividends and recorded accrued dividends of $543,570. During
the year ended February 29, 2008, the Company paid cash dividends on the Series C
Preferred Stock in the amount of $6,983 and recorded accrued dividends of $554,895 as of
and for the year ended February 29, 2008.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-21

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Warrants
| | --------

| | During
the year ended February 28, 2009, the board of directors approved the issuance of
Warrants and Stock Options to investor relations firms, employees and others.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended February 29, 2008, the board of directors approved the issuance of
Warrants and Stock Options to investor relations firms, employees and others.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series
A Convertible Preferred Stock and Note Payable Warrants
| | --------------------------------------------------------------

| | In
connection with the Series A Preferred Stock, the Company issued warrants to purchase
150,000 shares of Common Stock in October 2004, which were adjusted to 203,072 on January
16, 2007 because of the anti-dilution rights. The Warrants originally provided the holder
of the warrants the right to purchase shares of the Companys Common Stock at an
exercise price of $1.50, which was adjusted to $1.11 on January 16, 2007. The Warrants
expired unexercised on May 1, 2008.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series
B Convertible Preferred Stock Warrants
| | ---------------------------------------------

| | The
Company issued 4,950,000 warrants in connection with the Series B Preferred Stock
placement, adjusted to 5,180,391 on January 16, 2007 because of the anti-dilution rights.
The warrants originally provided the holder warrants the right to purchase shares of the
Companys Common Stock at an exercise price of $1.50, which was adjusted to $1.11 on
January 16, 2007 pursuant to anti-dilution rights. On January 28, 2008, Board of
Directors of the Company extended the expiration date for exercising these warrants
originally set to expire on February 1, 2008 to May 1, 2008. During the fiscal year ended
February 28, 2009, warrants were exercised to purchase 1,542,765 shares of common stock
for proceeds of $1,712,469. The remaining warrants expired May 1, 2008.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Placement
Agent Warrant Series B Preferred Stock
| | ------------------------------------------------

| | In
connection with the offer and sale of our Series B Preferred Stock, the Company granted a
warrant to purchase 24.75 units of the Series B Preferred Stock offering at a purchase
price of $13,000 per Unit (the Placement Agent Warrant). Each Unit consists
of (i) $13,000 of Series B Preferred Stock, convertible into 20,000 shares of Common
Stock at the rate of $0.65 per Share; and (ii) a three-year warrants to purchase 27,131
shares of Common Stock at an exercise price of $1.11 per share on the same terms and
conditions as the warrants issued to the Series B Preferred Stock holders. The Placement
Agent Warrant expired on May 1, 2008. During the year ended February 29, 2008, the
Company received $52,000 for the purchase of four Units. The Series B Preferred Stock
shares were simultaneously converted into 80,000 shares of Common Stock. In connection
with this transaction, warrants to purchase 108,108 shares of Common Stock at $1.11,
expiring May 1, 2008, were issued. On May 1, 2008, the Company issued 2,413.125 Series B
Convertible Preferred shares receiving gross proceeds in the amount of $269,747 from the
exercise of the 18.5625 placement agent warrants, issued in connection with the placement
of our Series B Convertible Preferred stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.5%
Convertible Debenture Warrants
| | -----------------------------------

| | In
connection with the offer and sale of the Debentures, the Company issued 1,150,000
warrants adjusted to 1,716,451 on January 16, 2007 pursuant to anti-dilution rights. The
warrants provide the holders the right to purchase shares of the Companys Common
Stock at an exercise price of $1.33 after adjusting for anti-dilution. The estimated fair
value of these warrants was recorded as debt issuance costs in the amount of $966,000 and
was determined using the Black  Scholes Model. Each warrant expired on July 22,
2008. The fair value has been recorded as debt issuance costs at the inception of the
agreements and amortized over the term of the debt.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Placement
Agent Warrant 2.5% Convertible Debenture
| | --------------------------------------------------

| | In
connection with the placement of the Series B Preferred Stock issue on July 22, 2005, the
Placement Agent or its designees received three-year warrants to purchase 230,000 shares
adjusted to 255,040 on January 16, 2007 pursuant to anti-dilution rights and 115,000
shares adjusted to 173,533 at $1.08 and $1.33 per share, respectively after adjusting for
anti-dilution. Using the Black Scholes Model, the fair values of these warrants were
estimated at $143,000 and $96,600, respectively. The fair value has been recorded as debt
issuance costs at the inception of the agreements and amortized over the term of the
debt.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series
C Convertible Preferred Stock Warrants
| | ---------------------------------------------

| | AC
Warrants
| | -----------

| | The
AC Warrants are three year warrants issued between December 1, 2006 and January 16, 2007,
are exercisable at $1.50 per common share and have a call feature (the AC Redemption)
for $0.01 per share provided that the Companys Common Stock has been trading at not
less than $3.50 per share for twenty consecutive trading days and the underlying shares
of Common Stock are subject to an effective registration statement that has been
continuously effective for a minimum of thirty days. The AC Redemption shall take effect,
which date shall be at least 65 calendar days after the redemption notice is sent to
Holder, provided, however, that the maximum aggregate redemption amount for all holders
of the same class as the AC Warrant (the Aggregate Redemption Amount) per
calendar week shall be 25% of the average daily trading volume of the Companys
Common Stock for the 20 trading days preceding each such redemption notice. The Aggregate
Redemption Amount shall be applied on a pro-rata basis to each holder of warrants of the
same class as the AC Warrant based upon the respective number of shares of Common Stock
underlying each holders warrants.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
AC Warrants have customary weighted-average anti-dilution rights with respect to any
subsequent issuance of Common Stock or Common Stock equivalents at a price less than
$1.50 per share (subject to adjustment), and otherwise in connection with forward or
reverse stock splits, stock dividends, recapitalizations, and the like. The anti-dilution
provisions shall not apply to employee stock options and shares issued in connection with
certain mergers and acquisitions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
AC Warrants have certain conversion cap limitations which prevent the Company and the
holders of the AC Warrants from effecting any exercise of the AC Warrants to the extent
that, after giving effect to the exercise, a holder and its affiliates would beneficially
own in excess of certain beneficial ownership limitations. The Beneficial Ownership
Limitation is (i) 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of the AC Warrants held by the applicable holder, with respect to any holder
whose initial number of Warrant Shares under the AC Warrants is less than 5,000,000, and
(ii) 9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon exercise of the AC
Warrants held by the applicable holder, with respect to any holder whose initial number
of Warrant Shares hereunder is 5,000,000 or more. The Beneficial Ownership Limitation
with respect to a holder subject to the 4.99% limitation described in part (i) of the
definition of Beneficial Ownership Limitation, may be waived by such holder, at the
election of such holder, upon not less than 61 days prior notice to the
Corporation, to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of the AC Warrant held by the applicable holder.
Upon such a change by a holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation shall not be
further waived. The Beneficial Ownership Limitation with respect to a holder subject to
the 9.99% limitation may not be waived by such holder. The Beneficial Ownership
Limitation shall terminate with respect to any Warrant Shares being redeemed by the
Company, which termination shall be effective 60 days subsequent to the transmission of a
Redemption Notice to the holder.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-23

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | As
of February 28, 2009, there were 21,166,658 AC Warrants issued and outstanding and none
had been exercised and the expiration date is as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

|                  | 
|----------------- | 
|December 1, 2009  | 
|December 29, 2009 | 
|January 16, 2010  | 
|                  | 
|                  | 
|                  | 

| | BC
Warrants
| | -----------

| | The
BC Warrants are three year warrants issued between December 1, 2006 and January 16, 2007,
are exercisable at $2.00 per common share and have a call feature (the BC Redemption)
for $0.01 per share provided that the Companys Common Stock has been trading at not
less than $4.00 per share for twenty consecutive trading days and the underlying shares
of Common Stock are subject to an effective registration statement that has been
continuously effective for a minimum of thirty days. The BC Redemption shall take effect,
which date shall be at least 65 calendar days after the redemption notice is sent to
Holder, provided, however, that the maximum aggregate redemption amount for all holders
of the same class as the BC Warrant (the BC Aggregate Redemption Amount) per
calendar week shall be 25% of the average daily trading volume of the Companys
Common Stock for the 20 trading days preceding each such redemption notice. The BC
Aggregate Redemption Amount shall be applied on a pro-rata basis to each holder of
warrants of the same class as the BC Warrant based upon the respective number of shares
of Common Stock underlying each holders warrants.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
BC Warrants have customary weighted-average anti-dilution rights with respect to any
subsequent issuance of Common Stock or Common Stock equivalents at a price less than
$2.00 per share (subject to adjustment), and otherwise in connection with forward or
reverse stock splits, stock dividends, recapitalizations, and the like. The anti-dilution
provisions shall not apply to employee stock options and shares issued in connection with
certain mergers and acquisitions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-24

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | The
BC Warrants have certain conversion cap limitations which prevent the Company and the
holders of the BC Warrants from effecting any exercise of the BC Warrants to the extent
that, after giving effect to the exercise, a holder and its affiliates would beneficially
own in excess of certain beneficial ownership limitations. The Beneficial Ownership
Limitation is (i) 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of the BC Warrants held by the applicable holder, with respect to any holder
whose initial number of Warrant Shares under the BC Warrants is less than 5,000,000, and
(ii) 9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon exercise of the BC
Warrants held by the applicable holder, with respect to any holder whose initial number
of Warrant Shares hereunder is 5,000,000 or more. The Beneficial Ownership Limitation
with respect to a holder subject to the 4.99% limitation described in part (i) of the
definition of Beneficial Ownership Limitation, may be waived by such holder, at the
election of such holder, upon not less than 61 days prior notice to the
Corporation, to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of the BC Warrant held by the applicable holder.
Upon such a change by a holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation shall not be
further waived. The Beneficial Ownership Limitation with respect to a holder subject to
the 9.99% limitation may not be waived by such holder. The Beneficial Ownership
Limitation shall terminate with respect to any Warrant Shares being redeemed by the
Company, which termination shall be effective 60 days subsequent to the transmission of a
Redemption Notice to the holder.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of February 28, 2009, there were 10,583,545 BC Warrants issued and outstanding and none
had been exercised. and the expiration date is as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------

|                  | 
|----------------- | 
|December 1, 2009  | 
|December 29, 2009 | 
|January 16, 2010  | 
|                  | 
|                  | 
|                  | 

| | Placement
Agent Warrants for Series C Offering
| | ----------------------------------------------

| | For
acting as the placement agent for the sale of the Series C Preferred Stock, the Placement
Agent or its designees are entitled to receive warrants to purchase 439,287 shares of the
Companys Common Stock at a price of $1.05 per share (the Placement Agent
Warrant), 439,287 shares of the Companys Common Stock at a price of $1.50 per
share on similar terms as the AC Warrants (the AC Placement Agent Warrants)
and 219,645 shares of the Companys Common Stock at a price of $2.00 per share on
similar terms as the BC Warrants (the BC Placement Agent Warrants). The AC
Placement Agent Warrants and the BC Placement Agent Warrants are included in the amount
of AC Warrants and BC Warrants issued and outstanding. Each of the Placement Agent
Warrants, AC Placement Agent Warrants and BC Placement Agent Warrants expires on January
16, 2010.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
AC Placement Agent Warrants may be called on the same terms as the AC Redemption. The BC
Placement Agent Warrants may be called on the same terms as the BC Redemption.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-25

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Nonqualified
Stock Options
| | --------------------------

| | On
July 23, 2008, the Company granted certain employees and agents of the Company an
aggregate of 4,200,000 options to acquire shares of the Companys Common Stock,
which are exercisable at a price of $1.01 (the Non-Qualified Stock Options).
Options representing 1,950,00 of the Non-Qualified Stock Options vest at a rate of 12.5%
each fiscal quarter ending August 31, November 30, February 28, May 31 through November
30, 2010 and expire on July 23, 2018. Options representing 2,250,000 of the Non-Qualified
Stock Options have a five year life and vest quarterly over three years commencing with
the quarter ending May 31, 2009. The Companys stock closed at $1.01 on July 23,
2008. The fair value of the Non-Qualified Stock Options was estimated on the date of the
grant utilizing the Black-Scholes option pricing model with the following assumptions:
expected life of the options is 10 years, expected volatility of 65%, risk free interest
rate of 4.2% and no dividend yield. The fair value for the Non-Qualified Stock Options
granted was approximately $0.77 per share. The value of the options was recorded at
$3,221,600 and $561,000 was amortized in the fiscal year ended February 28, 2009.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 30, 2008, the Company issued a three-year nonqualified stock option for 100,000
shares of Common Stock at an exercise price of $2.00 per share to an unrelated party for
shareholder relations services rendered. The closing price of the stock on January 30,
2008 was $1.20 per share. Using the Black-Scholes model with estimated volatility of
69.08%, risk-free interest rate of 4.11%, and a life of three years, the estimated fair
value of the grant is $41,400 which was recorded as general and administrative, stock
compensation expense in the fiscal year ended February 29, 2008.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 31, 2007, the Company issued a three-year nonqualified stock option for 100,000
shares of Common Stock at an exercise price of $2.00 per share to an unrelated party for
shareholder relations services rendered. The closing price of the stock on December 31,
2007 was $1.17 per share. Using the Black-Scholes model with estimated volatility of
69.08%, risk-free interest rate of 4.04%, and a life of three years, the estimated fair
value of the grant is $40,200 which was recorded as general and administrative, stock
compensation expense in the fiscal year ended February 29, 2008.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
October 15, 2007, the Company issued a three-year stock purchase warrant for 350,000
shares of Common Stock at an exercise price of $2.00 per share to an unrelated party for
shareholder relations services. The closing price of the stock on October 15, 2007, was
$1.15 per share. Using the Black-Scholes model with estimated volatility of 72.41%,
risk-free interest rate of 4.25%, and a life of three years, the estimated fair value of
the grant is $143,900, which was recorded as general and administrative expense, stock
compensation expense in the fiscal year ended February 29, 2008.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 28, 2006, the Company issued a three-year nonqualified stock option for 500,000
shares of Common Stock at an exercise price of $2.00 per share for shareholder relations
services rendered. The closing price of the stock on December 28, 2006, was $1.45 per
share. Using the Black-Scholes model with estimated volatility of 82.75%, risk-free
interest rate of 4.73%, and a life of three years, the estimated fair value of the grant
is $350,317, which was recorded as general and administrative, stock compensation expense
in the fiscal year ended February 28, 2007.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November 10, 2006, the Company granted certain employees and agents of the Company an
aggregate of 3,950,000 options to acquire shares of the Companys Common Stock,
which are exercisable at a price of $1.25. These stock options vest at a rate of 12.5%
each fiscal quarter ending November 30, February 28, May 31 and August 31; 2,250,000
options expire November 10, 2011 and 1,700,000 options expire on November 30, 2014. The
Companys stock closed at $1.24 on November 10, 2006. The fair value of the options
was estimated on the date of the grant utilizing the Black-Scholes option pricing model
with the following assumptions: expected life of the options is 10 years, expected
volatility of 81%, risk free interest rate of 5% and no dividend yield. The fair value
for the options granted was approximately $1.04 per share. The value of the options was
recorded at $4,124,400 and $515,550 is being amortized quarterly as the options vest.
During the fiscal years ended February 28, 2009, February 29, 2008, and February 28,
2007, $1,031,100, $2,062,000 and $1,031,100, respectively, were charged to general and
administrative stock compensation expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-26

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | The
following table summarizes information about fixed-price stock options and warrants
outside of the plans at February 28, 2009 and February 29, 2008.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | February 28, 2009 |  | February 29, 2008 |           
|------------------- | ----------------- |  | ----------------- | ----------
|
|Beginning of period |                   |  |                   | 40,100,012
|                    |                   |  |                   |           
|Granted             |                   |  |                   | 501,689   
|                    |                   |  |                   |           
|Exercised           |                   |  |                   | (1,542,765
|                    |                   |  |                   |           
|Expired             |                   |  |                   | (6,058,733
|                    |                   |  |                   |           
|                    |                   |  |                   |           
|End of period       |                   |  |                   | 33,000,203
|                    |                   |  |                   |           
|                    |                   |  |                   |           

| | Non-incentive
Stock Option Plan Shares Exercisable
| | --------------------------------------------------

|                    | February 28, 2009 |  | February 29, 2008 |          
|------------------- | ----------------- |  | ----------------- | ---------
|
|Beginning of period |                   |  |                   | 2,962,500
|                    |                   |  |                   |          
|Vested              |                   |  |                   | 1,718,750
|                    |                   |  |                   |          
|Exercised           |                   |  |                   |         
|                    |                   |  |                   |          
|Expired             |                   |  |                   |         
|                    |                   |  |                   |          
|                    |                   |  |                   |          
|End of period       |                   |  |                   | 4,681,250
|                    |                   |  |                   |          

F-27

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | As
a result of the grant of stock options to certain employees and others during the year
ended February 28, 2009 the following increase in options and warrants is summarized as
follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Number
of Shares
Exercisable | 
|------------------------------ | ---------------------------- | 
|Warrants  exercisable at $1.01 |                              | 
|                               |                              | 
|Warrants  exercisable at $1.25 |                              | 
|                               |                              | 
|                               |                              | 
|                               |                              | 

| | Equity
Incentive Stock Option Plan
| | ----------------------------------

| | In
August 2006, the Board of Directors adopted an incentive stock option plan reserving
10,000,000 shares of the Companys $0.001 par value common stock for issuance
pursuant to the plan which was adopted on June 11, 2007 at a special meeting of the
shareholders. No options have been granted under the plan.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 6, 2003, the Board of Directors adopted the New Frontier Energy, Inc. Stock Option
and Stock Grant Plan (The Plan). The Plan allows for the issuance of
incentive (qualified) options and non-qualified options and the grant of stock or other
equity incentives to employees, consultants, directors, and others providing service of
special significance to our company. The Plan is administered by a committee to be
appointed by the Board of Directors, or in the absence of that appointment, by the Board
itself. The Plan provides for the issuance of up to 625,000 shares or options. No option
may be exercised more than ten years from the date of grant. The Plan expires in 2013. On
January 30, 2008, the Company issued two ten-year qualified stock options for an
aggregate of 25,000 shares of Common Stock at an exercise price of $1.20 per share to
certain employees. The closing price of the stock on January 30, 2008 was $1.20 per
share. Using the Black-Scholes model with estimated volatility of 69.08%, risk-free
interest rate of 4.11%, and a life of ten years, the estimated fair value of the grants
is $23,300 which was recorded as general and administrative, stock compensation expense.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-28

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | The
changes in the outstanding stock options during the years ended February 28, 2009 and
February 29, 2008 are summarized as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------

|                    | February 28, 2009 |  | February 29, 2008 |        
|------------------- | ----------------- |  | ----------------- | -------
|
|Beginning of period |                   |  |                   | 584,333
|                    |                   |  |                   |        
|Granted             |                   |  |                   |       
|                    |                   |  |                   |        
|Exercised           |                   |  |                   |       
|                    |                   |  |                   |        
|Expired             |                   |  |                   |       
|                    |                   |  |                   |        
|                    |                   |  |                   |        
|End of period       |                   |  |                   | 584,333
|                    |                   |  |                   |        

| | At
February 28, 2009, the weighted average remaining contractual life for the $1.00 options
is 25 years, the weighted average remaining contractual life for the $0.75 options is
2.87 years, the remaining weighted average remaining contractual life for the $1.15
options is 1.20 years, and the remaining weighted average remaining contractual life for
the $1.20 options is 8.91 years.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the options and warrants outstanding and exercisable at
February 28, 2009:
| | ---------------------------------------------------------------------------------------------------------

|Range
of
Exercise
Price |  | Number
of Shares
Outstanding |  | Weighted
Average
Remaining
Contractual
Life in
Years |  | Weighted
Average
Exercise
Price |     
|----------------------- |  | ---------------------------- |  | ---------------------------------------------------- |  | ------------------------------- | ----
|$0.75 to $1.50          |  |                              |  | 26,432,241                                           |  |                                 | 1.74
|$1.51 to $2.75          |  |                              |  | 11,833,545                                           |  |                                 | 0.92
|                        |  |                             
|                        |  |                              |  | 38,265,786                                           |  |                                 |     
|                        |  |                             

F-29

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|10. | LITIGATION
|--- | ----------

| | The
 Company is a co-plaintiff in a cause of action
against a landowner over an easement for access to the Focus Ranch Federal 12-1 well
(Federal District Court of Colorado Civil Case. NO 07CV02393, Clayton Williams Energy,
Inc and New Frontier Energy, Inc. v. Stull Ranches, LLC). On May 15, 2009, the Company,
Clayton Williams Energy, Inc. and Stull Ranches, LLC agreed to settlement the Focus Ranch
Litigation. The terms of the settlement include the Company paying the legal fees of
Stull Ranches, an amount that is currently unknown and to be determined by an arbitrator
at a later date.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
 Company is the plaintiff in a cause of action
to recover an unused deposit from a drilling contractor. The Company is seeking to
recover the deposit in the amount of $217,200 ( Arapahoe County District Court,
2009CV689, New Frontier Energy, Inc. v. Aspen Drilling, LLC).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | COMMITMENTS
|--- | -----------

| | Laws
and Regulations
| | --------------------

| | The
Company is subject to extensive federal, state, and local environmental laws and
regulations. These requirements, which change frequently, regulate the discharge of
materials into the environment. The Company believes it is in compliance with existing
laws and regulations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Employment
Agreements
| | ---------------------

| | The
Company has written employment agreements with its two executive officers. Pursuant to
their employment agreements, said officers devote such time as each deems necessary to
perform their duties to the Company and are subject to conflicts of interest. The
employment agreements expire on December 31, 2009; however, they are automatically
renewable on an annual basis for additional one-year increments. Pursuant to the
employment agreements, the Officers receive base salary compensation in the aggregate
amount of $310,000 per annum, adjusted annually at the rate of inflation as
measured under the federal Consumer Price Index or ($6,000), whichever is greater. The
compensation is subject to annual escalations based on cost of living and merit increases
approved by the Board.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-30

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

|12. | BUSINESS
SEGMENT INFORMATION
|--- | ----------------------------

| | The
Company operates in two business segments: oil and gas exploration and gas gathering.
Operating results and other financial data for the years ended February 28, 2009, and
February 29, 2008 is presented for the principal business segments as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | Oil & Gas |  | Gas Gathering |             | Consolidated |  
|---------------------------------------- | --------- |  | ------------- | ----------- | ------------ | -
|February 28, 2009                        |           |  |               |             |              |  
|                                         |           |  |               |            
|Revenues                                 |           |  | $             | 1,219,565   |              | $
|                                         |           |  |               |            
|Income (loss) before taxes               |           |  | $             | (12,398,565 | )            | $
|                                         |           |  |               |            
|Total assets                             |           |  | $             | 14,568,153  |              | $
|                                         |           |  |               |            
|Property additions                       |           |  | $             | 2,261,686   |              | $
|                                         |           |  |               |            
|Interest expense                         |           |  | $             | (81,189     | )            | $
|                                         |           |  |               |            
|Depreciation, depletion and amortization |           |  | $             | 816,240     |              | $
|                                         |           |  |              

|                                         | Oil & Gas |  | Gas Gathering |            | Consolidated |  
|---------------------------------------- | --------- |  | ------------- | ---------- | ------------ | -
|February 29, 2008                        |           |  |               |            |              |  
|                                         |           |  |               |           
|Revenues                                 |           |  | $             | 622,442    |              | $
|                                         |           |  |               |           
|Income (loss) before taxes               |           |  | $             | (6,303,024 | )            | $
|                                         |           |  |               |           
|Total assets                             |           |  | $             | 23,815,167 |              | $
|                                         |           |  |               |           
|Property additions                       |           |  | $             | 5,493,729  |              | $
|                                         |           |  |               |           
|Interest expense                         |           |  | $             | (83,172    | )            | $
|                                         |           |  |               |           
|Debt issuance costs, non-cash            |           |  | $             | (365,517   | )            | $
|                                         |           |  |               |           
|Depreciation, depletion and amortization |           |  | $             | 601,343    |              | $
|                                         |           |  |              

|13. | RELATED
PARTIES
|--- | ---------------

| | The
Company executed an office lease for office space in Littleton, Colorado, with Spotswood
Properties, LLC, a Colorado limited liability company (Spotswood), and an
affiliate of the president, effective January 1, 2006, for a three-year term. The Company
continues to lease the office space on a month to month basis. The lease provides for the
payment of $2,667 per month plus utilities and other incidentals. The president of the
Company owns 50% of Spotswood. The Company is of the opinion that the terms of the lease
are no less favorable than could be obtained from an unaffiliated party. Spotswood was
paid $32,000 in fiscal years 2009 and 2008.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company paid a corporation controlled by one of the directors for geologic consulting
$68,750 and $85,000 in fiscal 2009 and 2008, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

F-31

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | SDG
accrued management fees in the amount of $8,176 in fiscal 2008 to an entity 50% owned by
the president of the Company.
| | --------------------------------------------------------------------------------------------------------------------------

| | Effective
December 31, 2007 the Company entered into a Purchase and Sale Agreement with Natural
Resource Group Gathering, LLC (NRGG), whereby the Company increased its
investment in Slater Dome Gathering, LLLP (SDG) by acquiring the general
partners interest for $1,075,000 consisting of $268,750 in cash and executing a
promissory note in the amount of $806,250. The Note bears interest at a rate of 2.5% per
annum and is payable in quarterly installments of $201,562 plus interest, was due
December 31, 2008. On December 26, 2008, the due date was extended to December 31, 2009.
The Company paid principal payments of $403,125 in the fiscal year ended February 28,
2009. The Company accrued interest in the amount of $16,373 and $3,534 in the fiscal
years ended 2009 and 2008 respectively. The Company paid interest in the amount of
$18,196 in the fiscal year ended February 28, 2009. At the option of the Company,
quarterly payments may be deferred until the maturity date. As a result, the Company owns
the 25% general partners interest together with 82.76% of the Class A limited
partnership interests in SDG. The Company will receive 84.487% of SDG cash distributions
until the limited partners have received cash distributions equal to their initial
capital contributions and 87.07% of cash distributions thereafter.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
purchase price was based on a valuation analysis of the gathering line by an independent
consulting firm that provides engineering project management, due diligence and expert
witness services to the oil and gas pipeline industry.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys President and Chief Executive Officer is a manager and owns 50% of the
membership interests of NRGG, the general partner of SDG, through December 31, 2007.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of February 28, 2007, the Company had a convertible subordinated debenture owed to NRGG
in the amount of $608,194. During the year ended February 29, 2008, this debenture and
all related interest were paid in full. The Companys President and Chief Executive
Officer is a manager and owns 50% of the membership interests of NRGG.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14. | MARKET
RISK
|--- | -----------

| | The
Companys major market risk exposure is in the pricing applicable to its oil and gas
production. Realized pricing is primarily driven by the prevailing worldwide price for
crude oil and spot prices applicable to its natural gas production. Historically, prices
received for oil and gas production have been volatile and unpredictable and price
volatility is expected to continue.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15. | DISCLOSURES
ABOUT OIL AND GAS PRODUCING ACTIVITIES
|--- | --------------------------------------------------

| | The
Company has incurred the following costs, both capitalized and expensed, in respect to
its oil and gas property acquisition. Exploration and development activities are
summarized as follows (all in the United States):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | February 28,
2009 |  | February 29,
2008 |          
|--------------------------- | ----------------- |  | ----------------- | ---------
|Property Acquisition Costs: |                   |  |                   |          
|Proved properties           |                   |  | $                 |         
|Unproved properties         |                   |  | $                 | 1,079,808
|Exploration costs           |                   |  | $                 | 221,841  
|Development costs           |                   |  | $                 | 1,121,182

F-32

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Results
of Operations for Oil and Gas Producing Activities
| | ----------------------------------------------------------

| | The
results of operations for oil and gas producing activities, excluding capital expenditures
and corporate overhead and interest costs, are as follows (all in the United States):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | February 28,
2009 |  | February 29,
2008 |           
|-------------------------------------------- | ----------------- |  | ----------------- | ----------
|Operating Revenues                           |                   |  | $                 | 1,219,565 
|                                             |                   |  |                   |           
|Costs and expenses:                          |                   | 
|Production                                   |                   |  |                   | 1,198,538 
|Exploration                                  |                   |  |                   | 221,841   
|Depletion, depreciation                      |                   | 
|and amortization                             |                   |  |                   | 682,400   
|                                             |                   |  |                   |           
|Total costs and expenses                     |                   |  |                   | 3,322,344 
|                                             |                   |  |                   |           
|(Loss) from oil and gas producing activities |                   |  | $                 | (2,102,779
|                                             |                   |  |                   |           

|16. | SUPPLEMENTARY
OIL AND GAS INFORMATION (Unaudited)
|--- | -------------------------------------------------

| | The
following supplemental information regarding the oil and gas activities of the Company is
presented pursuant to the disclosure requirements promulgated by the Securities and
Exchange Commission (SEC) and SFAS No. 69, Disclosures About Oil and Gas
Producing Activities.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
February 28, 2009, the Company prepared its own internal reserve report and in accordance
with definition of proved oil and gas reserves as found in Regulation S-X of the
securities Exchange Act of 1934, there were no recoverable reserves from the Companys
wells at the existing economic and operating, conditions, i.e. prices and costs as of
February 28, 2009.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
February, 29, 2008, the estimated oil and gas reserves presented herein were derived from
reports prepared by Questa Engineering, Corp., and an independent petroleum engineering
firm. The Company cautions that there are many inherent uncertainties in estimating
proved reserve quantities and in projecting future production rates and the timing of
development expenditures. Accordingly, these estimates are likely to change as future
information becomes available, and these changes could be material. The properties
included in the oil and gas reserve estimates are those properties at the Slater Dome
Prospect that are connected to the gas gathering pipeline at February 28, 2009, and
February 29, 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proved
oil and gas reserves are the estimated quantities of crude oil, condensate natural gas,
and natural gas liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing economic
and operating conditions. Proved developed reserves are reserves expected to be recovered
through existing wells with existing equipment and operating methods.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proved
undeveloped reserves are reserves that are expected to be recovered from new wells on
undrilled acreage. Reserves on undrilled acreage shall be limited to those drilling units
offsetting productive units that are reasonably certain of production when drilled.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-33

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Estimated
Oil and Gas Reserve Quantities.
| | -----------------------------------------

| | Estimated
quantities of proved developed and proved undeveloped reserves (all of which are located
within the United States), as well as the changes in proved developed reserves during the
periods indicated, are presented in the following tables:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | Natural Gas in MCF | 
|-------------------------------- | ------------------ | 
|
|Beginning balance at March 1     |                    | 
|Revisions of previous estimates  |                    | 
|Extensions and discoveries       |                    | 
|Sales of reserves in place       |                    | 
|Improved recovery                |                    | 
|Purchases of reserves            |                    | 
|Production                       |                    | 
|                                 |                    | 
|Proved developed net reserves at |                    | 
|February 28                      |                    | 
|                                 |                    | 

| | All
of the Companys oil and gas reserves are classified as proved developed or proved
undeveloped.
| | ---------------------------------------------------------------------------------------------------

| | Standardized
Measure of Discounted Future Net Cash Flow
| | -------------------------------------------------------

| | The
table below has been developed utilizing procedures prescribed by SFAS 69 Disclosures
about Oil and Gas Producing Activities and based on natural gas reserves and
production volumes estimated by the Company. It may be useful for certain comparison
purposes, but should not be solely relied upon in evaluating the Company or its
performance. Further, information contained in the following tables should not be
considered as representative or realistic assessments of future cash flows, nor should
the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative
of the current value of the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is of the opinion that the following factors should be taken into account in
reviewing the following information:
| | -----------------------------------------------------------------------------------------------------------------------------

| | Future
costs and selling prices will probably differ from these required to be used in these
calculations;
| | ----------------------------------------------------------------------------------------------------------

F-34

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Due
to future market conditions and governmental regulations, actual rates of production
achieved in future years may vary significantly from the rate of production assumed in
these calculations;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Selection
of a 10% discount rate, as required by SFAS 69, is arbitrary and may not be reasonable as
a measure of risk inherent in realizing future net oil and gas revenues; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future
net revenues may be subject to different rates of income taxation.
| | -------------------------------------------------------------------------

| | The
table below sets forth a standardized measure of the estimated discounted future net cash
flow attributable to the Companys proved oil and gas reserves. Estimated future
cash inflows were computed by applying prices of $0.00, $7.30 and $5.21 per MCF of
natural gas to the estimated future production of proved oil and gas reserves at February
28, 2009, February 29, 2008 and February 28, 2007 respectively. There were no extensions,
discoveries or improved recoveries for the year ended February 28, 2007. The future
production and development costs represent the estimated future expenditures to be
incurred in developing and producing the proved reserves, assuming continuation of
existing economic conditions. Discounting the annual net cash flows at 10% illustrates
the impact of timing on these future cash flows.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Standardized
measure of cash flows:
| | -----------------------------------

| | Principal
changes in the Standardized Measure for the years ended February 28, 2009, and February
29, 2008 are summarized as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------

|                                                       | February 28,
2009 |  | February 29,
2008 |            
|------------------------------------------------------ | ----------------- |  | ----------------- | -----------
|Standard measure as of beginning of fiscal year        |                   |  | $                 | 25,664,900 
|                                                       |                   |  |                   |            
|Sales of gas produced, net of production costs         |                   |  |                   | (21,027    
|Extensions and discoveries                             |                   |  |                   |           
|Net change in prices and production costs related to   |                   | 
|future production                                      |                   |  |                   | (11,393,913
|Development costs incurred during the year             |                   |  |                   |           
|Changes in estimated future development costs          |                   |  |                   | (13,240,660
|Development costs incurred during the year             |                   |  |                   |           
|Revisions of quantity estimates                        |                   |  |                   |           
|Changes in discount                                    |                   |  |                   |           
|Net change in income taxes                             |                   |  |                   | (17,415,200
|Accreciation of discount                               |                   |  |                   | 16,405,900 
|Changes in timing and other                            |                   |  |                   |           
|                                                       |                   |  |                   |            
|Aggregate change                                       |                   |  |                   | (25,664,900
|                                                       |                   |  |                   |            
|Standardized measure, as of the end of the fiscal year |                   |  | $                 |           
|                                                       |                   |  |                   |            

F-35

---



# NEW FRONTIER ENERGY,
INC.

# Notes to Consolidated
Financial Statements

# February 28, 2009

| | Subsequent
Events:
| | ------------------

| | On
May 15, 2009, the Company, Clayton William and Stull Ranches, LLC agreed to settlement
the Focus Ranch Litigation. As of the date of this Annual Report, the formal settlement
agreement has not been prepared or executed. Pursuant to the anticipated terms of the
settlement agreement, among other things, Stull Ranches, LLC agreed to assign the Company
the easement it had granted to Clayton Williams, which will remain in full force and
effect and the Company agreed to pay Stull Ranches, LLCs attorney fees. The amount
of attorneys fees are to be determined by an arbitrator. The Company agreed to limited
access along the easement during various big game hunting seasons.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-36

---