SECURITIES AND EXCHANGE COMMISSIONWashington D.C. 20549

FORM 10-Q

|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT
  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  |                                                                                           
|  | For the quarterly period
  ended August 31, 2009                                          
|  |                                                                                           
|o | TRANSITION REPORT PURSUANT
  TO 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 small business issuer as specified in its charter)

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

|                                              
|----------------------------------------------
|1789
  W. Littleton Blvd., Littleton, CO 80120
|                                              
|(Address
  of principal executive offices)    
|                                              
|(303)
  730-9994                              
|                                              
|(Issuers
  telephone number)                 

|                                                                                    
|------------------------------------------------------------------------------------
|                                                                                    
|(Former
  name, former address and former fiscal year, if changed since last report)

Indicate by check mark
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act of 1934 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

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.

|                        | > |                            
|----------------------- | - | ---------------------------
|Large accelerated filer | o | Accelerated filer o        
|Non-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

As of October 19, 2009,
there were 15,504,537 shares of common stock outstanding.

1

---



NEW
FRONTIER ENERGY, INC.

Index

Part I - FINANCIAL
INFORMATION

|        |  |                                                                                                         |  |   
|------- |  | ------------------------------------------------------------------------------------------------------- |  | --
|Item 1  |  | Financial Statements                                                                                    |  |   
|        |  | Consolidated Balance Sheets
  at August 31, 2009 (unaudited) and February 28, 2009                      |  | 3 
|        |  | Consolidated Statements of
  Operations (unaudited) for the three months ended August 31, 2009 and 2008 |  | 4 
|        |  | Consolidated Statements of
  Operations (unaudited) for the six months ended August 31, 2009 and 2008   |  | 5 
|        |  | Consolidated Statements of
  Cash Flows (unaudited) for the six months ended August 31, 2009 and 2008   |  | 6 
|        |  | Notes to Consolidated
  Financial Statements (unaudited)                                                |  | 7 
|Item 2  |  | Managements Discussion
  and Analysis or Plan of Operations                                            |  | 17
|Item 3  |  | Quantitative and
  Qualitative Disclosures About Market Risk                                            |  | 28
|Item 4  |  | Controls and Procedures                                                                                 |  | 28
|Item 4T |  | Controls and Procedures                                                                                 |  | 28

Part II - OTHER INFORMATION

|           |  |                                                               |  |   
|---------- |  | ------------------------------------------------------------- |  | --
|Item 1     |  | Legal Proceedings                                             |  | 29
|Item 1A    |  | Risk Factors                                                  |  | 29
|Item 2     |  | Unregistered Sales of
  Equity Securities and Use of Proceeds |  | 29
|Item 3     |  | Defaults Upon Senior
  Securities                             |  | 29
|Item 4     |  | Submission of Matters of a
  Vote of Security Holders         |  | 30
|Item 5     |  | Other Information                                             |  | 30
|Item 6     |  | Exhibits                                                      |  | 30
|           |  |                                                               |  |   
|SIGNATURES |  | 31                                                           
|           |  |                                                               |  |   
|EXHIBITS   |  | 32                                                           

2

---



NEW FRONTIER ENERGY, INC.
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | ------------------- | - | ----------- | -
|                                                                                                                                                                                    |  | August 31,
  2009 |             | February 28,
  2009 |  
|                                                                                                                                                                                    |  | (Unaudited)       |             |                     |  
|                                                                                                                                                                                    |  |                   |             |                     |  
|ASSETS                                                                                                                                                                              |  |                   |             |                     |   |             |  
|CURRENT ASSETS                                                                                                                                                                      |  |                   |             |                     |   |             |  
|Cash                                                                                                                                                                                |  | $                 | 487,508     |                     | $ | 856,475     |  
|Segregated arbitration funds,
affiliates                                                                                                                                            |  |                   | 500,000     |                     |   |            |  
|Accounts receivable, trade                                                                                                                                                          |  |                   | 828,537     |                     |   | 583,628     |  
|Prepaid expenses                                                                                                                                                                    |  |                   | 321,368     |                     |   | 233,423     |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|Total current assets                                                                                                                                                                |  |                   | 2,137,413   |                     |   | 1,673,526   |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|PROPERTY AND EQUIPMENT, NET OF ACCUMULATED
  DEPRECIATION AND DEPLETION of $2,500,264 and $2,278,466 as of August 31, 2009
  and February 28, 2009 respectively                     |  |                   | 13,207,562  |                     |   | 14,949,366  |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|OTHER ASSETS                                                                                                                                                                        |  |                   |             |                     |   |             |  
|Deposits                                                                                                                                                                            |  |                   | 160,000     |                     |   | 160,000     |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  | $                 | 15,504,975  |                     | $ | 16,782,892  |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|LIABILITIES
  AND STOCKHOLDERS EQUITY                                                                                                                                              |  |                   |             |                     |   |             |  
|CURRENT LIABILITIES                                                                                                                                                                 |  |                   |             |                     |   |             |  
|Accounts payable                                                                                                                                                                    |  | $                 | 841,229     |                     | $ | 862,248     |  
|Segregated funds indemnification,
affiliates                                                                                                                                        |  |                   | 500,000     |                     |   |            |  
|Notes payable, affiliates                                                                                                                                                           |  |                   | 403,125     |                     |   | 403,125     |  
|Notes payable, current portion                                                                                                                                                      |  |                   | 635,000     |                     |   | 825,898     |  
|Dividends payable                                                                                                                                                                   |  |                   | 2,368,229   |                     |   | 1,999,083   |  
|Accrued expenses                                                                                                                                                                    |  |                   | 840,498     |                     |   | 376,133     |  
|Accrued interest                                                                                                                                                                    |  |                   |            |                     |   | 2,459       |  
|Accrued interest, affiliates                                                                                                                                                        |  |                   | 6,286       |                     |   | 1,712       |  
|Accounts payable, affiliates                                                                                                                                                        |  |                   | 36,430      |                     |   | 36,430      |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|Total current liabilities                                                                                                                                                           |  |                   | 5,630,797   |                     |   | 4,507,088   |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|LONG TERM LIABILITIES                                                                                                                                                               |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|Asset retirement obligation                                                                                                                                                         |  |                   | 290,000     |                     |   | 290,000     |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|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;
19,000
  and 19,040 shares issued and outstanding as of August 31, 2009 and February
  28, 2009, respectively                       |  |                   | 19          |                     |   | 20          |  
|Series C Convertible, 230,000 shares authorized;
  216,000 shares issued and outstanding as of August 31, 2009 and February 28,
  2009                                              |  |                   | 216         |                     |   | 216         |  
|Common stock, $.001 par value, 500,000,000 shares
  authorized; 15,504,537 and 13,441,884 shares issued and outstanding as of
  August 31, 2009 and February 28, 2009, respectively |  |                   | 15,504      |                     |   | 13,441      |  
|Additional paid in capital                                                                                                                                                          |  |                   | 44,961,757  |                     |   | 43,460,402  |  
|Accumulated (deficit)                                                                                                                                                               |  |                   | (35,776,887 | )                   |   | (31,904,791 | )
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   | 9,200,609   |                     |   | 11,569,288  |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|Noncontrolling interest                                                                                                                                                             |  |                   | 383,569     |                     |   | 416,516     |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  |                   | 9,584,178   |                     |   | 11,985,804  |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  
|                                                                                                                                                                                    |  | $                 | 15,504,975  |                     | $ | 16,782,892  |  
|                                                                                                                                                                                    |  |                   |             |                     |   |             |  

See accompanying notes to the consolidated financial statements.

3

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NEW FRONTIER ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                                                        |  |                    |            |                   |   |            |  
|------------------------------------------------------- |  | ------------------ | ---------- | ----------------- | - | ---------- | -
|                                                        |  | Three Months Ended |           
|                                                        |  | August 31,
  2009  |            | August 31,
  2008 |  
|                                                        |  |                    |            |                   |  
|Operating revenues                                      |  |                    |            |                   |   |            |  
|Oil and gas sales                                       |  | $                  | 14,560     |                   | $ | 279,775    |  
|Gathering and operating fees                            |  |                    | 50,107     |                   |   | 51,108     |  
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    | 64,667     |                   |   | 330,883    |  
|                                                        |  |                    |            |                   |   |            |  
|Operating expenses                                      |  |                    |            |                   |   |            |  
|Exploration costs, including dry
holes                  |  |                    | 8,497      |                   |   | 46,899     |  
|Lease operating expenses                                |  |                    | 85,667     |                   |   | 305,711    |  
|General and administrative                              |  |                    | 1,013,719  |                   |   | 578,026    |  
|Issuance of common stock options and
warrants           |  |                    | 508,447    |                   |   | 918,250    |  
|Impairments and abandonments                            |  |                    | 809,721    |                   |   |           |  
|Depreciation, depletion and
amortization                |  |                    | 107,565    |                   |   | 245,600    |  
|                                                        |  |                    |            |                   |   |            |  
|Total operating expenses                                |  |                    | 2,533,616  |                   |   | 2,094,486  |  
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|(Loss) from operations                                  |  |                    | (2,468,949 | )                 |   | (1,763,603 | )
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Other income (expense)                                  |  |                    |            |                   |   |            |  
|Interest income                                         |  |                    | 526        |                   |   | 28,400     |  
|Interest expense                                        |  |                    | (10,027    | )                 |   | (21,722    | )
|                                                        |  |                    |            |                   |   |            |  
|Other income (expense), net                             |  |                    | (9,501     | )                 |   | 6,678      |  
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|(Loss) before income taxes                              |  |                    | (2,478,450 | )                 |   | (1,756,925 | )
|                                                        |  |                    |            |                   |   |            |  
|Income taxes                                            |  |                    |            |                   |   |            |  
|Current                                                 |  |                    |           |                   |   |           |  
|Deferred                                                |  |                    |           |                   |   |           |  
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |           |                   |   |           |  
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Noncontrolling interest                                 |  |                    | (6,129     | )                 |   | (13,270    | )
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Net (loss)                                              |  |                    | (2,484,579 | )                 |   | (1,770,195 | )
|                                                        |  |                    |            |                   |   |            |  
|Preferred stock dividends and distributions             |  |                    | (193,616   | )                 |   | (232,815   | )
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Net (loss) attributable to common shareholders          |  | $                  | (2,678,195 | )                 | $ | (2,003,010 | )
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Net (loss) per common share 
  Basic and diluted        |  | $                  | (0.19      | )                 | $ | (0.16      | )
|                                                        |  |                    |            |                   |   |            |  
|                                                        |  |                    |            |                   |   |            |  
|Weighted average shares outstanding
  Basic and diluted |  |                    | 13,758,976 |                   |   | 12,814,452 |  
|                                                        |  |                    |            |                   |   |            |  

See accompanying notes to the consolidated financial statements.

4

---



NEW FRONTIER ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                                                        |  |                     |            |                     |   |            |  
|------------------------------------------------------- |  | ------------------- | ---------- | ------------------- | - | ---------- | -
|                                                        |  | Six
  Months Ended  |           
|                                                        |  | August
  31,
  2009 |            | August
  31,
  2008 |  
|                                                        |  |                     |            |                     |  
|Operating revenues                                      |  |                     |            |                     |   |            |  
|Oil and gas sales                                       |  | $                   | 102,382    |                     | $ | 728,772    |  
|Gathering and operating fees                            |  |                     | 87,939     |                     |   | 99,958     |  
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     | 190,321    |                     |   | 828,730    |  
|                                                        |  |                     |            |                     |   |            |  
|Operating expenses                                      |  |                     |            |                     |   |            |  
|Exploration costs, including dry
holes                  |  |                     | 72,283     |                     |   | 96,710     |  
|Lease operating expenses                                |  |                     | 273,895    |                     |   | 596,895    |  
|Cost of gas gathering                                   |  |                     | 651        |                     |   | 648        |  
|General and administrative                              |  |                     | 1,353,795  |                     |   | 1,102,992  |  
|Issuance of common stock options and
warrants           |  |                     | 839,247    |                     |   | 1,433,800  |  
|Impairments and abandonments                            |  |                     | 809,721    |                     |   |           |  
|Depreciation, depletion and
amortization                |  |                     | 301,791    |                     |   | 510,777    |  
|                                                        |  |                     |            |                     |   |            |  
|Total operating expenses                                |  |                     | 3,651,383  |                     |   | 3,741,822  |  
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|(Loss) from operations                                  |  |                     | (3,461,062 | )                   |   | (2,913,092 | )
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Other income (expense)                                  |  |                     |            |                     |   |            |  
|Interest income                                         |  |                     | 1,355      |                     |   | 49,947     |  
|Interest expense                                        |  |                     | (28,158    | )                   |   | (43,060    | )
|                                                        |  |                     |            |                     |   |            |  
|Other income (expense), net                             |  |                     | (26,803    | )                   |   | 6,887      |  
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|(Loss) before income taxes                              |  |                     | (3,487,865 | )                   |   | (2,906,205 | )
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Income taxes                                            |  |                     |            |                     |   |            |  
|Current                                                 |  |                     |           |                     |   |           |  
|Deferred                                                |  |                     |           |                     |   |           |  
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |           |                     |   |           |  
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Noncontrolling interest                                 |  |                     | (13,044    | )                   |   | (24,288    | )
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Net (loss)                                              |  |                     | (3,500,909 | )                   |   | (2,930,493 | )
|                                                        |  |                     |            |                     |   |            |  
|Preferred stock dividends and distributions             |  |                     | (371,187   | )                   |   | (462,132   | )
|                                                        |  |                     |            |                     |   |            |  
|Net (loss) attributable to common shareholders          |  | $                   | (3,872,096 | )                   | $ | (3,392,625 | )
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Net (loss) per common share 
  Basic and diluted        |  | $                   | (0.28      | )                   | $ | (0.29      | )
|                                                        |  |                     |            |                     |   |            |  
|                                                        |  |                     |            |                     |   |            |  
|Weighted average shares outstanding
  Basic and diluted |  |                     | 13,600,430 |                     |   | 11,772,901 |  
|                                                        |  |                     |            |                     |   |            |  

See accompanying notes to the consolidated financial statements.

5

---



NEW FRONTIER ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                                                  |  |                   |            |                   |   |            |  
|--------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------- | - | ---------- | -
|                                                                                  |  | Six Months Ended  |           
|                                                                                  |  | August 31,
  2009 |            | August 31,
  2008 |  
|                                                                                  |  |                   |            |                   |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                   |            |                   |   |            |  
|Net (loss)                                                                        |  | $                 | (3,500,909 | )                 | $ | (2,930,493 | )
|Adjustments to reconcile net (loss) to net cash
(used
  in) operating activities: |  |                   |            |                   |   |            |  
|Depreciation, depletion and
amortization                                          |  |                   | 301,791    |                   |   | 510,777    |  
|Impairment and abandonment of of oil and gas
  properties                         |  |                   | 809,721    |                   |   |           |  
|Noncontrolling interest in net income of consolidated
  subsidiary                |  |                   | 13,044     |                   |   | 24,288     |  
|Stock option expenses, amortization and
grants                                    |  |                   | 1,476,762  |                   |   | 1,534,800  |  
|(Increase) decrease in assets:                                                    |  |                   |            |                   |   |            |  
|Accounts receivable, trade                                                        |  |                   | (383,651   | )                 |   | 448,050    |  
|Prepaid expense                                                                   |  |                   | (77,946    | )                 |   | 3,582      |  
|Increase (decrease) in
liabilities:                                               |  |                   |            |                   |   |            |  
|Accounts payable                                                                  |  |                   | 144,379    |                   |   | (359,246   | )
|Accrued expenses                                                                  |  |                   | 114,439    |                   |   | 476,620    |  
|                                                                                  |  |                   |            |                   |   |            |  
|Net cash (used in) operating
activities                                           |  |                   | (1,102,370 | )                 |   | (291,622   | )
|                                                                                  |  |                   |            |                   |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                   |            |                   |   |            |  
|                                                                                 
|(Increase) decrease in other
assets                                               |  |                   |           |                   |   | 33,300     |  
|Proceeds from Entek participation
agreement                                       |  |                   | 1,000,000  |                   |   |           |  
|Purchase of property and equipment                                                |  |                   | (19,708    | )                 |   | (1,574,526 | )
|                                                                                  |  |                   |            |                   |   |            |  
|Net cash provided by (used in) investing
activities                               |  |                   | 980,292    |                   |   | (1,541,226 | )
|                                                                                  |  |                   |            |                   |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                   |            |                   |   |            |  
|                                                                                 
|Payment of notes payable                                                          |  |                   | (200,898   | )                 |   | (218,500   | )
|Proceeds from common stock warrant
conversions                                    |  |                   |           |                   |   | 1,712,469  |  
|Proceeds from exercise of placement agent
warrants                                |  |                   |           |                   |   | 269,747    |  
|Preferred stock dividends paid                                                    |  |                   |           |                   |   | (286,172   | )
|Cost of issuance of equity for
cash                                               |  |                   |           |                   |   | (14,200    | )
|Noncontrolling interest in subsidiary                                             |  |                   | (45,991    | )                 |   | 132,225    |  
|Distributions to noncontrolling interest holders in
  consolidated subsidiary     |  |                   |           |                   |   | (44,856    | )
|                                                                                  |  |                   |            |                   |   |            |  
|Net cash provided by (used in) financing
activities                               |  |                   | (246,889   | )                 |   | 1,550,713  |  
|                                                                                  |  |                   |            |                   |   |            |  
|(DECREASE) IN CASH                                                                |  |                   | (368,967   | )                 |   | (282,135   | )
|                                                                                 
|BEGINNING BALANCE                                                                 |  |                   | 856,475    |                   |   | 3,602,939  |  
|                                                                                  |  |                   |            |                   |   |            |  
|ENDING BALANCE                                                                    |  | $                 | 487,508    |                   | $ | 3,320,804  |  
|                                                                                  |  |                   |            |                   |   |            |  
|Cash paid for income taxes                                                        |  | $                 |           |                   | $ |           |  
|                                                                                  |  |                   |            |                   |   |            |  
|Cash paid for interest                                                            |  | $                 | 13,181     |                   | $ | 44,912     |  
|                                                                                  |  |                   |            |                   |   |            |  
|                                                                                  |  |                   |            |                   |   |            |  
|Supplemental schedule of non-cash investing and
  financing activities:           |  |                   |            |                   |   |            |  
|Series B and C preferred stock converted to
common
  stock                        |  | $                 | 2,063      |                   | $ | 1,335      |  
|Accrued settlement payable                                                        |  | $                 | 350,000    |                   | $ |           |  
|Segregated arbitration funds and related
  indemnification agreement, affliates   |  | $                 | 500,000    |                   | $ |           |  

See accompanying notes to the consolidated financial statements.

6

---



NEW
FRONTIER ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2009

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Business

New Frontier Energy, Inc.
(New Frontier 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 a domestic energy company
engaged in the exploration for, and development of, oil and natural gas
reserves 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.

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 (the 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 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.

Principles
of Consolidation

The August 31, 2009
financial statements include the accounts of the Company as of and for the
reporting periods ended August 31, and include the accounts of SDG as of and
for the reporting periods ended June 30. SDG has a calendar quarter end, June
30, which is consolidated with the Company effective August 31, 2009 and 2008.
All significant intercompany accounts and transactions in 2009 and 2008 were
eliminated. The creditors of SDG do not have recourse to the general credit of
the Company.

7

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Unaudited
Statements

The financial statements
included in this Form 10-Q have been prepared by the Company without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted as
allowed by such rules and regulations, and management believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements include all of the adjustments, which, in the opinion
of management, are necessary to a fair presentation of financial position and
results of operations. All such adjustments are of a normal and recurring
nature only. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements at February 28, 2009, included in the Companys annual
report on Form 10-K filed with the Commission on May 29, 2009.

Reclassifications

Certain amounts reported in
the Companys financial statements for the previous reporting periods have been
reclassified to conform to the current period presentation.

2. GOING CONCERN

The consolidated financial
statements have been prepared on the basis of a going concern which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the accompanying financial
statements, we have incurred significant operating losses. As of August 31,
2009, we have limited financial resources and have not been able to generate
positive cash flow from operations. The Company had a working capital
deficiency of $3,493,384 at August 31, 2009 and $2,833,562 at February 28,
2009. 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 generate revenue from our planned
business operations and control exploration costs. 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 any joint venture partners, or obtain additional
financing from investors or private lenders, or that additional commercial
production can be attained.

3. ENTEK PARTICIPATION AGREEMENT

On August 10, 2009, the
Company entered into a Participation Agreement with Entek GRB LLC (Entek)
under which Entek agreed to purchase certain assets of the Company and spend up
to an additional approximately $11.5 million over three years on exploration
and development within approximately 66,000 gross acres (the Underlying
Leases) to earn up to 55% of the Companys interest in the Underlying Leases
and certain of its other assets, including its partnership interests in Slater
Dome Gathering, LLLP (collectively the Assets). The Company and Entek also
created an area of mutual interest (the Area of Mutual Interest) in all lands
located in Routt County, Colorado, Moffatt County, Colorado, Sweetwater County,
Wyoming, and Carbon County Wyoming. Pursuant to the Area of Mutual Interest,
Entek shall be entitled to participate for up to 55% in any additional interest
acquired within the Area of Mutual Interest by the Company and the Company
shall be entitled to participate for up to 45% in any additional interest
acquired within the Area of Mutual Interest.

8

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Pursuant to the
Participation Agreement, on August 10, 2009, Entek purchased 4.0625% interest
in the Assets for $1,000,000 (the Initial Asset Purchase). Further, Entek has
the option to purchase an additional 8.125% interest in the Assets for
$1,000,000, if, within 180 days, Entek reasonably believes that there exists a
danger of NFEI Insolvency (as defined in the Participation Agreement).

Pursuant to the
Participation Agreement, Entek has the right to participate in the exploration
and development of the Underlying Leases, and the right to earn assignments of
interests in the Assets in three phases. On August 10, 2009, Entek irrevocably
committed to expend $3.0 million (the Phase 1 Funds) and earned 16.25% (the
Phase 1 Interests) of the Companys interest in the Assets. Between the first
anniversary date and the second anniversary date of the Participation
Agreement, Entek has the right but not the obligation to expend $4.0 million
(the Phase 2 Funds) and earn an additional 16.25% (the Phase 2 Interests)
of the Companys interest in the Assets. Between the second anniversary date
and the third anniversary date of the Participation Agreement, Entek has the
right but not the obligation to expend $4,538,500 (the Phase 3 Funds) and
earn an additional 18.4375% (the Phase 3 Interests) of the Companys interest
in the Assets. Entek will have the right to become the operator after the
completion of Phase 1 and the commencement of Phase 2, subject to certain
regulatory and other approvals.

Pursuant to the
Participation Agreement, the Company and Entek have established an operating
committee that is responsible for the annual Work Program (as defined in the
Participation Agreement) for each phase and the determination of a budget for
each phase. The Phase 1 Funds, Phase 2 Funds and the Phase 3 Funds are to be
used solely for the Work Program.

In the event that Entek
elects not to participate in Phase 2, the Participation Agreement shall
terminate after the expenditure of the Phase 1 Funds paid by Entek, the Company
shall have no further obligation to assign to Entek any further interests in
the Assets and the Area of Mutual Interest shall terminate immediately.

In the event that Entek
elects not to participate in Phase 3, the Participation Agreement shall
immediately terminate, the Company shall have no further obligation to assign
to Entek any further interests in the Assets, provided that Entek shall retain
any interest in the Assets from the Initial Asset Purchase, the Phase 1
Interest, the Phase 2 Interest and any portion of the Phase 3 Interests earned
by it and the Area of Mutual Interest shall terminate immediately.

4. SEGREGATED ARBITRATION FUNDS AND SEGREGATED FUNDS
INDEMNIFICATION

Pursuant to the Entek
Participation Agreement, Samyak Veera, a director of the Company, agreed to
deposit $500,000 into a segregated account (the Segregated Arbitration
Funds). The Segregated Arbitration Funds shall be used to satisfy the
Companys obligation to pay legal fees associated with the Stull Ranch
litigation after arbitration on the amount of the legal fees is concluded in
the event that the Company is unable to satisfy such obligation.

The Company and Mr. Veera
also entered into an Indemnification Agreement dated August 7, 2009 (the Veera
Indemnification Agreement), whereby the Company agreed to indemnify and
reimburse Mr. Veera if any of the Segregated Arbitration Funds are released
from the segregated account.

9

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Effective August 17, 2009,
Mr. Veera was granted 2,056,500 shares of the Companys $0.001 par value common
stock, valued at $637,515 and a two year option to acquire 1,250,000 shares of the Companys Common
Stock at a price of $0.20 per share, valued at $231,647 for certain consulting services previously
rendered and as a structuring fee relating to the deposit of $500,000 into a
segregated account in connection with the Participation Agreement.

5. NOTES PAYABLE, AFFILIATES

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. The Note bears interest at a rate of
2.5% per annum and is payable in quarterly installments of $201,562 plus
interest and was due December 31, 2008. On December 24, 2008, the note was
extended under the same terms and conditions with a maturity date of December
31, 2009, and in connection with the extension of the maturity date, the Company
paid principal in the amount of $201,562 together with accrued interest of
$5,881. Effective July 29, 2009, the Company and NRGG entered into a
Modification of Partnership Purchase Agreement whereby the Note was further
modified to extend the date and payments terms whereby principal in the amount
of $201,566 is due on December 31, 2009 and the principal balance of $201,566
together with all accrued and unpaid interest will be due December 31, 2010.
The Note may be prepaid at any time without penalty. 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 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.

At August 31, 2009, the
balance of the note payable is $403,125. Interest in the amount of $5,060 has
been accrued for the six-month period ended August 31, 2009.

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 at 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 had an interest rate of 7.56% per annum.  The Steamboat  Mortgage  required 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 terms were modified on February 26, 2009 whereby the maturity date was changed to September 1, 2009.

10

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Effective July 7, 2009, the Company
transferred legal title to the Steamboat Property to the Companys President and
Chief Executive Officer, as nominee, to facilitate the refinancing of the Steamboat
Property; However, the Company retains equitable ownership of the Steamboat Property and
the accompanying financial statements reflect the rights and responsibilities of
ownership, including an obligation under the New Steamboat Mortgage described in the
following paragraph. The Companys President and Chief Executive Officer and the
Company anticipate entering into a nominee agreement to reflect this transaction.

On or about July 7, 2009, the Company
made a $200,000 payment on the Steamboat Mortgage and the Companys President and
Chief Executive Officer entered into a new mortgage for the Steamboat Property in the
principal amount of $635,000 (the New Steamboat Mortgage). The New Steamboat
Mortgage bears interest at the Wall Street Journal prime rate plus four percent, subject
to a minimum interest rate of 10%, and is due on July 6, 2010. One years interest on
the New Steamboat Mortgage was paid in advance.

7. STOCKHOLDERS EQUITY

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 par value $0.001 (the
Series B Preferred). Between December 23, 2004 and February 28, 2005 the
Company sold 32,175 shares of Series B Preferred. The stated value and issue
price of the Series B Preferred Stock is $100.00 per share. Each share of
Series B Preferred is convertible, at the option of the holder, into that
number of shares of Common Stock determined by dividing the issue price of the
aggregate number of shares of Series B Preferred being converted plus any
accrued and unpaid dividends by $0.65 per share, unless otherwise adjusted. The
Series B Preferred pays a cumulative, preferential cash dividend equal to 12%
of the $100 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.

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 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 Stockholders. 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.

In June 2009, the Company
issued an aggregate of 6,153 shares of common stock pursuant to conversion of
40 shares of Series B Preferred Stock. As of August 31, 2009, there were 19,000
shares of the Series B Preferred issued and outstanding. During the six months
ended August 31, 2009, dividends of $98,968 were accrued and no cash dividends
were paid. Aggregate accrued and unpaid dividends totaled $919,451 as of August
31, 2009.

11

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Series
C Convertible Preferred Stock

Effective November 22, 2006,
the board of directors of New Frontier Energy, Inc. 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). Between December 1, 2006 and
January 16, 2007 the Company sold 222,250 shares of Series C Preferred Stock.

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 Stock 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
has 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 Stock 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.

As of August 31, 2009, there
were 216,000 shares of the Series C Preferred Stock issued and outstanding.
During the six months ended August 31, 2009, dividends of $272,219 were accrued
and no cash dividends were paid. Aggregate accrued and unpaid dividends totaled
$1,448,778 as of August 31, 2009.

12

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Common Stock

Effective August 17, 2009, the Company granted to its chairman 2,056,500
shares of the Companys  $0.001 par value common stock, valued at $637,515,
and a two year option to acquire 1,250,000 shares of the  Companys  Common
Stock at a price of $0.20 per shares, valued at $231,647, for certain consulting
services previously rendered and as a structuring fee relating to the deposit of
$500,000  into a  segregated  account  in  connection  with  the  Participation
Agreement.

Stock
Options and Warrants

On August 17, 2009, the
Company granted the Chairman of the Company 1,250,000 options to acquire shares
of common stock, which are exercisable at a price of $0.20 per share. These
stock options have a two year life and vest immediately. The fair value of the
fixed-price 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 2 years, expected volatility of 87%, risk free interest
rate of 4% and no dividend yield. The fair value for the options granted was
approximately $0.19 per share. The value of the options was recorded at
$231,647 and charged to general and administrative expense during the six
months ended August 31, 2009.

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 $607,600 was amortized in the six months ended
August 31, 2009.

In
connection with the sale of the Series C Preferred Stock, the Company issued
the investors in that offering three-year warrants to purchase 21,166,658
shares of Common Stock at an
exercise price of $1.50 per share (the AC Warrants) and three year warrants
to purchase 10,583,545 shares of
Common Stock at an exercise price of $2.00 per share (the BC Warrants). The
AC Warrants and the BC Warrants will expire pursuant to their terms between
December 1, 2009 and January 16, 2010.

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 was amortized $515,000 per quarter as the options vested. During
the three months ended May 31, 2008, the options were charged to general and
administrative stock compensation expense. The options were fully vested and
amortized during fiscal year ended February 28, 2009.

13

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The activity for options and
warrants during the six months ended August 31, 2009 is summarized in the following
tables:

Exercisable Non-Incentive
Stock Option Plan Shares:

|                    |  |        |           |                                 |   |      | 
|------------------- |  | ------ | --------- | ------------------------------- | - | ---- | 
|                    |  | Shares |           | Weighted
Average
Exercise
Price |  
|                    |  |        |           |                                 |  
|Beginning of period |  |        | 4,681,250 |                                 | $ | 1.21 | 
|Vested              |  |        | 862,250   |                                 | $ | 1.01 | 
|Exercised           |  |        |          |                                 | $ |     | 
|Expired             |  |        |          |                                 | $ |     | 
|                    |  |        |           |                                 |   |      | 
|End of period       |  |        | 5,543,750 |                                 | $ | 1.18 | 
|                    |  |        |           |                                 |   |      | 

Exercisable
Incentive Stock Option Plan Shares:

|                    |  |        |         |                                 |   |      | 
|------------------- |  | ------ | ------- | ------------------------------- | - | ---- | 
|                    |  | Shares |         | Weighted
Average
Exercise
Price |  
|                    |  |        |         |                                 |  
|Beginning of period |  |        | 584,333 |                                 | $ | 0.89 | 
|Granted             |  |        |        |                                 | $ |     | 
|Exercised           |  |        |        |                                 | $ |     | 
|Expired             |  |        | (50,000 | )                               | $ | 1.00 | 
|                    |  |        |         |                                 |   |      | 
|End of period       |  |        | 534,333 |                                 | $ | 0.88 | 
|                    |  |        |         |                                 |   |      | 

Fixed-Price Stock Options
and Warrants:

|                    |  |        |            |                                 |   |      | 
|------------------- |  | ------ | ---------- | ------------------------------- | - | ---- | 
|                    |  | Shares |            | Weighted
Average
Exercise
Price |  
|                    |  |        |            |                                 |  
|Beginning of period |  |        | 33,000,203 |                                 | $ | 1.68 | 
|Granted             |  |        | 1,250,000  |                                 | $ | .20  | 
|Exercised           |  |        |           |                                 | $ |     | 
|Expired             |  |        |           |                                 | $ |     | 
|                    |  |        |            |                                 |   |      | 
|End of period       |  |        | 34,250,203 |                                 | $ | 1.63 | 
|                    |  |        |            |                                 |   |      | 

The following table
summarizes the options and warrants outstanding and exercisable at August 31,
2009:

|                        |  |                              |            |                                                      |  |                                 |  |   |      | 
|----------------------- |  | ---------------------------- | ---------- | ---------------------------------------------------- |  | ------------------------------- |  | - | ---- | 
|Range
of
Exercise
Price |  | Number
of Shares
Outstanding |            | Weighted
Average
Remaining
Contractual
Life in
Years |  | Weighted
Average
Exercise
Price | 
|                        |  |                              |            |                                                      |  |                                 | 
|$0.20                   |  |                              | 1,250,000  |                                                      |  | 1.96                            |  | $ | .20  | 
|$0.75
to $1.50          |  |                              | 27,244,741 |                                                      |  | 1.42                            |  | $ | 1.42 | 
|$1.51
to $2.75          |  |                              | 11,833,545 |                                                      |  | 0.41                            |  | $ | 2.00 | 
|                        |  |                              |            |                                                      |  |                                 |  |   |      | 
|                        |  |                              | 40,328,286 |                                                      |  |                                 |  |   |      | 
|                        |  |                              |            |                                                      |  |                                 |  |   |      | 

14

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8. RELATED PARTIES

The Company paid $16,000
during the six months ended August 31, 2009 and 2008, respectively, in
connection with an office lease for office space in Littleton, Colorado with
Spotswood Properties, LLC, (Spotswood), a Colorado limited liability company
and an affiliate of the Companys president. 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 paid a
corporation controlled by one of the former directors and a shareholder $12,500
and $15,000 for geological consulting during the six months ended August 31,
2009 and 2008, respectively.

Effective July 7, 2009, the
Company transferred legal title to the Steamboat Property to the Companys President and Chief
Executive Officer, as nominee, to facilitate the refinancing of the Steamboat Property.

 See Note 6 above.

9. STULL RANCH LITIGATION

On June 17, 2009, the
Company, Stull Ranches, LLC, and Clayton Williams Energy, Inc. entered into a
settlement agreement relating to the Easement Agreement granted by Stull
Ranches, LLC to Clayton Williams Energy, Inc. which granted access to a road
which serviced the Federal 12-1 and Federal 3-1 wells in the Focus Ranch Unit.
The terms of the settlement consented to Clayton Williams assignment of the
easement to the Company. Further, the Company is obligated to pay Stull Ranches
attorneys fees and litigation expense, as determined by an independent
arbiter, in connection with the lawsuit to allow the assignment of the
easement. Additionally, the Company agreed not to engage in coal bed methane
exploration or production within the boundaries of the Focus Ranch Unit. The
Company determined that it will be required to pay at least $350,000 pursuant
to the settlement agreement, and has therefore recorded an accrued expense of
$350,000 in the August 31, 2009 financial statements.

10. 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 six months ended August 31, 2009 and 2008 are
presented for the principal business segments as follows:

|                                           |  |           |            |               |   |              |   |   |            |  
|------------------------------------------ |  | --------- | ---------- | ------------- | - | ------------ | - | - | ---------- | -
|                                           |  | Oil &
Gas |            | Gas
Gathering |   | Consolidated |  
|                                           |  |           |            |               |   |              |  
|August 31, 2009                            |  |           |            |               |   |              |   |   |            |  
|Revenues                                   |  | $         | 102,382    |               | $ | 87,939       |   | $ | 190,321    |  
|(Loss)
  before taxes                      |  | $         | (3,482,535 | )             | $ | (5,330       | ) | $ | (3,487,865 | )
|Total assets                               |  | $         | 13,342,508 |               | $ | 2,162,467    |   | $ | 15,504,975 |  
|Property
  additions                       |  | $         | 19,708     |               | $ |             |   | $ | 19,708     |  
|Interest
  expense                         |  | $         | (28,158    | )             | $ |             |   | $ | (28,158    | )
|Depreciation,
  depletion and amortization |  | $         | 236,545    |               | $ | 65,246       |   | $ | 301,791    |  
|                                           |  |           |            |               |   |              |   |   |            |  
|August 31, 2008                            |  |           |            |               |   |              |   |   |            |  
|Revenues                                   |  | $         | 750,812    |               | $ | 77,918       |   | $ | 828,730    |  
|Income
  (Loss) before taxes               |  | $         | (2,906,905 | )             | $ | 700          |   | $ | (2,906,205 | )
|Total assets                               |  | $         | 24,185,451 |               | $ | 2,320,854    |   | $ | 26,506,305 |  
|Property
  additions                       |  | $         | 1,574,526  |               | $ |             |   | $ | 1,574,526  |  
|Interest
  expense                         |  | $         | (43,060    | )             | $ |             |   | $ | (43,060    | )
|Depreciation,
  depletion and amortization |  | $         | 445,531    |               | $ | 65,246       |   | $ | 510,777    |  

15

---



11. SUBSEQUENT EVENTS

The Company is
currently offering on a best efforts basis to exchange (the Exchange
Offers) any and all of the Companys issued and outstanding (i) Series B 12%
Cumulative Convertible Preferred Stock (Series B Preferred Stock) and the
accrued and unpaid dividends thereunder and (ii) 2.5% Series C Cumulative
Convertible Preferred Stock (Series C Preferred Stock) and the accrued and
unpaid dividends thereunder, for newly issued shares of the Companys common
stock, par value $0.001 per share (the Common Stock).

The Company is
offering the holders of its Series B Preferred Stock the right to convert the
stated value of the Series B Preferred Stock, plus all accrued and unpaid
dividends through the expiration date of the offering, into shares of the
Companys Common Stock at a price of $0.30 per share (the Series B Exchange
Offer).

The Company is
offering the holders of its Series C Preferred Stock the right to convert the
stated value of the Series C Preferred Stock, plus all accrued and unpaid
dividends through the expiration date of the offering, into shares of the
Companys Common Stock at a price of $0.45 per share (the Series C Exchange
Offer). The holders of the Series C Preferred Stock will also agree to tender
for cancellation those warrants issued to them in connection with their
purchase of the Series C Preferred Stock that are exercisable at a price of
$1.50 per share (the AC Warrants) and $2.00 per share (the BC Warrants).

The Exchange
Offers will expire at 5:00 p.m., Denver, Colorado time, on November 6, 2009
(unless the Company extends or terminates such Exchange Offers).

16

---



Item 2. Managements Discussion and
Analysis or Plan of Operation.

Forward Looking Information

Information
contained in the following discussion of results of operations and financial
condition and in certain of the notes to the financial statements included in
this document contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by
the use of words such as may, will, expect, anticipate, estimate, or
continue, or variations thereon or comparable terminology. In addition, all
statements other than statements of historical facts that address activities,
events, or developments the Company expects, believes, or anticipates will or
may occur in the future, and other such matters, are forward-looking
statements. The following discussion should be read in conjunction with the
Companys unaudited financial statements and related notes included elsewhere
herein.

The
Companys future operating results may be affected by various trends and
factors, which are beyond the Companys control. The important factors that
could prevent us from achieving our stated goals and objectives include, but
are not limited to, those set forth in our Annual Report on Form 10-K for the
fiscal year ended February 28, 2009 and the following:

| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The general state of the
  economy;                                                                                                                                                                      
| |   |                                                                                                                                                                                                          
| |  | Our ability to
  successfully implement our plan of operations;                                                                                                                                          
| |   |                                                                                                                                                                                                          
| |  | Our ability to raise
  additional capital, as it may be affected by general economic conditions,
  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;                                                                                                         
| |   |                                                                                                                                                                                                          
| |  | Our ability to identify,
  finance and integrate other acquisitions;                                                                                                                                     
| |   |                                                                                                                                                                                                          
| |  | Volatility of our stock
  price; and                                                                                                                                                                     
| |   |                                                                                                                                                                                                          
| |  | Actions of overseas
  producers of oil and natural gas over which we have no control.                                                                                                                    

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.

The
Company cautions the reader that a number of important factors discussed
herein, and in other reports filed with the Securities and Exchange Commission,
including its 10-K for the year ended February 28, 2009, could affect the
Companys actual results and cause actual results to differ materially from
those discussed in forward-looking statements. This information should be read
in conjunction with our Annual Report on Form 10-K for the year ended February
28, 2009.

Overview

We
are a natural resource exploration and production company engaged in the
exploration, acquisition and development of oil and gas properties in the
United States. We currently own an interest in five oil and gas prospects,
three of which are undeveloped. Recently, we entered into an agreement with
Entek GRB LLC (Entek) under which Entek can acquire up to 55% of our interest
in our oil and gas properties and certain other assets. The Company owns a
66.66667% working interest in the Slater Dome Field and is the operator of this
field. The Slater

17

---



Dome Field consists of
33,303 net acres, held by mineral leases, and is located along the
Colorado-Wyoming border in Moffat County, Colorado, and Carbon County, Wyoming.
The Slater Dome Field targets coal-bed methane gas located at relatively
shallow depths by industry drilling standards. The Flattops Prospect consists
of 3,276 net acres, of which we own 100% of the working interest. The North
Slater Dome Field consists of 600 gross acres, of which we own a 100% working
interest. 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. The terms of the farm-out agreement provide that if
commercial production from the Focus Ranch Unit is established, the Company
will make a production payment from 35% of the net proceeds at the wellhead to
the farmor. If the Focus Ranch Unit is abandoned, we are obligated to plug and
abandon the Focus Ranch Federal 12-1 Drill Site and reclaim the site together
with the existing 12-mile service road to BLM standards. We also own a 15%
working interest in 15,049 gross acres in Routt County Colorado called
Gibraltar Peaks Prospect. The acreage includes all rights from the surface of
the earth to the base of the Mesa Verde Formation. The Gibraltar Peaks Prospect
is included in the Focus Ranch Unit. The Weitzel prospect located in Denver
Julesburg Basin prospect consists of 16,560 gross acres (1,731 net acres).

On
August 10, 2009, we entered into a Participation Agreement (the Participation
Agreement) with Entek GRB LLC (Entek), under which Entek agreed to purchase
certain assets of the Company and spend up to an additional approximately $11.5
million over three years on exploration and development within approximately
66,000 gross acres to earn up to 55% of our interest in the underlying leases
and certain other assets, including the partnership interests in Slater Dome
Gathering, LLLP. Pursuant to the Participation Agreement, Entek purchased
4.0625% interest in the assets for $1,000,000. Further, Entek has the option to
purchase an additional 8.125% interest in the assets for an additional
$1,000,000, if, within 180 days, Entek reasonably believes that there exists a
danger of NFEI Insolvency (as defined in the Participation Agreement).

In
conjunction with Entek, we plan to complete the testing of the Niobrara and
Frontier formations in the Focus Ranch Federal 12-1 well and reenter and test
the Federal 3-1 well at the Focus Ranch Unit. Pursuant to the Entek Agreement,
we have established an operating committee that is responsible for the annual
work program for each phase and the determination of a budget for each phase.

The
following discussion and analysis covers the consolidated financial condition
of the Company at August 31, 2009, changes in our financial condition since
February 28, 2009, the end of the previous fiscal year, and a comparison of the
results of operation for the three and six months ended August 31, 2009 to the
same period from the previous year. This information should be read in conjunction
with our Annual Report on Form 10-K for the year ended February 28, 2009.

18

---



Results of Operation: Three months ended
August 31, 2009 compared to the three months ended August 31, 2008

For
the three months ended August 31, 2009 we reported a net loss attributable to
common shareholders of $2,678,195 or $0.19 per share on revenue of $64,667.
This compares to a net loss attributable to common shareholders of $2,003,010
or $0.16 per share, on revenue of $330,883, for the comparable period of the
previous fiscal year. We expect to incur losses until such time as we complete
the rehabilitation of our existing wells, bring the Focus Ranch Unit wells into
production, and complete new productive wells in connection with the
Participation Agreement with Entek. There is no assurance that we will be
successful in these efforts.

We
anticipate that results of operations for future periods will be significantly
affected by the Participation Agreement. The agreement provides for Entek to
fund up to approximately $11.5 million over three years to earn up to 55% of
our interest in the underlying leases and certain other assets. As of August
31, 2009, Entek was entitled to an interest of 20.3125%. For accounting
purposes, we will allocate to Entek their percentage share of revenues and
expenses during the term of the agreement, which is expected to reduce the
amounts of revenue and expenses reported by us in the future.

Revenues
for the three months ended August 31, 2009 were $64,667 compared with $330,883
for the three months ended August 31, 2008, a decrease of $266,216 or 80%. Oil
and gas revenues during the three months ended August 31, 2009 were $14,560
compared with $279,775 during the three months ended August 31, 2008, a
decrease of $265,215 or 95%. Substantially all of our production was curtailed
during the period as a result of our liquidity constraints. Furthermore, the
average gas sales price decreased by 70% to $2.46 per mcf during the three
months ended August 31, 2009 as compared to $8.16 per mcf during the three
months ended August 31, 2008.

Gathering
and operating fees were $50,107 for the three months ended August 31, 2009
compared with $51,108 for the three months ended August 31, 2008, a nominal
change. These fees are generally fixed by agreement and do not exhibit
significant variations.

Exploration
costs for the three months ended August 31, 2009 were $8,497 compared with
$46,899 for the three months ended August 31, 2008, a decrease of $38,402 or 82%.
The individual components of exploration costs are shown n the following table:

|                    |  |                                 |       |          |   |            |  |   |         |  
|------------------- |  | ------------------------------- | ----- | -------- | - | ---------- |  | - | ------- | -
|                    |  | Three
  months Ended August 31, |       | Increase |  
|                    |  | 2009                            |       | 2008     |   | (Decrease) | 
|                    |  |                                 |       |          |   |            | 
|Geologic consulting |  | $                               | 3,125 |          | $ | 16,250     |  | $ | (13,125 | )
|Seismic consulting  |  |                                 | 1,006 |          |   | 5,125      |  |   | (4,119  | )
|Misc other costs    |  |                                 | 281   |          |   | 12,619     |  |   | (12,338 | )
|Delay rentals       |  |                                 | 4,085 |          |   | 12,905     |  |   | (8,820  | )
|                    |  |                                 |       |          |   |            |  |   |         |  
|                    |  | $                               | 8,497 |          | $ | 46,899     |  | $ | (38,402 | )
|                    |  |                                 |       |          |   |            |  |   |         |  

The decrease in cost is a
result of decreased exploration activity at the Slater Dome Field and Focus
Ranch Unit. Certain activities were suspended during the period pending receipt
of additional funding.

19

---



Lease
operating expenses for the three months ended August 31, 2009 were $85,667
compared with $305,711 during the three months ended August 31, 2008, a
decrease of $220,044 or 72%. The changes are summarized as follows:

|                         |  |                                 |        |          |   |            |  |   |          |  
|------------------------ |  | ------------------------------- | ------ | -------- | - | ---------- |  | - | -------- | -
|                         |  | Three
  months Ended August 31, |        | Increase |  
|                         |  | 2009                            |        | 2008     |   | (Decrease) | 
|                         |  |                                 |        |          |   |            | 
|Lease operating expenses |  | $                               | 80,215 |          | $ | 278,947    |  | $ | (198,732 | )
|Gas sales costs          |  |                                 | 4,000  |          |   | 6,000      |  |   | (2,000   | )
|Production taxes         |  |                                 | 1,452  |          |   | 20,764     |  |   | (19,312  | )
|                         |  |                                 |        |          |   |            |  |   |          |  
|                         |  | $                               | 85,667 |          | $ | 305,711    |  | $ | (220,044 | )
|                         |  |                                 |        |          |   |            |  |   |          |  

Lease
operating expenses decreased $198,732 when compared with the previous period
ending in 2008 since we reduced our activities in response to our lack of
liquidity during the period. The decrease in gas sales costs and production
taxes is consistent with the decrease in production and revenues.

General
and administrative expenses for the three months ended August 31, 2009 were
$1,013,719 compared with $578,026 in the three months ended August 31, 2008, an
increase of $435,693 or 75%. The following table summarizes the major
components:

|                                 |  |                                 |           |          |   |            |  |   |          |  
|-------------------------------- |  | ------------------------------- | --------- | -------- | - | ---------- |  | - | -------- | -
|                                 |  | Three
  months ended August 31, |           | Increase |  
|                                 |  | 2009                            |           | 2008     |   | (Decrease) | 
|                                 |  |                                 |           |          |   |            | 
|Employee compensation            |  | $                               | 140,965   |          | $ | 248,589    |  | $ | (107,623 | )
|Financial consulting, affiliates |  |                                 | 637,515   |          |   |           |  |   | 637,515  |  
|Legal and accounting             |  |                                 | 153,033   |          |   | 62,700     |  |   | 90,333   |  
|Other consulting                 |  |                                 | 6,272     |          |   | 32,550     |  |   | (26,278  | )
|Restricted stock awards          |  |                                 |          |          |   | 101,000    |  |   | (101,000 | )
|Financial public relations       |  |                                 | 4,431     |          |   | 38,709     |  |   | (34,278  | )
|All other                        |  |                                 | 71,503    |          |   | 94,479     |  |   | (22,976  | )
|                                 |  |                                 |           |          |   |            |  |   |          |  
|                                 |  | $                               | 1,013,719 |          | $ | 578,026    |  | $ | 435,693  |  
|                                 |  |                                 |           |          |   |            |  |   |          |  

As
a result of our current lack of liquidity, we worked to reduce our cash
operating expenses. Employee compensation decreased $107,623 in the quarter
ended August 31, 2009 compared with the quarter ended August 31, 2008 as a
result of reduced personnel and decreases in salaries paid to officers. During
the quarter ended August 31, 2009, we agreed to issue 2,056,500 shares of
restricted common stock, valued at $637,515, to our chairman as compensation
for financial consulting services and as consideration for providing funds to
be used as the segregated arbitration fund. Professional fees for legal and
accounting services increased by $90,333 in the three months ended August 31,
2009, compared to the quarter ended in 2008, primarily because of the Stull
Ranch litigation. The decrease in other consulting fees was primarily composed
of decreased engineering and landman fees resulting from our reduced level of
exploration activity. During the quarter ended August 31, 2008, we issued
100,000 shares of restricted common stock, valued at $101,000 to our officers
as compensation. The decrease in financial public relations of $34,278 was
principally the result of a decrease in fees paid to service providers for
financial public relations and shareholder relations. The decrease in all other
general and administrative expenses reflects our lower activity level in
response to our liquidity constraints.

20

---



Issuance
of common stock options and warrants represents the pro-rata amortization of
estimated fair value of stock based compensation. During the quarter ended
August 31, 2009, costs decreased to $508,447, a decrease of $409,803, or 45%,
as compared to costs of $918,250 incurred during the quarter ended August 31,
2008. The costs reported during the quarter ended August 31, 2009, include the
estimated fair value of options issued to our chairman on August 17, 2009 to
purchase 1,250,000 shares at $0.20 per share, valued at $231,647, plus the
amortization of estimated fair value associated with 4,200,000 options issued
during July 2008 which are being amortized over two years. The costs reported
during the quarter ended August 31, 2008 include the amortization of estimated
fair value associated with 4,200,000 options issued during July 2008 plus the
amortization of estimated fair value associated with 3,950,000 options issued
during November, 2006 which were fully amortized as of November, 2008.

Depreciation,
depletion and amortization for the three months ended August 31, 2009 was
$107,565 compared with $245,600 during the three months ended August 31, 2008,
a decrease of $138,035 or 56%. The components of the increase are summarized in
the following table:

|                                   |  |                               |         |          |   |            |  |   |          |  
|---------------------------------- |  | ----------------------------- | ------- | -------- | - | ---------- |  | - | -------- | -
|                                   |  | Three months Ended August 31, |         | Increase |  
|                                   |  | 2009                          |         | 2008     |   | (Decrease) | 
|                                   |  |                               |         |          |   |            | 
|Producing
  oil and gas properties |  | $                             | 44,700  |          | $ | 178,800    |  | $ | (134,100 | )
|Slater
  Dome Gathering, LLLP      |  |                               | 32,623  |          |   | 32,623     |  |   |         |  
|Other
  depreciable assets         |  |                               | 30,242  |          |   | 34,177     |  |   | (3,935   | )
|                                   |  |                               |         |          |   |            |  |   |          |  
|                                   |  | $                             | 107,565 |          | $ | 245,600    |  | $ | (138,035 | )
|                                   |  |                               |         |          |   |            |  |   |          |  

The
decrease in depletion on producing properties is attributable to the decreased
production from the Slater Dome Field. Other depreciation decreased $3,935
during the three months ended August 31, 2009 as compared with the three months
ended August 31, 2008 as certain assets became fully depreciated.

Interest
income for the three months ended August 31, 2009 was $526 compared with
$28,400 in the three months ended August 31, 2008, a decrease of $27,874 or
98%. The decrease is the result of reduced cash balances held by the Company
during the three months ended August 31, 2009.

Interest
expense for the three months ended August 31, 2009 was $10,027 compared with
$21,722 in the three months ended August 31, 2008, a decrease of $11,695 or
54%. Interest expense on notes payable to affiliates decreased $2,726 in the
three months ended August 31, 2009 because the outstanding principal balance
has been reduced. Interest expense on the Steamboat Mortgage decreased by
$8,969 because the mortgage was retired during the quarter.

The
non-controlling interest in the income of the consolidated subsidiary for the three
months ended August 31, 2009 was $6,129 as compared to $13,270 for the three
months ended August 31, 2008, a decrease of $7,141 or 54%. This fluctuation
principally relates to the decrease in production from the Slater Dome Field
and corresponding decreased net income attributable to the non-controlling interest.

21

---



During
the three months ended August 31, 2009, the Company accrued dividends on the
Series B and C Convertible Preferred Stock in the amount of $57,506 and
$136,110 respectively. compared with $69,233 and $132,549 during the three
months ended August 31, 2008, a decrease of $8,166 or 4%. The decrease in
distributions to the SDG non-controlling interests is because SDG did not make any
distribution to non-controlling interest owners during 2009 as compared with 2008.

|                     |  |                               |         |          |   |            |  |   |         |  
|-------------------- |  | ----------------------------- | ------- | -------- | - | ---------- |  | - | ------- | -
|                     |  | Three months Ended August 31, |         | Increase |  
|                     |  | 2009                          |         | 2008     |   | (Decrease) | 
|                     |  |                               |         |          |   |            | 
|Dividends
  Series B |  | $                             | 57,506  |          | $ | 69,233     |  | $ | (11,727 | )
|Dividends
  Series C |  |                               | 136,110 |          |   | 132,549    |  |   | (3,561  | )
|Distributions
  SDG  |  |                               |        |          |   | 31,033     |  |   | (31,033 | )
|                     |  |                               |         |          |   |            |  |   |         |  
|                     |  | $                             | 193,616 |          | $ | 232,815    |  | $ | (39,199 | )
|                     |  |                               |         |          |   |            |  |   |         |  

As
a result of the above, we generated a net loss attributable to common
shareholders of $2,678,195 or $0.19 per share during the three months ended
August 31, 2009 as compared to a net loss attributable to common shareholders
of $2,003,010 or $0.16 per share during the three months ended August 31, 2008.

Results of Operation: Six months ended August
31, 2009 compared to the six months ended August 31, 2008

For
the six months ended August 31, 2009 we reported a net loss attributable to
common shareholders of $3,872,096 or $0.28 per share on revenue of $190,321.
This compares to a net loss attributable to common shareholders of $3,392,625
or $0.29 per share, on revenue of $828,730, for the comparable period of the
previous fiscal year. We expect to incur losses until such time as we complete
the rehabilitation of our existing wells, bring the Focus Ranch Unit wells into
production, and complete new productive wells in connection with the
Participation Agreement with Entek. There is no assurance that we will be
successful in these efforts.

We
anticipate that results of operations for future periods will be significantly
affected by the Participation Agreement. The agreement provides for Entek to
fund up to approximately $11.5 million over three years to earn up to 55% of
our interest in the underlying leases and certain other assets. As of August
31, 2009, Entek was entitled to an interest of 20.3125%. For accounting
purposes, we will allocate to Entek their percentage share of revenues and
expenses during the term of the agreement, which is expected to reduce the
amounts of revenue and expenses reported by us in the future.

Revenues
for the six months ended August 31, 2009 were $190,321 compared with $828,730
for the six months ended August 31, 2008, a decrease of $638,409 or 77%. Oil
and gas revenues during the six months ended August 31, 2009 were $102,382
compared with $728,772 during the six months ended August 31, 2008, a decrease
of $626,390 or 86%. Substantially all of our production was curtailed during
the period as a result of our liquidity constraints. Furthermore, the average
gas sales price decreased by 70% to $2.39 per mcf during the six months ended
August 31, 2009 as compared to $8.13 per mcf during the six months ended August
31, 2008.

22

---



Gathering
and operating fees were $87,939 for the six months ended August 31, 2009
compared with $99,958 for the six months ended August 31, 2008, a decrease of
$12,019 or 12%. These fees are generally fixed by agreement and, while they do
not exhibit significant variation, they will vary somewhat based on production
volume.

Exploration
costs for the six months ended August 31, 2009 were $72,283 compared with
$96,710 for the six months ended August 31, 2008, a decrease of $24,427 or 25%.
The individual components of exploration costs are shown in the following
table:

|                      |  |                             |        |          |   |            |  |   |         |  
|--------------------- |  | --------------------------- | ------ | -------- | - | ---------- |  | - | ------- | -
|                      |  | Six months Ended August 31, |        | Increase |  
|                      |  | 2009                        |        | 2008     |   | (Decrease) | 
|                      |  |                             |        |          |   |            | 
|Geologic
  consulting |  | $                           | 12,500 |          | $ | 31,250     |  | $ | (18,750 | )
|Seismic
  consulting  |  |                             | 24,992 |          |   | 34,863     |  |   | (9,871  | )
|Misc
  other costs    |  |                             | 766    |          |   | 16,102     |  |   | (15,336 | )
|Delay
rentals         |  |                             | 34,025 |          |   | 14,495     |  |   | 19,530  |  
|                      |  |                             |        |          |   |            |  |   |         |  
|                      |  | $                           | 72,283 |          | $ | 96,710     |  | $ | (24,427 | )
|                      |  |                             |        |          |   |            |  |   |         |  

The
decrease in cost is a result of decreased exploration activity at the Slater
Dome Field and Focus Ranch Units. Certain activities were suspended during the
period pending receipt of additional funding. Increased delay rentals are
attributable to contractual requirements for acreage at the Focus Ranch Unit.

Lease
operating expenses for the six months ended August 31, 2009 were $273,895
compared with $596,895 in the six months ended August 31, 2008, a decrease of
$323,000 or 54%. The changes are summarized as follows:

|                           |  |                             |         |      |          |            |  |   |          |  
|-------------------------- |  | --------------------------- | ------- | ---- | -------- | ---------- |  | - | -------- | -
|                           |  | Six months Ended August 31, |         |      | Increase |           
|                           |  | 2009                        |         | 2008 |          | (Decrease) | 
|                           |  |                             |         |      |          |            | 
|Lease
  operating expenses |  | $                           | 257,372 |      | $        | 536,267    |  | $ | (278,895 | )
|Gas sales
  costs          |  |                             | 10,000  |      |          | 12,000     |  |   | (2,000   | )
|Production
  taxes         |  |                             | 6,523   |      |          | 48,628     |  |   | (42,105  | )
|                           |  |                             |         |      |          |            |  |   |          |  
|                           |  | $                           | 273,895 |      | $        | 596,895    |  | $ | (323,000 | )
|                           |  |                             |         |      |          |            |  |   |          |  

Lease
operating expenses decreased $278,895 when compared with the previous period ending
in 2008 since we reduced our activities in response to our lack of liquidity
during the period. The decrease in gas sales costs and productions taxes is
consistent with the decrease in production and revenues.

General
and administrative expenses for the six months ended August 31, 2009 were
$1,353,795 compared with $1,102,992 in the six months ended August 31, 2008, an
increase of $250,803 or 23%. The following table summarizes the major
components:

|                                   |  |                             |           |          |   |            |  |   |          |  
|---------------------------------- |  | --------------------------- | --------- | -------- | - | ---------- |  | - | -------- | -
|                                   |  | Six months Ended August 31, |           | Increase |  
|                                   |  | 2009                        |           | 2008     |   | (Decrease) | 
|                                   |  |                             |           |          |   |            | 
|Employee
  compensation            |  | $                           | 294,410   |          | $ | 401,845    |  | $ | (107,435 | )
|Financial
  consulting, affiliates |  |                             | 637,515   |          |   |           |  |   | 637,515  |  
|Legal and
  accounting             |  |                             | 233,359   |          |   | 140,975    |  |   | 92,384   |  
|Other
  consulting                 |  |                             | 49,971    |          |   | 64,098     |  |   | (14,127  | )
|Restricted
  stock awards          |  |                             |          |          |   | 101,000    |  |   | (101,000 | )
|Financial
  Public relations       |  |                             | 12,171    |          |   | 180,079    |  |   | (167,908 | )
|All other                          |  |                             | 126,369   |          |   | 214,995    |  |   | (88,626  | )
|                                   |  |                             |           |          |   |            |  |   |          |  
|                                   |  | $                           | 1,353,795 |          | $ | 1,102,992  |  | $ | 250,803  |  
|                                   |  |                             |           |          |   |            |  |   |          |  

23

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As
a result of our current lack of liquidity, we worked to reduce our cash
operating expenses. Employee compensation decreased $107,435 in the six months
ended August 31, 2009 compared with the six months ended August 31, 2008 as a
result of reduced personnel and decreases in salaries paid to officers. During
the six months ended August 31, 2009, we agreed to issue 2,056,500 shares of
restricted common stock, valued at $637,515, to our chairman as compensation
for financial consulting services and as consideration for providing funds to
be used as the segregated arbitration fund. Professional fees for legal and
accounting services increased by $92,384 in the six months ended August 31,
2009, compared to the comparable period ended in 2008 primarily because of the
Stull Ranch litigation. The decrease in other consulting fees was primarily
composed of decreased engineering and landman fees resulting from our reduced
level of exploration activity. During the six months ended August 31, 2008, we issued
100,000 shares of restricted common stock, valued at $101,000 to our officers
as compensation. The decrease in financial public relations of $167,908 was
principally the result of a decrease in fees paid to service providers for
financial public relations and shareholder relations. The decrease in all other
general and administrative expenses reflects our lower activity level in
response to our liquidity constraints.

Issuance
of common stock options and warrants represents the pro-rata amortization of
the estimated fair value of stock based compensation. During the six months
ended August 31, 2009, costs decreased to $839,247, a decrease of $594,553, or
41%, as compared to costs of $1,433,800 incurred during the six months ended
August 31, 2008. The costs reported during the six months ended August 31, 2009
include the estimated fair value of options issued to our chairman on August
17, 2009 to purchase 1,250,000 shares at $0.20 per share, valued at $231,647,
plus the amortization of estimated fair value associated with 4,200,000 options
issued during July 2008 which are being amortized over two years. The costs
reported during the six months ended August 31, 2008 include the amortization
of estimated fair value associated with 4,200,000 options issued during July
2008 and the amortization of estimated fair value associated with 3,950,000
options issued during November, 2006 which were fully amortized as of November,
2008.

Depreciation,
depletion and amortization for the six months ended August 31, 2009 was
$301,791 compared with $510,777 during the six months ended August 31, 2008, a
decrease of $208,986 or 41%. The components of the decrease are summarized in
the following table:

|                                   |  |                             |         |          |   |            |  |   |          |  
|---------------------------------- |  | --------------------------- | ------- | -------- | - | ---------- |  | - | -------- | -
|                                   |  | Six months Ended August 31, |         | Increase |  
|                                   |  | 2009                        |         | 2008     |   | (Decrease) | 
|                                   |  |                             |         |          |   |            | 
|Producing
  oil and gas properties |  | $                           | 172,500 |          | $ | 377,900    |  | $ | (205,400 | )
|Slater
  Dome Gathering, LLLP      |  |                             | 65,246  |          |   | 65,246     |  |   |         |  
|Other
  depreciable assets         |  |                             | 64,045  |          |   | 67,631     |  |   | (3,586   | )
|                                   |  |                             |         |          |   |            |  |   |          |  
|                                   |  | $                           | 301,791 |          | $ | 510,777    |  | $ | (208,986 | )
|                                   |  |                             |         |          |   |            |  |   |          |  

The
decrease in depletion on producing properties is attributable to the decreased
production from the Slater Dome Field. Other depreciation decreased $3,586
during the six months ended August 31, 2009 as compared with the six months
ended August 31, 2008 as certain assets became fully depreciated.

24

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Interest
income for the six months ended August 31, 2009 was $1,355 compared with
$49,947 in the six months ended August 31, 2008, a decrease of $48,592 or 97%.
The decrease is the result of reduced cash balances held by the Company during
the six months ended August 31, 2009.

Interest
expense for the six months ended August 31, 2009 was $28,158 as compared to
$43,060 during the six months ended August 31, 2008, a decrease of $14,902 or
35%. Interest expense on notes payable to affiliates decreased $2,891 during
the six months ended August 31, 2009 because the outstanding principal balance
has been reduced. Interest expense on the Steamboat Mortgage decreased by
$12,011 because the mortgage was retired during the quarter.

The
non-controlling interest in the income of the consolidated subsidiary for the six
months ended August 31, 2009 was $13,044 as compared to $24,288 for the six
months ended August 31, 2008, a decrease of $11,244 or 46%. This fluctuation
principally relates to the decrease in production from the Slater Dome Field
and corresponding decreased net income attributable to the non-controlling interest.

During
the six months ended August 31, 2009, the Company accrued dividends on the
Series B and C Convertible Preferred Stock of $98,968 and $272,219,
respectively, compared with $140,239 and $277,037 during the six months ended
August 31, 2008, a decrease of $46,089 or 11%. Reduced dividends on the Series
B and C Preferred Stock reflect reductions in the number of outstanding
preferred shares that resulted from the conversion of preferred shares into
common shares. The decrease in distributions to the SDG non-controlling interests is
because SDG did not make any distribution to non-controlling interest owners during
the six months ended June 30, 2009 as compared with the same period in 2008.

|                     |  |                             |         |          |   |            |  |   |         |  
|-------------------- |  | --------------------------- | ------- | -------- | - | ---------- |  | - | ------- | -
|                     |  | Six months Ended August 31, |         | Increase |  
|                     |  | 2009                        |         | 2008     |   | (Decrease) | 
|                     |  |                             |         |          |   |            | 
|Dividends
  Series B |  | $                           | 98,968  |          | $ | 140,239    |  | $ | (41,271 | )
|Dividends
  Series C |  |                             | 272,219 |          |   | 277,037    |  |   | (4,818  | )
|Distributions
  SDG  |  |                             |        |          |   | 44,856     |  |   | (44,856 | )
|                     |  |                             |         |          |   |            |  |   |         |  
|                     |  | $                           | 371,187 |          | $ | 462,132    |  | $ | (90,945 | )
|                     |  |                             |         |          |   |            |  |   |         |  

As
a result of the above, we generated a net loss attributable to common
shareholders of $3,872,096 or $0.28 per share during the six months ended
August 31, 2009 as compared to a net loss attributable to common shareholders
of $3,392,625 or $0.29 per share during the six months ended August 31, 2008.

Liquidity and Capital Resources

We
are not currently able to generate positive cash flows from operating
activities. During the six months ended August 31, 2009, we experienced a
liquidity shortage and curtailed certain activities to conserve cash. As
discussed below, the principal source of funds during the period was $1,000,000
proceeds from the sale of certain assets to Entek.

25

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Historically,
the primary sources of capital have been from equity financings and, to a much
lesser extent, loans and the sale of gas. Historically, our primary use of
capital has been for the acquisition, development and exploration of oil and
gas properties and general and administrative expenses.

Our
working capital requirements are expected to increase in line with the planned
growth of our business. We have no lines of credit or other bank or off balance
sheet financing arrangements.

The
Participation Agreement with Entek provided cash of $1,000,000 for the sale of
a 4.0625% interest in certain assets. The agreement provides that Entek may
purchase an additional 8.125% interest for an additional $1,000,000 during the
ensuing 180 days if Entek reasonably believes that a danger of NFEI Insolvency
(as defined in the Participation Agreement) exists.

The
continued operation of our business will require an additional capital infusion
and we plan 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
independent auditors report accompanying the Companys February 28, 2009
consolidated financial statements contains 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
accompanying 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
entered into the Participation Agreement whereby Entek may expend up to $11.5
million over 3 years to develop an agreed area of mutual interest within our
existing properties. In the initial year of the agreement, Entek has agreed to
expend $3 million to earn 16.25% of our interest in the aforementioned
prospects together with an interest in Slater Dome Gathering, LLLP.

Our
plan of operations for the next twelve months is to complete the testing of the
Niobrara and Frontier formations in the Focus Ranch Federal 12-1 well and
reenter and test the Federal 3-1 well at the Focus Ranch Unit. Pursuant to the
Participation Agreement we expect to spend $3 million towards the development
of the Focus Ranch Unit wells and towards reworking certain of the Companys
coal gas wells. In conjunction therewith, we have established an operating
committee that is responsible for the annual work program for each phase and
the determination of a budget for each phase.

26

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We
believe that the plan of operations for the next twelve months will require
additional capital of approximately $2,000,000 to fund general administrative
and other costs. To the extent that additional opportunities present
themselves, we would require additional sources of capital to participate in
these opportunities. Management believes that current cash balances plus cash
flow from operations plus commitments from Entek will not be sufficient to fund
our capital and liquidity needs for the next twelve months and we will be
required to obtain additional capital through the issuance of debt or equity
securities or other means to execute our plans. Additional issuances of equity
or convertible debt securities will result in dilution to our current common
stockholders

As
of August 31, 2009, we had a cash balance of $487,508 and a working capital
deficiency of $3,493,384. The following summarizes the Companys capital
resources at August 31, 2009 compared with February 28, 2009:

|                |  |                   |            |                     |   |                       |   |                       |           |   |  |     |   
|--------------- |  | ----------------- | ---------- | ------------------- | - | --------------------- | - | --------------------- | --------- | - |  | --- | --
|                |  | August
  31, 2009 |            | February
  28, 2009 |   | Increase
  (Decrease) |   | Increase
  (Decrease) |          
|                |  |                   |            |                     |   |                       |   |                       |          
|Cash            |  | $                 | 487,508    |                     | $ | 856,475               |   | $                     | (368,967  | ) |  | (43 | )%
|Current assets  |  | $                 | 2,137,413  |                     | $ | 1,673,526             |   | $                     | 463,887   |   |  | 28  | % 
|Current         |  |                   |            |                     |   |                       |   |                       |           |   |  |     |   
|liabilities     |  | $                 | 5,630,797  |                     | $ | 4,507,088             |   | $                     | 1,123,709 |   |  | 25  | % 
|Working capital |  | $                 | (3,493,384 | )                   | $ | (2,833,562            | ) | $                     | (659,822  | ) |  | (23 | )%

Our
capital resources declined during the period primarily because revenue from the
sale of gas significantly declined. Net cash used in operating activities
during the six months ended August 31, 2009 was $1,102,370 compared to $291,622
during the comparable period of 2008, an increase of $810,748. For the most
part, our revenues declined more rapidly than we were able to reduce our
operating expenses.

Investing
activities provided net cash of $980,292 during the six months ended August 31,
2009 and used net cash of $1,541,226 during the six months ended August 31,
2008. During 2009, we reduced capital expenditures to $19,708 compared to
capital expenditures of $1,574,526 during 2008. Furthermore, the Participation
Agreement with Entek included the sale of a 4.0625% working interest in
exchange for $1,000,000.

Financing
activities used net cash of $246,889 during the six months ended August 31,
2009, primarily for payments on the Steamboat mortgage. During the comparable
period of 2008, financing activities provided net cash of $1,550,713, primarily
from the exercise of warrants.

The
balance of cash and equivalents decreased to $487,508 as of August 31, 2009
from $856,475 as of February 28, 2009, a net decrease in cash of $368,967. We
continue to refine our liquidity and capital resource requirements. As a
company that is currently experiencing a liquidity shortage, there is
significant uncertainty in our estimates. We may require additional capital to
continue our plan of operations.

27

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Critical Accounting Policies

There
have been no material changes in our critical accounting policies since
February 28, 2009.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

Interest Rate
Risks

The
Company pays a fixed rate of interest on its outstanding debt and accordingly,
there is no interest rate market risk.

Commodity
Price Risks

Our
major market risk exposure is in the pricing applicable to our natural gas
production. Pricing is primarily driven by the prevailing spot market prices
applicable to our U.S. natural gas production. Pricing for natural gas has been
volatile and unpredictable for several years. The prices we receive for
production depend on many factors outside of our control. For the quarter ended
August 31, 2009, our income before income taxes would have changed by $3,046
for each $0.50 change per Mcf in natural gas prices. We have not entered into
natural gas derivative contracts to manage our exposure to natural gas price
volatility.

Item 4. Controls and Procedures

Not
applicable.

Item 4T. Controls and Procedures

As
of the end of the period covered by this report, an evaluation was carried out
by New Frontier Energy, Inc., with the participation of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that these disclosure controls and
procedures were effective as of the end of the period covered by this report.
In addition, no change in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

28

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PART II--OTHER INFORMATION

Item 1. Legal Proceedings

For
a description of legal proceedings in which the Company has been involved with
during the current fiscal year, see the Companys Form 10-Q for the quarter
ended May 31, 2009 filed with the SEC on July 15, 2009, which we incorporate by reference herein.

Item 1A. Risk Factors

Except
as set forth below, there have been no material changes in our Risk Factors
from those reported in Item 1A of Part I of our Annual Report on Form 10-K for
the fiscal year ended February 28, 2009 filed with the Securities and Exchange
Commission, which we incorporate by reference herein.

Risks Relating to Our Business, Supplementing
the Risk Factors in Our Form 10-K/A for the fiscal year ended February 28,
2009.

Entek
may not make additional investments pursuant to the Participation Agreement.

On
August 10, 2009, New Frontier Energy, Inc. (the Company) entered into a
Participation Agreement with Entek GRB LLC (Entek) under which Entek agreed
to purchase certain assets of the Company and spend up to an additional
approximately $11.5 million over three years on exploration and development
within approximately 66,000 gross acres (the Underlying Leases) to earn up to
55% of the Companys interest in the Underlying Leases and certain of its other
assets, including its partnership interests in Slater Dome Gathering, LLLP
(collectively the Assets). For a complete discussion of the terms of the Participation
Agreement, see the Form 8-K we filed with the SEC on August 21, 2008, which is
incorporated herein by this reference. Pursuant to the Participation Agreement,
Entek has the right to participate in the exploration and development of the
underlying leases, and the right to earn assignments of interests in the Assets
in three phases. However, Entek is not obligated to expend additional funds to
earn additional interest in the Assets. Further, the Company may not use the
funds expended by Entek for working capital purposes. There can be no assurance
that the Entek will make additional payments to the Company pursuant to the
Participation Agreement or that the Company will further explore or develop its
properties.

Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.

Not
Applicable.

Item 3. Defaults Upon Senior Securities.

Not
Applicable.

29

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

Not
Applicable.

Item 5. Other Information

Effective October 1, 2009, the Company appointed Frank L. Jennings the Chief Financial
Officer and Principal Accounting Officer of the Company.

Frank
L. Jennings, age 58, was appointed our Chief Financial Officer and Principal
Accounting Officer effective October 1, 2009. Mr. Jennings has served as the Chief
Financial Officer of Gold Resources Corp. since June 2006 and the Principal
Financial and Accounting Officer of Synergy Resource Corporation since June
2007. Since 2001, Mr. Jennings has been an independent consultant providing
managing and financial services, primarily to smaller public companies. From
2000 to 2005, he served as the Chief Financial Officer and a director of Global
Casinos, Inc., a publicly traded corporation, and from 2001 to 2005, he served
as Chief Financial Officer and a director of OnSource Corporation, now known as
Ceragenix Pharmaceuticals, Inc., also a publicly traded corporation. Mr.
Jennings has a Bachelor of Science Degree in Economics from Austin College and
a Masters in Business Administration with an emphasis in Finance from Indiana
University.

Item 6. Exhibits

| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Exhibits:
  The following exhibits are filed with this report:                                                                 
| |                                                                                                                                
| | 31.1
  Certification pursuant to Rule 13a-14(a) or 15d-14(a) under The Securities
  Exchange Act of 1934 as amended.           
| |                                                                                                                                
| | 31.2
  Certification pursuant to Rule 13a-14(a) or 15d-14(a) under The Securities
  Exchange Act of 1934 as amended.           
| |                                                                                                                                
| | 32.
  Certifications pursuant to 18 U.S.C section 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.

30

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SIGNATURES

In
accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                         |                             |                                        
|------------------------ | --------------------------- | ---------------------------------------
|                         | New Frontier
  Energy, Inc.
|                         |                            
|Date:
  October 20, 2009 | By:                         | /s/ Paul G.
  Laird                    
|                         |                             |                                        
|                         |                             | Paul G.
  Laird,                       
|                         |                             | President
  and Chief Executive Officer
|                         |                            
|                         | By:                         | /s/ Frank L.
  Jennings                
|                         |                             |                                        
|                         |                             | Frank L.
  Jennings,                   
|                         |                             | Chief
  Financial Officer              

31

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