UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  FORM 10-KSB/A
                                AMENDMENT NO. 1


                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2003

                 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

     For the transition period from _________________ to __________________


                          Commission File No. 000-27783

                          NATHANIEL ENERGY CORPORATION
        (Exact name of small business issuer as specified in its charter)


Delaware                                                        84-1572525
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

8001 South InterPort Blvd. Suite 260, Englewood,  Colorado          80112
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number, including area code:  (303)690-8300


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

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

     Title of class: Common Stock, $0.001 par value per share

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

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

Nathaniel Energy's revenues for its most recent fiscal year (2003): $8,424,741

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  computed by reference to the average bid and asked price of such
common equity, as of March 4, 2004 was $25,009,921.

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity, as of March 4, 2004 is 69,719,414 shares.

DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>

                          NATHANIEL ENERGY CORPORATION

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
Forward Looking Statements................................................  2

                                            PART I
Item 1.   Description of Business.........................................  3
Item 2.   Description of Property.........................................  9
Item 3.   Legal Proceedings...............................................  9
Item 4.   Submission of Matters to a Vote of Security Holders.............  9

                                            PART II
Item 5.   Market for Common Equity and Related Stockholder Matters........ 10
Item 6.   Management's Discussion and Analysis or Plan of Operation....... 11
Item 7.   Financial Statements............................................ 16
Item 8.   Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure. .................................... 17
Item 8A.  Controls and Procedures......................................... 17

                                            PART III
Item  9.  Directors and Executive Officers of the Registrant.............. 18
Item 10.  Executive Compensation.......................................... 19
Item 11.  Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters.................... 21
Item 12.  Certain Relationships and Related Transactions.................. 22
Item 13.  Exhibits and Reports on Form 8-K................................ 24
Item 14.  Principal Accountant Fees and Services.......................... 25



<PAGE>



                                EXPLANATORY NOTE

The amendments in this Amendment No. 1 to Annual Report on Form 10-KSB/A for the
year  ended  December  31,  2003  with  Nathaniel  Energy  Corporation  includes
revisions to

        o Forward  Looking  Statements
        o Item 1  "Description  of Business -- Change in Control"
        o Item 5 "Market for Common  Equity and Related  Stockholder  Matters --
          Unregistered Sales of Securities during the past three years"
        o Item  11  "Security   Ownership  of  Certain   Beneficial  Owners  and
          Management"
        o Footnotes  1, 2, 7, 12 to the  Financial  Statements  included in this
          report, and
        o The addition of certain exhibits to this report.



                           FORWARD LOOKING STATEMENTS


Certain  information  contained  in this  report  may  include  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995,  and is subject to the safe harbor created by that act. The safe harbor
created  by the  Securities  Litigation  Reform  Act will not  apply to  certain
"forward  looking  statements"  because we issued  "penny  stock" (as defined in
Section  3(a)(51) of the  Securities  Exchange Act of 1934 and Rule 3a51-1 under
the Exchange  Act) during the three year period  preceding  the date(s) on which
those forward looking statements were first made, except to the extent otherwise
specifically  provided  by  rule,  regulation  or order  of the  Securities  and
Exchange  Commission.  We caution  readers  that certain  important  factors may
affect our actual results and could cause such results to differ materially from
any  forward-looking  statements  which  may be deemed to have been made in this
information  statement  or which are  otherwise  made by or on behalf of us. For
this purpose, any statements contained in this report that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the  generality  of the  foregoing,  words  such  as  "may",  "will",  "expect",
"believe", "explore", "consider",  "anticipate",  "intend", "could", "estimate",
"plan",  or "continue"  or the negative  variations of those words or comparable
terminology are intended to identify  forward-looking  statements.  Factors that
may  affect  our  results  include,  but are  not  limited  to,  the  risks  and
uncertainties associated with:


     o    Our ability to raise capital necessary to implement our business plan.
     o    Our ability to finance and complete  planned  projects and  facilities
          upgrades.
     o    Our ability to execute our business plan and commercialize the Thermal
          Combustor(TM)  technology,  including building Thermal  Combustors(TM)
          that meet  customers'  specifications  and that meet local  regulatory
          environmental and permit requirements.
     o    Risks related to dependency on a small number of customers.
     o    Our ability to satisfy our customers' expectations.
     o    Our ability to employ and retain qualified management and employees.
     o    Changes  in  government   regulations  which  are  applicable  to  our
          business.
     o    The availability of a consistent, economically viable, and sustainable
          waste stream supply to fuel the Thermal Combustor(TM) operations.
     o    Changes in the demand for our products  and  services,  including  the
          impact  from  changes  in  governmental  regulation  and  funding  for
          alternative energy.
     o    The degree and nature of our  competition,  including the  reliability
          and pricing of traditional energy sources, economic viability of other
          alternative energy sources such as wind and solar power.
     o    Our ability to generate sufficient cash to pay our creditors.
     o    Disruption in the economic and financial conditions primarily from the
          impact of terrorist attacks in the United States and overseas, threats
          of future attacks, police and military activities and other disruptive
          worldwide political events.

We are  also  subject  to  other  risks  detailed  from  time to  time in  other
Securities and Exchange Commission filings and elsewhere in this report. Any one
or more of these  uncertainties,  risks and other  influences  could  materially
affect our results of operations and whether forward-looking  statements made by
us  ultimately  prove  to be  accurate.  Our  actual  results,  performance  and
achievements  could differ  materially  from those expressed or implied in these
forward-looking  statements.  We undertake no obligation  to publicly  update or
revise any  forward-looking  statements,  whether from new  information,  future
events or otherwise.


                                        2
<PAGE>

                                     PART I

Item 1. Description of Business.

General

Nathaniel  Energy  Corporation  is a  renewable  energy  company  that  provides
industry with an  alternative  energy  comparable  to that of fossil fuels.  Its
proprietary  patented  technology,  the  Thermal  Combustor(TM),  is  a  2-stage
gasification  system  designed to convert  waste,  biomass,  tires and any other
solid,  carbon-based  materials into inexpensive  electrical and thermal energy,
while exceeding the most stringent EPA and European Union regulations.

Nathaniel Energy focuses its patented technology in three main areas:

o    licensing,
o    creating energy infrastructures, and
o    building mini power plants.

We plan to license the Thermal Combustor(TM)  technology to qualified companies,
joint venture partners,  and  distributorships.  Nathaniel Energy plans to build
energy infrastructures that will produce specialty gases and byproducts that can
be sold to various markets.  Additionally, the company plans to build mini power
plants for  businesses  that seek an  independent  source of energy.  These mini
power plants would be built on the businesses' premises ("in the fence") and can
reduce the  dependence  a business  has on fossil fuels and power from the local
utility.  In some  cases,  the mini power  plants can  become a  business'  self
sustained utility.

Nathaniel Energy has also been in the fuel processing  business,  including used
tire recycling and collection  services,  since 1997. We have operated a 27 acre
fuel  processing  facility in  Hutchins,  Texas  since 1999 and have  operated a
helium and gas processing facility in Keyes, Oklahoma since April 2003.

Nathaniel  Energy's  short term  objective is to use the Hutchins  facility as a
fuel supply for its first energy  infrastructure  operation which is planned for
construction in Keyes, Oklahoma. At this site, Nathaniel Energy plans to build a
Thermal  Combustor(TM)  which  will  obtain  its  fuel  from the  Hutchins  fuel
processing  facility.  The Thermal  Combustor(TM)  will also produce  marketable
byproducts,  including  electricity that will be used to power the gas operation
at Keyes.

Description of Thermal Combustor(TM) Technology

The Thermal  Combustor(TM) uses waste, such as scrap tires  (tire-derived fuel -
TDF), fuel derived from municipal and industrial  waste streams  (refuse-derived
fuel  -  RDF),  wood  waste  and  agricultural   waste.  Fuel  for  the  Thermal
Combustor(TM)  is placed on a moving grate in a chamber where it is subjected to
high  temperatures and gasified.  The resulting gas is withdrawn into a separate
chamber  where  it is  combusted  at  temperatures  ranging  from  three to four
thousand degrees fahrenheit.  The byproducts from combustion are heat, elemental
carbon,  carbon dioxide,  low levels of carbon  monoxide,  sulfur  dioxide,  and
nitrogen  oxides.  The process  also  generates  two forms of ash.  The first is
bottom ash, the unburnable  solids  remaining in the fuel, such as metals,  rock
and sand. The second is fly ash, small particles  commonly known as particulate,
which is captured in filters.

As a result of the pre-combustion gasification and high temperatures achieved in
the  Thermal  Combustor(TM),  unusable  pollutants  emitted  are in  very  small
quantities  and well below  current  EPA  environmental  standards.  The Thermal
Combustor's(TM)  high  temperatures  destroy 99.9% of hazardous  air  pollutants
emitted from refuse-derived fuel and tire derived fuel, including PCBs, dioxins,
and  furans.   Gaseous   pollutants  are  captured  by  scrubbers  or  catalytic
converters.

The Thermal  Combustor(TM)  is simple in design and  operation.  It has only two
moving parts, two fire belts, exposed to the high temperatures of the combustion
process. All other moving parts are located outside the gasification chamber and
the combustion chamber and are easily accessible for service.

In addition  to the  relatively  straightforward  construction  of the  patented
gasification and combustion  chambers,  Nathaniel Energy's  intelligent  process
control system  features  modern computer  process  technology.  The intelligent
process  control system monitors and controls all aspects of fuel and air volume
to maintain optimal  combustion.  This system allows for a virtually  unattended
operation.  The intelligent process control system features  self-diagnostic and
corrective  action functions  prompting the operator to take action if a problem
occurs  which is beyond  the  ability of the  computer  system to  correct.  The
Predictive Failure Analysis function pinpoints  potential weak spots that can be
dealt with as a  preventative  maintenance  item  before a more  costly  failure
occurs.

                                        3
<PAGE>

While the Thermal Combustor(TM) is adaptable to any combustible material, a 1995
study and test by Hazen  Research  found tire derived fuel generates the highest
number of BTUs per pound of any refuse-derived  fuel.  Management  believes that
the  abundance  of  discarded  tires  in the  United  States  and the  resulting
environmental   hazard  they  represent  provides  an  opportunity  to  position
Nathaniel  Energy to expand into the  collection  and  shredding of scrap tires,
useable as fuel for the Thermal Combustor(TM).

Environmental Testing

In May 2000 Bord Na Mona  Environmental  Limited,  an  environmental  management
company  conducted a  comprehensive  environmental  test on behalf of  Nathaniel
Energy of a Thermal Combustor(TM)  temporarily installed at a facility in County
Louth,  Ireland.  During this testing the Thermal  Combustor(TM) was fueled with
refuse-derived  fuel.  Testing was conducted for more than 50 different chemical
pollutants,  including dioxins and PCBs, many of which are extremely  hazardous.
The report concludes that the Thermal  Combustor(TM) was within then and pending
European directive limits.  Management believes it is significant that the tests
show  extremely  toxic  substances  in  emissions,  including  dioxins,  furans,
chlorophenols,   chlorobenzenes,   and  polycyclic  aromatic   hydrocarbons  are
significantly below the European limits, less than 10% of standard in all cases,
with many compounds completely absent.

Marketable Byproducts

Most byproducts of the Thermal Combustor(TM) can be marketable.

Primary byproducts include:

o Heat - useable for heating purposes, such as heating companion facilities,  or
  for steam generation.

o Electricity - produced by the addition of steam turbines and  generators,  for
  use in a companion project or for sale to the local utility.

Secondary   byproducts   include:

o Carbon black - can be sold for tire manufacturing,  water filtration,  and for
  use in the cosmetics industries.
o Carbon  dioxide  - can be  sold to  greenhouse  operators  for use in  growth
  enhancement or for other industrial processes involving carbonation.
o Sulfur dioxide - can be sold in the form of gypsum.
o Nitrogen - can be sold for use in natural gas pipelines.

Nathaniel Energy believes the marketable  byproducts that can be produced by the
Thermal  Combustor(TM) are ideally suited for use in proximity with a variety of
industrial  operations,  such  as  gas  pipelines,   chemical  plants,  printing
facilities,  industrial parks, and designated  "clean energy"  generation sites,
especially  in colder  climates  where heat is used for site warming or used for
co-generation of electricity.

Business Model

The company focuses its patented technology in three main areas:

o licensing,
o creating energy infrastructures, and
o building mini power plants.

The company plans to license the Thermal  Combustor(TM)  technology to qualified
companies, joint venture partners, and distributorships.  Nathaniel Energy plans
primarily to place Thermal  Combustors(TM)  in joint ventures in which Nathaniel
Energy is a participant.  The level of the Company's  joint  ownership will vary
with each joint venture.  Nathaniel  Energy is focused on forming joint ventures
with  partners  who  possess  both the  financial  capability  and  governmental
resources to execute a successful  operation.  These joint ventures are expected
to have a typical life in excess of 30 years.

The company does not plan to pursue  expansion of its fuel processing  business,
other than in connection with, and as a fuel source for,  Thermal  Combustor(TM)
installations  in  which  it has an  ongoing  financial  interest.  The  sale or
utilization of the byproducts from Thermal Combustor(TM) operations are expected
to enhance the return on Nathaniel  Energy's  investment in a combustor project.
Nathaniel  Energy may decide to sell Thermal  Combustors(TM)  from time to time,
depending upon the circumstances,  instead of pursuing the joint-venture  model.
We are presently not involved in any joint ventures,  however,  we are exploring
joint venture opportunities.

                                        4
<PAGE>

Proposed Expansion of Business

Nathaniel   Energy  has  plans  to  build  an  energy   infrastructure   Thermal
Combustor(TM)  operation  adjacent to the helium and gas processing  facility in
Keyes,  Oklahoma, in which Nathaniel Energy has a majority interest. The Company
plans to obtain the majority of its tire  derived fuel from its fuel  processing
facility  in  Hutchins,   Texas  with   supplemental   tire  derived  fuel  from
non-affiliates.  The goal of the initial energy  infrastructure  is to prove the
commercial  application of the Thermal Combustor and to lower the gas processing
plant's  operational costs by eliminating  purchased  electricity costs.  Future
expansion phases of the energy infrastructure  operation could include combustor
expansion,  gas well  enhancements  and the addition of ethanol  production.  In
addition to Nathaniel  Energy's  traditional  emphasis on domestic markets,  the
Company  will  continue  efforts to increase  its  business  internationally  by
attempting to develop new markets and expanding Nathaniel Energy's market share.

Nathaniel  Energy has a contract to supply two 1800 BHP  Thermal  Combustors(TM)
for $2.1 million for a Refuse Derived Fuel project in Cologna Venetta Italy. The
Thermal  Combustors(TM) will be used in a co-generation  waste-to-energy  plant.
Our contract is with L & R Energy Co. LLC who is the equipment supply contractor
for the project.  L & R has assigned to us the right to receive proceeds under a
letter of credit in the amount of our contract. Under this agreement,  Nathaniel
Energy has until July 1, 2004 to construct,  deliver and  successfully  test the
combustors.  We cannot  predict we will complete  this contract  within the time
frame allotted,  and if we do not complete this contract we cannot predict if we
will  become  involved  in a legal  action  relating  to  non-completion  of the
contract  including,  among other things, a payment dispute and  indemnification
liability,  and if so,  if we  will  prevail  in such  an  action.  If we do not
complete this project,  management believes the Thermal Combustors(TM) built for
this contract can be used in another project.

Fuel Processing Operation

Since 1999 Nathaniel Energy has operated a fuel processing facility in Hutchins,
Texas.  Under Texas  State  regulations  Nathaniel  Energy is licensed as a tire
processor and tire storage facility. The Company is paid a tipping fee (fee paid
per pounds of scrap disposed) for accepting scrap tires.  Nathaniel Energy sells
the output of its fuel processing  operation to two major users.  One is a large
cement company located in Texas, which uses the tire-derived fuel for firing its
kilns,  thereby displacing equal amounts of coal. The other is a national broker
which has an agreement with Nathaniel Energy to purchase tire-derived fuel on an
as-needed  basis,  primarily  for use by paper mill  plants.  Until the  Thermal
Combustor(TM) is operating economically using the tire-derived fuel processed in
Texas,  the company's  income  potential  from this operation will be limited to
tipping fees from the collection of scrap tires and selling tire-derived fuel to
others.

Intellectual Property

Nathaniel Energy owns three U.S.  patents,  the latest issued in March 2003, and
has a patent application  pending.  A European patent  application  covering the
Thermal  Combustor(TM)  technology is also pending. The Thermal Combustor(TM) is
used to produce  energy using  alternate  fuel sources which is then sold by the
Company.   As   described  in  Item  12  "Certain   Relationships   and  Related
Transactions",  our Chief Executive  Officer and Director Stanley Abrams and our
Vice President Fuel Processing,  Brett Abrams, have a right to a reassignment of
these patents from Nathaniel Energy, if neither of them are employed as officers
of the  company  and neither of them is a  director,  unless  termination  as an
officer was for cause, or legal incompetence, or by voluntary resignation, or as
a result of death,  or if the company  becomes  bankrupt,  or the company ceases
business operations.

Government Approval / Environmental Laws and Regulation

Operation  of a  Thermal  Combustor(TM),  a fuel  processing  facility  and  gas
processing  facility are subject to a variety of federal,  state, and local laws
and regulations,  including those relating to the discharge of material into the
environment  and protection of the  environment.  The  governmental  authorities
primarily responsible for regulating Nathaniel Energy's environmental compliance
are the  U.S.  Environmental  Protection  Agency,  Department  of  Environmental
Quality and comparable  regulatory  agencies and departments in the states where
Nathaniel Energy establishes operations.  Nathaniel Energy is subject to the air
quality  programs  under  federal and state law. The Company's  fuel  processing
operations  in Texas  are  subject  to  regulation  by the Texas  Commission  of
Environmental Quality.

                                        5
<PAGE>

Before Nathaniel  Energy can begin any Thermal  Combustor(TM) or fuel processing
operations  at any  location,  the company is  required  to obtain air  emission
permits,  as well as,  obtaining  appropriate  construction  and other necessary
permits.

Failure to comply with the laws  promulgated by these  authorities may result in
monetary sanctions, liability for environmental clean up, and other remedies. To
maintain the company's compliance,  Nathaniel Energy may make occasional changes
in the company's waste generation and disposal procedures, Thermal Combustor(TM)
operation  or  other  operations.  Nathaniel  Energy  believes  these  laws  and
regulations will not have a material adverse effect on its capital  expenditures
or competitive position. Nathaniel Energy believes that its technology complies,
in all material respects, with the various federal, state, and local regulations
that apply to its current and proposed operations.

Research and Development

During 2003 Nathaniel Energy increased its research and development efforts with
$37,409 spent on outside  resources and over  $100,000 in  engineering  salaries
dedicated to internal product development. In 2002, one full time engineer at an
annual salary of $60,000 devoted  approximately 75% of his time to improving the
Thermal Combustor(TM) technology.  Nathaniel Energy plans to continue increasing
internal  product research and development with a goal of offering its customers
the best and most  efficient  product  opportunities.  In January 2004 Nathaniel
Energy  hired a Vice  President  of  Operations  to lead  Thermal  Combustor(TM)
technology advancement and commercialization efforts.

Market Opportunity

Demand for licensing the Thermal  Combustor(TM)  technology,  or building energy
infrastructures  or mini  power  plants  using the  Thermal  Combustor(TM),  all
increase as the cost of traditional  energy costs rise. In industries  with high
energy demands such as chemical plants or newspaper  operations,  grid blackouts
or other service  interruptions  also drive the need for a more reliable "in the
fence" energy source such as the Thermal Combustor(TM).

According to the Rubber  Manufacturers  Association (RMA), there are up to three
billion scrap tires in stockpiles in the United  States.  The RMA estimates that
in 2001 alone,  281 million  tires were  scrapped.  Of these 281 million  tires,
about 218 million were recycled, 38 million were stockpiled, and 25 million were
shredded and buried in landfills or used as landfill covers.

The use of scrap tires for fuel is  currently  the  largest  single use of scrap
tires.  Tire-to-energy  technology  preserves natural resources by utilizing the
stored energy in petroleum-based  tires. Tires have a heating value of 12,000 to
15,000 BTUs per pound (6,668 to 8,335 kilo calories per  kilogram).  Each twenty
pound (nine kilogram) car tire is equivalent to about  twenty-five  pounds (11.4
kilograms)  of bituminous  coal.  Tires contain less ash than most types of coal
and less sulfur than  bituminous  coals.  Tires are shredded into chunks as tire
derived fuel. In 2001, cement kilns, pulp and paper mills,  electric  utilities,
waste-to-energy  plants, and industrial boilers burned approximately 115 million
tires.  However,  management  expects new regulations will be enacted which will
reduce the percentage of scrap tires used to fuel cement kilns. Although some of
these facilities use whole tires and/or tire derived fuel as the only fuel, most
mix or "co-fire" the tires/tire derived fuel with other fuels, such as coal.

Nathaniel Energy's Thermal Combustor(TM)  technology provides a viable method of
utilizing  scrap tires,  reducing  landfill and  stockpile  accumulations  while
generating energy and other marketable byproducts in an environmentally friendly
manner.

Competition

The  expanding  alternative  fuel  industry  is  a  rapidly  changing  field  of
technology.  Nathaniel Energy recognizes that to be competitive it must continue
to expand the  application  and  utilization of the Thermal  Combustor(TM).  The
company's  management  believes that the compactness,  flexibility of multi-fuel
capability  and  comparably  lower cost to  manufacture  and install the Thermal
Combustor(TM), compared to industrial solid waste burners, will enable Nathaniel
Energy to capture a share of the waste-to-energy market.

Nathaniel  Energy  is not aware of any  companies  marketing  equipment  for the
50-1,000  horsepower  market or offering joint  ventures for its equipment.  The
company does compete for waste-to-energy  business from different competitors in
each  addressed  market.  Nathaniel  Energy's  competitors,  however,  may  have
financial and marketing  resources far greater than those available to Nathaniel
Energy  and may have  greater  application  for  large  waste  streams,  such as
municipal waste from large cities.

In industries with high energy demands,  such as specialty gas plants,  chemical
manufacturing or newspaper productions, Nathaniel Energy competes with the local
utility which provides  traditional  electrical  power, in addition to alternate
power sources such as solar or wind power.

In industries  with regulated  waste  disposal,  Nathaniel  Energy competes with
incinerators and waste management  companies.  In some cases these solutions may
provide  lower cost waste  disposal,  but do not  remove  the  emissions  and/or
pollutants from the environment.
                                       6
<PAGE>

For  municipalities,  Nathaniel  Energy may compete  against  other  alternative
energy  sources,  especially if the  municipality  seeks to meet their regulated
percentage of alternate or "green" energy sources.  In this market,  the company
may also compete  against the local utility,  incinerators  or waste  management
companies, depending on the municipalities, regulatory environment and political
pressures to employ alternate energy sources.

Helium Production Operation

Nathaniel  Energy has a 51%  ownership  interest in a helium and gas  processing
facility in Keyes,  Oklahoma.  This  facility  produces  2,000,000 mcf (thousand
cubic  feet) of natural gas  annually,  5,500 mcf of natural gas daily and 3,600
gallons of natural gas liquids daily. A more detailed  ownership  description of
our Keyes  operation is contained under the heading  "Corporate  History" below.
Nathaniel Energy also acquired a 130-mile pipeline that collects natural gas for
the plant  from over 50 gas  wells.  The  acquisition  included  a  take-and-pay
contract with Air Products and Chemicals,  Inc. for the helium production and an
operating  agreement  with  Colorado  Interstate  Gas  Company  for the  sale of
processed  natural gas. The natural gas liquids  recovered by the plant are sold
to various parties.

The company has an agreement with Nexus Energy Company,  a third party producer,
for the gathering and  processing of new volumes of natural gas from  additional
wells and  gathering  fields.  The  company  believes  that this new natural gas
agreement will enable the company to significantly increase the gas flow through
the helium and gas  processing  plant,  substantially  increasing  annual  gross
profit, if equipment  upgrades,  which were completed in March 2004, process the
higher  volumes as designed.  No assurance can be given that these upgrades will
process significantly higher volumes.

Major Suppliers

We currently have three main suppliers in our helium production operations which
accounts for  approximately  93% of our sales.  Nexus Energy Company supplies us
with  natural  gas under a 10-year  agreement,  which  renews for an  additional
10-year  term if  Nexus  can  produce  commercial  quantities  of  natural  gas.
Additionally,  Nexus pays Nathaniel Energy fees for transporting the natural gas
from  a  central  delivery  point  to  the  Keyes  helium  plant  and a fee  for
compressing  the gas at the central  delivery  point. We have a 30 year contract
with EOG Resources,  Inc. (EOG) to purchase all helium from EOG's gas production
and to recover and sell the helium which we remove from the natural gas. Regency
Gas  Services,  LLC  supplies  us with crude  helium  under an  agreement  which
requires us to purchase  all crude  helium  produced  from the Lakin  processing
plant until 2016.

If we lose any of these suppliers,  we could suffer a material disruption in our
natural gas and crude helium supply, which could substantially effect the volume
of helium  and  liquid gas  products  which we are able to  produce  for our own
account.  However, if this occurred, we believe that we would be able to process
natural gas for third parties (which is known as toll  processing).  Although we
anticipate that toll processing  operations would keep our processing operations
at capacity, it could have a substantial adverse effect on our profit margins.

Major Customers

As noted  above,  approximately  93% of our  sales  stem from  helium  sales and
processed  natural gas sales,  with some  additional  sales of liquid  gases and
monthly fees from a take and pay contract.  We currently do most of our business
with three major customers. Because we offer several different products, we have
reduced  dependency  on any one  customer.  Air  Products  and  Chemicals,  Inc.
purchases all of the helium  produced under contract  through 2021 at which time
either party may terminate the agreement.  If it is not terminated at that time,
it may be terminated at any time upon two years' advance notice by either party.
This  contract can be  terminated  in 2008 and 2015 if either  party  requests a
price  determination  that is not  agreed to by the  other  party.  Should  this
contract  expire or be  terminated  early,  we  believe  there  are other  major
companies  which have a stated  interest in  purchasing  the  helium.  We have a
month-to-month  agreement  with Colorado  Interstate Gas Company for the sale of
processed  natural gas.  Additionally,  we have a month-to-month  agreement with
Koch  Hydrocarbon,  LP for the sale of natural gas liquids.  The  company's  top
three  customers  accounted  for  66% of our  total  revenue  in  2003,  however
Management  believes that the loss of any of these  customers  would not cause a
material  disruption to our overall sales volume  because we believe we would be
able to replace them in a relatively short time.

Personnel

Nathaniel  Energy has 31 full time  employees,  with nine located in  Englewood,
Colorado,  12 in Hutchins,  Texas and 10 in Keyes,  Oklahoma.  Nathaniel  Energy
believes that it will need to add approximately five full time employees: one at
the  executive  level,  two each at the Keyes and Hutchins  facility to meet its
business  plan needs during  2004.  We  anticipate  that  significant  personnel
additions  will be  required  if we obtain  additional  project  funding for the
energy infrastructure business.

                                        7
<PAGE>

Corporate History

Nathaniel Energy Corporation was incorporated in Delaware in 1996 under the name
of Ajax  Reinsurance  Limited.  Nathaniel,  Ltd. was incorporated in Colorado in
1992.  Nathaniel,  Ltd.  started its scrap tire  recycling  business in 1997. In
1998,  Nathaniel,  Ltd. agreed to merge with G-VII Energy Corp.  ("G-VII") which
had been  incorporated in Delaware in 1987. In July 1998, G-VII changed its name
to "Nathaniel Energy  Corporation" and in December 1998, it agreed to merge into
Ajax. In 1999, Ajax changed its name to Nathaniel Energy Corporation.

From  1997  to  2002,  Nathaniel  Energy's  operations  were  limited  to a fuel
processing  facility which sells its output of shredded rubber and steel wire to
others  primarily for use as fuel and recycling into steel  products.  On August
26, 2002,  Nathaniel  Energy  acquired MCNIC Rodeo  Gathering,  Inc. which owned
18.55% of Keyes Helium Company,  LLC. On April 3, 2003 Nathaniel Energy acquired
the remaining  81.45% interest in Keyes Helium  Company,  LLC from CIG Resources
Company through our subsidiary,  Nathaniel Energy Oklahoma Holdings Corporation.
Nathaniel  Energy  transferred  all of the  stock in MCNIC to  Nathaniel  Energy
Oklahoma  Holdings.  Also on April 3, 2003,  Nathaniel Energy Oklahoma  Holdings
acquired  the Keyes  gathering  system  and  Sturgis  gas  processing  plant and
compressor  station  from CIG Field  Services,  Company.  These  facilities  are
located  on a 15 acre site in Keyes,  Oklahoma.  These  facilities  receive  and
process natural gas,  remove liquid gases and helium,  and then send the natural
gas into a natural gas pipeline.

In  connection  with  approximately  $11,997,500  in debt  financing  for  these
acquisitions,  49% of Nathaniel Energy Oklahoma  Holdings  Corporation's  common
stock was issued to Richard Strain.  Accordingly,  Nathaniel  Energy owns 51% of
Nathaniel Energy Oklahoma Holdings.

On December  31, 2002,  MNS Eagle  Equity  Group IV, Inc.  and its  stockholders
entered  into a Stock  Exchange  Agreement  with  Nathaniel  Energy  Corporation
pursuant to which  Nathaniel  Energy  acquired all of MNS's  outstanding  common
stock for $20,750 in cash and 50,000 shares of Nathaniel  Energy's common stock.
MNS, a reporting  company under Section 12(g) of the Securities  Exchange Act of
1934, became a wholly owned subsidiary of Nathaniel Energy.  The purpose of this
transaction was for Nathaniel  Energy to succeed to the  registration  status of
MNS  under the  Exchange  Act in  reliance  upon  Rule  12g-3 of the  Securities
Exchange Act of 1934. Currently MNS is not engaged in any business.

Change in Control

Effective  October 3, 2003, a company change in control  occurred as a result of
the  closing of a  conversion  agreement  between  Nathaniel  Energy and Richard
Strain.   Pursuant  to  the  conversion   agreement,   $10  million  dollars  of
indebtedness  of Nathaniel  Energy to Mr. Strain  converted into an aggregate of
50,000,000 shares of Nathaniel Energy's common stock to be issued to NEC Energy,
LLC, a designee of Mr. Strain.

Nathaniel Energy has 75,000,000  shares of common stock authorized for issuance.
Prior to the conversion transaction, the Company had 38,262,664 shares of common
stock issued and outstanding. Accordingly, the Company did not have a sufficient
number of shares of common  stock  authorized  for  issuance to issue all of the
shares of common stock in the conversion. The conversion agreement provided that
to the extent that the Company did not have  sufficient  shares of common  stock
authorized  to issue all of the  shares in the  conversion,  NEC  Energy has the
irrevocable  right to the shares that could not be issued.  Nathaniel Energy has
issued 30,000,000  shares of common stock to NEC Energy,  and NEC Energy has the
irrevocable  right to an additional  20,000,000  shares of common stock.  In the
conversion  agreement,  Nathaniel  Energy agreed to take all required  corporate
action to seek the  stockholders'  approval to increase the number of authorized
shares to a number which is at least  sufficient  for the Company to deliver all
of the shares of common stock issuable to NEC Energy  pursuant to the conversion
agreement.

Giving  effect to the  issuance  of all of the shares of common  stock under the
conversion agreement, NEC Energy owns 55.7% of the issued and outstanding shares
of common stock of the Company.

In  connection  with the  conversion,  NEC Energy  received  the right to demand
registration  of the  resale of the  shares at any time  after  January 3, 2004.
Additionally,  NEC was granted piggyback registration rights relating to certain
registration  statements  which Nathaniel Energy files after January 3, 2004, if
any.


At the time of the conversion of the debt into common stock,  Nathaniel Energy's
stock price was very volatile.  Nathaniel Energy used a three-day  average price
of $1.05 per share in the transaction.  The closing prices of Nathaniel Energy's
common  stock on the OTC  Bulletin  Board on October 2, October 3 and October 6,
2003 were $1.10, $0.80 and $1.25 respectively.  Therefore,  the value attributed
to the 50,000,000  shares to be issued in the concersion  was  $52,500,000.  The
$42,500,000  difference between this value and the $10,000,000 of debt which was
converted was recorded as a non-cash financing expense.


Subsidiaries

Nathaniel  Energy has one wholly  owned  subsidiary:  MNS Eagle Equity Group IV,
Inc.,  which  currently  has no  operations.  The  company  has  one  51%  owned
subsidiary:  Nathaniel Energy Oklahoma Holdings Corporation,  which beneficially
owns all of Keyes Helium Company, LLC and the Keyes gathering system and Sturgis
gas processing plant and compressor station.

                                        8
<PAGE>

Available Information

The SEC  maintains an internet  site at  www.sec.gov  that contains the reports,
proxy and information  statements,  and other  information  regarding  Nathaniel
Energy.  In addition,  the company provides easy access to these reports free of
charge via the company's internet website, www.nathanielenergy.com.  Information
on our website is not part of this report.

Nathaniel Energy  maintains a codes and policies page on its website.  This page
includes,  among other items,  the Nathaniel Energy Code of Business Conduct and
Ethics for Officers (Vice President and Senior) and Directors, and the Nathaniel
Energy Code of Business  Conduct and Ethics for  Employees  and Officers  (other
than Vice President and Senior).

Item 2. Description of Property.

Nathaniel Energy owns approximately 27 acres of property in Hutchins,  Texas and
a 10,000 square foot building  located on the property  where  Nathaniel  Energy
operates the fuel processing  division.  The building is  approximately 13 years
old and has been maintained in good condition.  Nathaniel  Energy believes it is
suitable for its existing scrap tire  reclamation  and processing  operations at
that location.  This property has a mortgage loan which has a principal  balance
of $220,000  and bears 14%  interest  per year.  Installments  of interest  only
payments of $2,567 were payable  monthly.  The loan by its terms expired in July
2002.  The lender  informally  agreed to extend the term to December  31,  2003.
Nathaniel  Energy has not paid the  principal  and interest  since  December 31,
2003. The lender,  however,  has not declared the loan in default. The lender is
currently forebearing on declaring the loan in default, but it has no obligation
to continue to forebear.  Nathaniel  Energy  anticipates  it will either use the
proceeds from its March 17, 2004 debt  financing,  which is described in Item 12
"Certain Relationships and Related Transactions" to pay off the loan, or it will
obtain mortgage financing to pay off the loan.

Nathaniel  Energy  leases a 3,815 square foot office  facility for its corporate
offices in  Englewood,  Colorado and believes this space will meet its corporate
business needs in 2004.

Nathaniel Energy  beneficially  owns a 51% interest in approximately 15 acres of
land in Keyes,  Oklahoma  on which  the  Keyes  helium  plant  and  Sturgis  gas
processing plant and compressor station is located.  The facility includes a gas
processing, compression and liquid chilling plant.

Nathaniel Energy  beneficially owns a 51% interest in approximately 190 acres in
Keyes, Oklahoma, adjacent to the Helium plant. Pursuant to an agreement with the
seller of the property, the Cimarron Industrial Park Authority,  we are required
to commence  construction of a co-generation plant and tire reclamation facility
on this property by June 20, 2004. If we do not meet this  deadline,  the seller
may  elect to have the  property  revert  back to it.  At this  time we have not
commenced construction of this project.

Item 3. Legal Proceedings.

Nathaniel Energy is involved in litigation in the normal course of its business,
none of which is anticipated to have a material  adverse effect on its financial
condition, operations or prospects.

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

During the fourth  quarter of the fiscal  year  ended  December  31,  2003,  the
following  actions were  approved by written  consent of  stockholders  owning a
majority of our voting stock:

o    to amend the  Certificate  of  Incorporation  to  provide  for our Board of
     Directors  the  authority  to issue  shares  of our  previously  authorized
     preferred stock with designations, rights and preferences determined by the
     Board;

o    to amend the Certificate of  Incorporation  to give effect to a one-for-ten
     reverse stock split of our issued and outstanding shares of common stock;

o    approval of the  Nathaniel  Energy  Corporation  2003 Equity  Participation
     Plan.

Nathaniel Energy received the consent of  approximately  52.5% of the issued and
outstanding  shares of its  common  stock  for the  actions  described  above on
November 20, 2003.

A  preliminary  information  statement  relating to these actions has been filed
with the Securities and Exchange Commission,  however the information  statement
has not been finalized.  Accordingly, a definitive information statement has not
been filed with the Securities  and Exchange  Commission nor has it been sent to
our stockholders. The actions approved by the holders of a majority of our stock
cannot  be  effectuated  until  at  least  20 days  after  we mail a  definitive
information  statement  to our  stockholders.  We cannot  predict when this will
occur.

                                       9
<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Nathaniel  Energy's  common  stock is presently  quoted on the  Over-the-Counter
Bulletin  Board (OTCBB) under the symbol NECX.  The following  table sets forth,
for the fiscal quarters  indicated,  the high and low close price quotations for
Nathaniel Energy's common stock as reported on the OTCBB. The quotations reflect
inter-dealer quotations without retail markup,  markdown or commission,  and may
not represent actual transactions.

                                                     High          Low
                                                   --------      --------
Fiscal Year Ended December 31, 2002:
   First Quarter                                   $   0.95      $   0.07
   Second Quarter                                  $   1.50      $   0.35
   Third Quarter                                   $   2.00      $   0.81
   Fourth Quarter                                  $   3.00      $   1.25
Fiscal Year Ended December 31, 2003:
   First Quarter                                   $   2.45      $   1.75
   Second Quarter                                  $   2.05      $   0.85
   Third Quarter                                   $   1.80      $   0.70
   Fourth Quarter                                  $   2.55      $   0.80

Stockholders of Record

As of March 1, 2004,  Nathaniel Energy had approximately  1,031  stockholders of
record.

Dividends

Nathaniel  Energy has never  declared or paid any dividends on its common stock.
Nathaniel  Energy  currently  intends  to  retain  any  earnings  for use in the
business and  therefore  does not  anticipate  paying any  dividends in the near
future.  Dividends on our common stock can be paid  lawfully only out of current
and retained earnings and surplus of the company,  when, and if, declared by the
Board of Directors.  Nathaniel  Energy has not declared or paid any dividends on
the  common  stock  and  there  is no  assurance  dividends  will be paid in the
foreseeable  future.  The payment of  dividends  in the future  rests within the
discretion of the Board of Directors and will depend,  among other things,  upon
the Company's earnings, its capital requirements and its financial condition, as
well as other factors, which the Board of Directors deems relevant.

Unregistered sales of securities during the past three years:
<TABLE>
<CAPTION>

                               Issuance    Common Stock     Total                   Type of
Holder Name                      Date         Shares        Price                Consideration
- -----------------------------------------------------------------------------------------------------------

<S>                            <C>            <C>         <C>
J.DeMasi                       07/10/01       75,000      $   12,750   Financial Consulting Services
H. Seidman                     07/10/01       75,000      $   12,750   Financial Consulting Services
Cesar Muniz                    07/17/01    1,000,000      $  170,000   Services Rendered/Investor Relations
Kay Rhodes                     01/05/02      294,000      $   50,000   Conversion of Debt per Note
Alvin Mordoh                   02/12/02      275,000      $  121,000   Financing Incentive
Paula Lowry(1)                 02/12/02       10,000      $    4,400   Cash Investment
Linda Mordoh(1)                02/12/02        5,000      $    2,200   Cash Investment
Sam Epstein(1)                 02/12/02        5,000      $    2,200   Cash Investment
Solomon Mordoh(1)              02/12/02        5,000      $    2,200   Cash Investment
Alternate Capital LLC          03/15/02   13,500,000(2)   $  800,000   Financial Services
Richard Strain                 04/19/02    8,250,000      $1,650,000   Conversion of Debt
Managerial Advisory Services   07/11/02      198,000      $  136,620   Investor Relation Services
Jackson Morris                 07/11/02      200,000      $  188,000   Legal Services
Bodden Int'l                   07/11/02      600,000      $  564,000   Financing Services
Mel Siegal                     07/11/02          200      $      200   Conversion of Note Interest
Sol Adler                      07/11/02      200,000      $  140,000   Consulting Services
Bob and Peggy Isom             07/11/02       29,690      $   29,690   Manufacture of Equipment
Judy Bailey                    07/16/02      205,882      $   35,000   Conversion of Debt
Michael Musich                 08/09/02       10,000      $    6,000   Cash Investment
Ken Lucas                      08/09/02       50,000      $   50,000   Financing Services

                                               10
<PAGE>

                               Issuance    Common Stock     Total                   Type of
Holder Name                      Date         Shares        Price                Consideration
- -----------------------------------------------------------------------------------------------------------

Rusty Bailey                   10/17/02       12,249      $   12,249   Internet Services
Alvin Mordoh                   10/17/02       13,333      $   13,333   Cash Investment
Herman J. Calderon(1)          10/17/02        2,000      $    2,000   Cash Investment
Harry Greenberg(1)             10/17/02        1,000      $    1,000   Cash Investment
Paula Lowry(1)                 10/17/02        1,000      $    1,000   Cash Investment
Gilbert Cohen(1)               10/17/02        1,000      $    1,000   Cash Investment
G. M. Fornmarino               10/17/02        8,000      $    8,000   Cash Investment
Kay Rhodes                     10/17/02      100,000      $   50,000   Conversion of Debt
Roberta Clark                  11/14/02       21,428      $   12,856   Cash Investment
Harry Greenberg(1)             12/24/02        2,000      $    2,000   Cash Investment
Alternate Capital LLC          02/18/03    1,066,667      $  800,000   Marketing and Financing Services
Strong Wilken LLC              02/18/03      233,333      $  175,000   Marketing Services
Mike Libeer                    05/09/03      100,000      $  195,000   Sign-on Bonus (4)
Robert Barnett                 09/22/03      100,000      $  125,000   Legal Services
NEC Energy, LLC                10/03/03   30,000,000(3)   $6,000,000   Conversion of Debt
Stan Abrams                    10/30/03      117,733      $  217,806   Accrued Compensation Payment
Brett Abrams                   10/30/03      171,632      $  317,519   Accrued Compensation Payment
Gene Bailey                    10/30/03      166,200      $  307,470   Accrued Compensation Payment
Brian Culvey                   10/30/03      565,665      $1,046,480   Accrued Compensation Payment
Cesar Muniz                    10/30/03      235,520      $  435,712   Accrued Compensation Payment
</TABLE>

----------------------

(1) The  recipient  of these  shares  was a  designee  of Alvin  Mordoh  who was
entitled to receive the shares for an investment made by him.


(2) 12, 291,666 of these shares were issued to the members of Alternate Capital,
LLC.


(3) Partial  issuance of shares in  conversion of an aggregate of $10 million of
indebtedness,  which is  described  in detail under Item 1 "Business - Change in
Control."

(4)  Earned in 2001. Shares were issued in May 2003.

In March 2002,  Nathaniel Energy also issued warrants to purchase 205,882 shares
of common  stock at a price of $0.17 per share,  expiring two years from date of
issue, to Judy Bailey, wife of Nathaniel Energy's vice president and director.

Each of the above issuances were exempt from registration  under Section 4(2) of
the Securities Act of 1933. We did not use any underwriter or placement agent in
these  transactions,  and did not pay any  compensation  to anyone in connection
with these issuances.

All of the issuances were made:

o directly by Nathaniel  Energy to persons with whom its  management  had direct
contact and personal relationships,

o to persons who were  introduced  to  Nathaniel  Energy by members of Nathaniel
Energy's management, and

o to attorneys, consultants and others in compensation for services.

Item 6. Management's Discussion and Analysis of Results of Operations, Liquidity
and Financial Condition.

Results of Operations

Supplemental Quarterly Results of Operations

During  2003  Nathaniel  Energy   completed  a  variety  of  material   non-cash
transactions   which  were  recognized  as  expenses  under  Generally  Accepted
Accounting  Principles  (GAAP).  With  respect to the  issuance of common  stock
shares in payment of employee compensation and for non-employee  expenses,  GAAP
requires  recording of an expense equal to the common stock fair market value on
the issue date,  times the number of shares  issued.  GAAP also  requires  other
stock  transactions,  such as the debt  conversion  that  occurred in the fourth
quarter of 2003, to be recorded at fair market value.  Since Nathaniel  Energy's
stock price varies from  quarter to quarter and the number of shares  issued for
services did not occur evenly during the year, the Company  desires to highlight
these non-cash expenses for comparability purposes.

                                       11
<PAGE>

The following tables set forth certain unaudited quarterly results of operations
of  Nathaniel  Energy  for  2003.  The  quarterly   operating  results  are  not
necessarily indicative of future results of operations.
<TABLE>
<CAPTION>

                                                                          Three Months Ended 2003(unaudited)
                                                                                                                        Year ended
                                                                                                                         Dec. 31,
                                                          March 31        June 30         Sept. 30        Dec. 31          2003
                                                       ------------    ------------    ------------    ------------    -----------
<S>                                                    <C>             <C>             <C>             <C>             <C>
Revenue                                                $    104,915    $  2,803,633    $  2,716,970    $  2,799,223    $  8,424,741
Cost of revenue                                             147,464       2,691,003       2,834,531       2,178,843       7,851,841
                                                       ------------    ------------    ------------    ------------    ------------
Gross profit (loss)                                         (42,549)        112,630        (117,561)        620,380         572,900

  Non-cash employee compensation (1)                           --              --              --         1,828,745       1,828,745
  Non-cash charges and expenses (2)                         975,000          45,000         125,000            --         1,145,000
  Depreciation and amortization                              58,754         258,348         162,455         265,881         745,438
  Other operating expenses                                   62,588         120,813         839,383         650,822       1,673,606
                                                       ------------    ------------    ------------    ------------    ------------
Total operating expenses                                  1,096,342         424,161       1,126,838       2,745,448       5,392,789

Operating loss                                           (1,138,891)       (311,531)     (1,244,399)     (2,125,068)     (4,819,889)

  Non-cash stock issue for conversion of debt (3)              --              --              --       (42,500,000)    (42,500,000)
  Non-cash write off of stock subscription                     --              --              --          (175,500)       (175,500)
    receivable (4)
  Interest expense, net                                    (182,062)       (379,362)       (320,597)       (139,752)     (1,021,773)
  Other non-operating  income (expense)                       7,526          26,133              75         (23,060)         10,674
                                                       ------------    ------------    ------------    ------------    ------------
 Loss before income taxes and minority interest          (1,313,427)       (664,760)     (1,564,921)    (44,963,380)    (48,506,488)
  Income tax expense                                           --              --              --              --              --
  Minority interest                                         (19,920)       (100,300)        146,578         (34,139)         (7,781)
                                                       ------------    ------------    ------------    ------------    ------------
   Net loss                                            $ (1,333,347)   $   (765,060)   $ (1,418,343)   $(44,997,519)   $(48,514,269)
                                                       ------------    ------------    ------------    ------------    ------------

Weighted-average common shares
   outstanding-diluted                                   38,262,664      38,262,664      38,362,664      68,671,091      45,913,555
                                                       ------------    ------------    ------------    ------------    ------------
Shares outstanding at end of period                      38,262,664      38,262,664      38,362,664      69,719,414      69,719,414
                                                       ------------    ------------    ------------    ------------    ------------
</TABLE>

(1) A total of  1,256,750  shares were issued to pay accrued  compensation  (see
Footnote 9 "Non Cash  Financing  Activities" ) Another  285,000 shares are to be
issued in 2004 to pay for accrued employee severance expense.

(2) A total of 1.5 million shares were issued to pay for  marketing,  financing,
legal and other professional services.

(3) $10  million  in debt  was  converted  to 50  million  common  stock  shares
effective Oct 3, 2003. (see Footnote 8 "Stockholder's Equity")

(4) During the 2003 fourth quarter a non cash charge of $175,500 was recorded to
write off stock subscription receivables.

Year ended December 31, 2003 and 2002

Company Overview

Nathaniel  Energy's mission is to provide a lower cost, clean energy alternative
to fossil fuels worldwide.  Our operational plan focuses on three major business
models:  licensing,  building  energy  infrastructures  and building  mini power
plants. In 2003 revenue was generated by two businesses  integral to funding and
operating the energy infrastructure  business.  The largest business, the helium
and gas processing plant,  generated 93% of revenue,  or $7,851,531 during 2003.
The second business,  the fuel processing operation generated 7% of the revenue,
or $573,210 during 2003. Compared to 2002,  revenue,  assets and liabilities all
increased  significantly  due to the  acquisition of a helium and gas processing
facility in April 2003.

Nathaniel  Energy's long term goal is to produce the majority of its revenue and
cash flow from  building  energy  infrastructures  and mini power  plants.  As a
result,  the  majority  of its  resources  are  focused  on  these  construction
businesses. In both of these developing businesses,  Nathaniel Energy expects to
market its  capabilities,  raise  capital for the  construction  of projects and
manage the projects from start to finish.

Historically,  the  company has not had  difficulty  finding  potential  project
opportunities.  Worldwide,  industries  and  municipalities  seek lower cost and
clean energy  alternatives to fossil fuels. Demand for these energy alternatives
is expected to grow.  A key to the  company's  success  will be wisely  choosing
among project opportunities and focusing resources on projects with the greatest
chance of success and returns for stockholders.

Nathaniel  Energy enters 2004 with a proven,  patented  technology and a current
year mission to prove the commercial  application of the Thermal  Combustor(TM).
At the same time,  the company is seeking  funds for numerous  projects that use
the Thermal  Combustor(TM)  technology  ranging in size from $6 to $24  million,
which we are currently  exploring.  Once financed,  Nathaniel Energy anticipates
these projects would take approximately 9 to 24 months to complete.

                                       12
<PAGE>

Operating results 2003 compared to 2002

For the year ended December 31, 2003 revenue increased from $175,662 in 2002, to
$8,424,741 in 2003, a dramatic increase due to Nathaniel Energy's acquisition of
the Keyes helium  plant,  the Sturgis gas plant and the Keyes  gathering  system
from CIG on April 3,  2003.  The  revenues  and  expenses  of  Nathaniel  Energy
Oklahoma  Holdings are consolidated  within total operations  beginning April 3,
2003.  Revenues from the helium and gas processing  operations  were  $7,851,531
during 2003, with none during the preceding year.  Revenues from fuel processing
operations  were  $573,210  during the period,  up $397,548 from $175,662 in the
preceding year.

Gross profit turned  positive in 2003 at 7% compared to a negative 156% in 2002.
During  2003 the helium and gas  processing  operation  gross  profit of 11% was
offset by a negative 48% margin at the fuel  processing  operation for the year.
Both  businesses have plans to improve gross margins in 2004. On January 9, 2004
Nathaniel  Energy  completed a new contract with Nexus Energy Company to receive
additional  gas through its existing  pipeline for  processing  at the company's
facilities.  According to the contract, Nathaniel Energy will extract helium and
natural gas liquids from this new gas stream.  The company believes that the new
contract and the $1.1 million  spent on equipment  upgrades in the first quarter
of 2004 will enable the company to increase  gas volumes and  production  at the
processing plant beginning in the second quarter of 2004.

Total selling,  general and  administrative  expenses  increased $726,961 or 16%
from  $4,665,828 for the year ended  December 31, 2002.  The largest  expense in
2003 was non-cash employee and professional  service compensation of $2,973,745,
which  increased  $282,796  compared  to  $2,690,949  in 2002.  Cash  costs that
increased  from the prior year include,  gas and helium  operations  general and
administrative  expense of  $158,044  and  insurance  expense  of  approximately
$100,000. The 2003 non-cash expense includes $1,472,495 of employee compensation
expenses  which  represents  the fair market value of stock issued in payment of
accrued  compensation in excess of compensation expense recorded in prior years.
See Note 9 for a complete  description  of stock  issued for  compensation.  The
remainder of the non-cash expenses includes $356,250 for employee  severance and
$1,145,000 for marketing legal and professional services.

Financing expense in 2003 included  $42,500,000 related to the conversion of $10
million of debt into stock. The difference  between the fair market value of the
stock  issued  and the  carrying  value of the debt was  recorded  as a non-cash
financing  expense.  The  remaining  finance  expense  in 2003 was  $175,500,  a
non-cash write off of stock subscriptions receivable.

Interest expense  increased from $569,073 in the year ended December 31, 2002 to
$1,021,773 in the comparable  period of 2003,  due to additional  debt financing
added  during  2003.  At December  31, 2003 debt  financing  has been reduced to
$7,529,784 from its peak during 2003 of approximately  $15.8 million,  resulting
primarily from a $10 million  conversion of  indebtedness to Richard Strain into
equity. Current debt financing costs are approximately $600,000 per year.

Liquidity and Capital Resources

As of December 31, 2003 Nathaniel Energy owed $547,383 to financial institutions
under installment notes with an average interest rate of 11%, which were secured
by equipment.  The remaining  $6,982,401 in total debt consists of $6,892,151 in
secured loans from Richard  Strain with an average  interest  rate of 8.0%.  The
remaining  indebtedness  consists of miscellaneous  notes to unaffiliated  third
parties of $90,250.

Effective October 3, 2003, the company and Richard Strain converted an aggregate
of $10,000,000 of debt into 50,000,000 shares of common stock. 30,000,000 shares
were issued and the investor has the irrevocable  right to the other  20,000,000
shares.  In  September  and  October  of 2003,  the same  investor  advanced  an
additional $2,000,000 to the company. This debt bears interest at the rate of 8%
per year.  Principal  plus  interest  is payable in four  quarterly  payments of
$540,000 each on October 1, 2005 and January 1, April 1 and July 1 2006.

Other debt financing due this investor is $4,892,151 as of December 31, 2003 and
bears  interest at 8% per year. No payments will be due until March 31, 2007, at
which  time the  principal  and  accrued  interest  will be repaid in  quarterly
payments of $572,876  through  December 31, 2009. This debt  originally  totaled
$4,097,215.  During 2003 $794,936 of accrued interest was added to the principal
indebtedness.  Also  during  2003 the same  investor  forgave  $488,294  accrued
interest which was credited to additional paid-in capital.

In March 2004 Richard Strain loaned Nathaniel  Energy an additional  $2,000,000.
The loan bears  interest at the rate of 8% per year.  Principal plus interest is
payable in four quarterly  payments of $540,000 each on October 1, 2005, January
1, April 1, and July 1, 2006.

The following is a summary of Nathaniel  Energy's cash flows sources (uses) from
operating, investing, and financing activities during the periods indicated:

                                       13
<PAGE>

                                                  Year ended December 31,
                                                 2003                  2002
                                             ------------          ------------
Operating activities                         $ (1,863,279)         $ (2,164,023)
Investing activities                          (10,655,438)           (2,406,518)
Financing activities                           12,821,442             4,768,532
                                             ------------          ------------
Net effect on cash                           $    302,725          $    197,991
                                             ============          ============

For the  period  ended  December  31,  2003,  the  net  cash  used in  operating
activities is due to a cash loss for the year of  $2,111,805  and an increase in
operating  assets of $725,265  offset by an  increase  in  accounts  payable and
accrued  expenses of $973,791.  The $2,111,805  cash loss equals the $48,514,269
GAAP net loss  less  non-cash  charges  of  $46,402,464.  Non  cash  charges  of
$46,402,464  include  depreciation and amortization,  stock issued for services,
stock issued to convert debt,  minority  interest,  and subscription  receivable
write off. The net change in investing activities is primarily the result of the
acquisition of the Keyes helium plant, the Sturgis gas plant and Keyes gathering
system assets of $9,357,215  ($9,947,215 less cash acquired  $590,000).  The net
change in financing activities is due to $13,021,043 issuance of debt, offset by
debt repayments of $199,601.

For the period ended December 31, 2002,  the operating  activities net change is
due primarily to a cash loss for the year of $2,584,429 offset by an increase in
accounts  payable and accrued  expenses of $579,788.  The  $2,584,429  cash loss
equals  the  GAAP  net  loss of  $5,457,871  less  non-cash  expenses  including
depreciation  and  amortization  of  $156,135,  stock  issued  for  services  of
$2,690,949  and  minority  interest  of  $26,358.  The net  change in  investing
activities is the result of asset acquisitions of $2,406,518.  The net change in
financing activities is due to the issuance of debt of $5,158,722,  the proceeds
from sales of stock of $372,698, offset by debt repayments of $762,888.

During the third quarter of 2003, certain employees who are officers,  directors
and  stockholders  waived  accrued  compensation  aggregating  $1,088,459.   The
remaining   accrued   compensation   due  them  and  other   employees   totaled
approximately  $1.4 million was paid out in cash of $340,000 and by the issuance
of an aggregate of 1,256,750 shares of common stock.

Nathaniel  Energy had cash of  approximately  $1.4  million at December 31, 2003
which  will be used to fund the  Company's  operations,  pay  current  debts and
partially fund current Thermal Combustor(TM)  projects. The near term commitment
of  approximately  $1.1  million  for  equipment  upgrades at the helium and gas
processing plant will be customer financed with repayments made from future cash
flows over 14 to 19 months.

Critical Accounting Policies

The  preparation of financial  statements and related  disclosures in conformity
with  accounting  principles  generally  accepted in the United States  requires
management to make judgments,  assumptions and estimates that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results  could vary from these  estimates.  A material  change in these or other
estimates could potentially have a material impact on results of operations. The
following critical accounting policies are impacted  significantly by judgments,
assumptions and estimates.

                      Conversion of Debt into Common Stock

When debt is converted  into shares of common stock the  transaction is recorded
at the fair market value of the stock.  The  difference  between the fair market
value of the stock  issued and the carry  value of the debt is recorded as a non
cash financing expense in the period the transaction occurs.

             Property, Plant and Equipment and Related Depreciation

Property,  plant and equipment is recorded at its original cost of  construction
or, upon acquisition,  the fair value of the assets acquired. Direct costs, such
as labor and  materials,  and  indirect  costs,  such as  overhead  used  during
construction   are  capitalized.   Major  units  of  property   replacements  or
improvements  are  capitalized  and minor items are  expensed.  Depreciation  is
provided  for  using   straight-line   and  accelerated   methods.   Significant
assumptions and judgment is used to determine which improvement,  replacement or
indirect  costs  are  capitalized.   Significant  assumptions  and  judgment  is
necessary  to  determine  what  useful  life  is  appropriate  for  each  asset,
particularly  for machinery and equipment  which useful life can range from five
to twenty years.

                                       14
<PAGE>

                                Long-Lived Assets

In accordance with the Financial Accounting Standards Board's ("FASB") Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for  the
Impairment or Disposal of Long-Lived Assets", the Company reviews its long-lived
assets for impairment whenever events or changes in circumstances  indicate that
the related  carrying  amount may not be  recoverable.  Recovery of assets to be
held and used is measured by a comparison  of the carrying  amount of the assets
to the future net cash flows  expected  to be  generated  by the asset.  If such
assets are  considered  to be  impaired,  the  impairment  to be  recognized  is
measured by the amount by which the  carrying  amount of the assets  exceeds the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the  carrying  amount  or fair  value  less the cost to  sell.  Management  uses
significant judgments,  assumptions and estimates to calculate future cash flows
expected to be generated by the assets under impairment review.

                  Impact from Recent Accounting Pronouncements

The Company  does not expect the  adoption of recent  accounting  pronouncements
will have a significant effect on the Company's financial statement presentation
or  disclosures.  See  "Recent  Accounting  Pronouncements"  in  Note  1 to  the
financial statements.

Other Considerations

We are subject to many risks factors detailed below and elsewhere in this report
and from time to time in our other Securities and Exchange  Commission  filings.
Any one or  more of  these  uncertainties,  risks  and  other  influences  could
materially   affect  our  results  of  operations   and  prospects  and  whether
forward-looking  statements  made by us  ultimately  prove to be  accurate.  The
following risk factors represent items that management desires to highlight,  in
addition  to forward  looking  statements  described  at the  beginning  of this
report,  to help investors better  understand the potential risks and rewards of
Nathaniel Energy's business.

Nathaniel  Energy's  business model depends on obtaining several million dollars
in funding.

Nathaniel Energy will require several million dollars in capital  investments to
develop its emerging  third business  segment,  the alternate  energy  business,
which is the business segment on which we plan to focus. Some projects currently
contemplated  require $6 million to $24  million  dollars.  Capital  investments
could be in the form of debt,  equity,  government  grants or guaranteed  loans.
There can be no assurance that  Nathaniel  Energy will obtain the funding needed
to develop this third  business  segment,  or that funds raised for a particular
project will be sufficient to complete the project.

Revenue and gross margin growth is dependent on successful equipment upgrades.

Nathaniel Energy has specific plans in place to increase revenue and profits. In
particular,  the helium and gas  processing  plant was  purchased at a favorable
price compared to its revenue producing  capabilities.  Future revenue and gross
margin  increases are  dependent on an equipment  upgrade which was completed in
the first quarter of 2004.  There can be no assurance  that these  upgrades will
meet our expectations to provide the capacity to process higher volumes of gas.

Nathaniel Energy depends on a small number of large customers and suppliers.

Nathaniel  Energy's top three  customers  accounted  for 66% of 2003 revenue and
this  percentage  dependency  is likely to rise in 2004.  Although we believe we
could replace these customers if lost, if the Company does not maintain positive
relationships  with these  customers,  these  customers  change  their  business
strategy, or their financial position  deteriorates,  Nathaniel Energy's revenue
and operating results could be materially and negatively impacted.

If  Nathaniel  Energy  fails to  satisfy  customer  expectations,  existing  and
continuing business could be adversely affected.

If Nathaniel Energy fails to satisfy customer  expectations,  its reputation and
ability to retain  existing  customers and attract new customers may be damaged.
In addition,  if Nathaniel Energy fails to perform  adequately on projects,  the
Company  could be liable to  customers  for breach of  contract  and could incur
substantial cost, negative publicity,  and diversion of management  resources to
defend a claim, and as a result, the business results could suffer.

                                       15
<PAGE>

If  Nathaniel   Energy  fails  to  successfully   use  patented   technology  in
commercialized applications, its business may not become profitable.

If Nathaniel Energy fails to identify the latest alternative energy solutions or
fails to  successfully  apply the technology to customer  demand,  the Company's
reputation  and ability to compete for  customers and the best  employees  could
suffer. If Nathaniel Energy cannot compete successfully for projects and project
funding, revenues may not grow.

Because our market changes  constantly,  some of the most  important  challenges
facing us are the need to:

o develop equipment that meets changing customer needs;

o identify  and  effectively  market  alternative  solutions to a diverse set of
customers;

o enhance and protect the applications of our patented technology;

o influence and respond to emerging industry  standards and other  technological
changes.

All of these challenges must be met in a timely and  cost-effective  manner.  We
cannot assure you that we will succeed in effectively meeting these challenges.

Research,  experience  and shifts in  technology  and market  demand may require
changes in our business model.

During the regular course of business  Nathaniel Energy must adjust its business
plan giving consideration to its own research, experience,  technology evolution
and market demand.  Accepting unforeseen business  opportunities may also result
in a business model change.  Nathaniel Energy cannot guarantee that any business
model  or  adjustment  in  business  plan  will  become  successful  or be  more
successful than its current  business  model. A shift in the Company's  business
model may result in the use of other technologies. Other technologies may in the
future prove to be more efficient and/or economical to Nathaniel Energy than its
current  technology.  Nathaniel  Energy  cannot  guarantee  that any  change  in
technology  will  become  successful  or be more  successful  than  its  current
technology.

Public   company   legislative   and  regulatory   requirements,   such  as  the
Sarbanes-Oxley Act of 2002, may lead to increased insurance,  accounting,  legal
and other costs, which may cause expenses to increase.

Nathaniel  Energy became a reporting  company under the  Securities and Exchange
Act of 1934 in early 2003.  The company will be subject to additional  reporting
and  governance  requirements  if it applies  and is  accepted  for listing on a
national stock exchange or the Nasdaq system.  Nathaniel  Energy is committed to
full  regulatory  compliance  and high  standards  of corporate  governance  and
expects legal accounting and professional  fees to increase in 2004. The cost of
regulatory  compliance  could  strain our  limited  resources  as well as divert
attention  of  our  relatively   small   management  team  from  daily  business
operations.

One stockholder  beneficially owns over 50% of outstanding shares and controls a
vote of stockholders.

One  stockholder,  NEC Energy,  LLC,  beneficially  owns over 50% of outstanding
shares  based,  on a  Schedule  13D  filed  by that  stockholder  with  the SEC.
Accordingly,  that shareholder has the ability to control the director elections
and the approval of any other action requiring stockholder  approval,  including
any amendments to the certificate of  incorporation  and mergers or sales of all
or substantially all assets, even if the other stockholders  perceive that these
actions are not in their best interests.

Under the rules of certain stock exchanges which we are  contemplating  applying
to for listing or inclusion,  if a single stockholder holds more than 50% of the
voting power of a company,  that company is considered a "controlled company." A
controlled  company  is exempt  from the rules of  certain  stock  exchanges  or
systems  (such as Nasdaq or the  American  Stock  Exchange)  that require that a
majority of the company's  Board of Directors be independent  directors and that
the  audit,  compensation  and  nomination  committees  be  comprised  solely of
independent  directors.  Since NEC Energy,  LLC owns more than 50% of the voting
power of Nathaniel Energy, we may take advantage of such exemptions  afforded to
controlled  companies if we seek a listing on an  exchange,  or system which has
these exemptions in its rules.

Item 7. Financial Statements

The  financial  statements  required by this Item 7 are  included in this Annual
Report on Form 10-KSB following Item 14 hereof.

                                       16
<PAGE>

Item  8.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

In March,  2003 and in January 2004,  Nathaniel Energy changed  accountants,  as
reported on a Current  Report on Form 8-K report  dated March 11,  2003,  and as
reported on a Current Report on Form 8-K for an event dated January 12, 2004.

Item 8A. Controls and Procedures

Disclosure Controls and Procedures

Nathaniel  Energy's Chief Executive Officer and Chief Financial  Officer,  after
evaluating  the  effectiveness  of Nathaniel  Energy's  disclosure  controls and
procedures  (as defined in Rules  13a-14(c) and 15d-14(c)  under the  Securities
Exchange  Act of 1934,  as amended) as of December 31,  2003,  (the  "Evaluation
Date"),  have concluded  that, as of the  Evaluation  Date,  Nathaniel  Energy's
disclosure   controls  and  procedures  were  effective  to  ensure  the  timely
collection,  evaluation,  and  disclosure of  information  relating to Nathaniel
Energy that would  potentially  be subject to  disclosure  under the  Securities
Exchange  Act of 1934,  as amended,  and the rules and  regulations  promulgated
under the Act.

Financial Reporting Procedures and Operating Procedure

During the  fourth  quarter  of 2003 and the first  quarter  of 2004,  Nathaniel
Energy performed an overall  assessment of the effectiveness of internal control
over financial reporting and general operations.  As a result of the assessment,
the  following  actions  were  taken by our  Board of  Directors  to  strengthen
Nathaniel Energy's financial reporting processes and operating procedure:

o Adoption  of  a  policy  relating  to  the   pre-approval  of  related  party
transactions and parameters of related party transactions, which is described in
more detail under Item 12 - "Certain Relationships and Related Transactions".

o Amended the by-laws to require  unanimous board approval for stock  issuances,
expenditures or commitments greater than $10,000, and material contracts.

o Adoption of a Code of Business Conduct and Ethics for Officers (Vice President
and  Senior/and  Directors),  and a Code of  Business  Conduct  and  Ethics  for
Employees and Officers (other than Vice President and Senior).

o Adoption of an Insider Trading Policy.

o Adoption  of  guidelines  for   identifying   and  evaluating   nominees  for
directorships.

o Adoption  of  guidelines  relating  to audit  oversight  until the company has
independent directors and an audit committee is established.

Board Nominations

A nominating  committee  has not been  established  due to the small size of the
company  and  its  board.  Until  a  nominating  committee  is  established  the
nominating  decisions are made by the board of directors.  The board is actively
seeking   independent   directors   and   reviews  and   evaluates   stockholder
recommendations for nominees along with other candidates with the same criteria.
The board seeks candidates with mature business  judgment,  financial acumen and
may also seek specific  industry or technical  skills that can complement  those
held  by  management.  The  board  also  requires  high  ethical  standards  and
successful experience with public and growth companies.  The board will consider
written  nominee  recommendations  by a stockholder who has owned at least 2% of
Nathaniel Energy's common stock for one year.

Stockholder Communications

Stockholders  may  communicate  with directors  located at 8001 South  InterPort
Blvd., Suite 260, Englewood,  Colorado 80112 by sending a written  communication
to the  attention  of the  Secretary of the Company at the  Company's  executive
offices:   All  communication   will  be  forwarded  directly  to  the  intended
recipients.

During the past year no stockholder, or group of stockholders,  who beneficially
owns more than five percent of the company's voting stock for at least one year,
recommended  an individual for nomination to the board of directors and no third
party assisted in identifying or evaluating nominees in exchange for a fee.

                                       17
<PAGE>

                                    PART III

Item 9. Directors and Executive Officers of the Registrant

The  names,  ages and  terms of  office  of  Nathaniel  Energy's  directors  and
executive officers are set forth in the following table:

Name                     Age       Positions with Nathaniel Energy
-----                    ---     -------------------------------
Brett Abrams              32     Vice President Fuel Processing
Stanley Abrams*           64     Chairman & Chief Executive Officer and Director
Russell "Gene" Bailey*    64     Director & Vice President
Clifford Barker           49     Vice President Gas Operations
George Cretecos*          50     Director & Chief Operating Officer
Brian Culvey              48     Vice President Engineering
Dennis Pungitore          46     Vice President Operations

* Directors are also named executive officer for purposes of Section 16(a)

Directors are elected by holders of the common stock. Officers serve at the will
of the board.  Nathaniel  Energy may indemnify  directors  and officers  against
damages which qualify, in the opinion of the disinterested members of the board,
for indemnification under Delaware law and Nathaniel Energy's Bylaws. Insofar as
indemnification for liabilities arising under the federal securities laws may be
permitted  to  directors,  officers  or  persons  controlling  Nathaniel  Energy
pursuant to Delaware law and its Bylaws, Nathaniel Energy has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the laws and is therefore unenforceable.

Management Biographies

Brett Abrams has served as Nathaniel  Energy's Vice  President  Fuel  Processing
since 1998. He was a director of Nathaniel  Energy from 1998 to 2003. Mr. Abrams
joined Nathaniel Energy in 1997 and held increasing levels of responsibility for
the fuel  processing  business.  Mr. Abrams has developed the Hutchins  Facility
utilizing  state-of-the-art  processing equipment,  key personnel,  policies and
procedures, marketing programs, as well as, positioned the Company strategically
with the State regulators. Prior to this, Mr. Abrams held a variety of sales and
marketing  positions in retail,  restaurant and sports businesses  including the
Colorado Sky Sox. Mr. Abrams  earned a bachelor of science  degree in finance in
1993 from the University of Arizona. Mr. Abrams is Stan Abrams' son.

Stanley Abrams has served as Nathaniel  Energy's Chairman of the Board and Chief
Executive  Officer and as a director  since 1998.  Mr.  Abrams began his term in
1997 as a director of Nathaniel Ltd.,  which was acquired by Nathaniel Energy in
1998. Mr. Abrams has been a successful  real estate  developer in Colorado.  Mr.
Abrams has 30 years of extensive  experience in  negotiating  with both domestic
and foreign  governments,  municipalities,  and states.  In 1983 he purchased an
interest  in the  Thermal  Combustor(TM)technology  and is  responsible  for its
commercial  development  and  several  patents.  He also  has  over 30  years of
extensive  experience  developing many commercial and manufacturing  projects in
the public and private  arenas.  Mr.  Abrams  studied  political  science at the
University of Colorado. Mr. Abrams is Brett Abrams' father.

Russell  "Gene" Bailey has served as Nathaniel  Energy's Vice President and as a
director  since  1998.  Mr.  Bailey  brings 35 years of finance,  technical  and
consulting  experience to Nathaniel Energy. From February 2000 to April 2003 Mr.
Bailey served as Nathaniel Energy's Chief Financial Officer.  From 1976 to 2000,
Mr.  Bailey  served as a merger  and  acquisition  consultant  with  Bailey  and
Associates  on an as needed  basis.  In addition  to his merger and  acquisition
role,  from 1994 to 2000 Mr. Bailey has been an adjunct  professor at Pikes Peak
Community College teaching geology and physical  geography.  Mr. Bailey earned a
B.S.  degree in geology in 1962 from the University of New Mexico.  He completed
the course work for a Ph.D.  degree in geology in 1965 at the  University of New
Mexico and completed a year of graduate  studies at the University of Arizona in
finance and mining economics in 1974.

Clifford Barker was appointed  Nathaniel  Energy's Vice President Gas Operations
in December  2003.  Prior to joining  Nathaniel  Energy,  Mr.  Barker  served in
various  management and leadership roles at Excel Energy.  From 1995 to 1999, as
president and founder of Colorado Energy  Partners,  Inc., Mr. Barker  consulted
energy companies on sales,  accounting systems,  contract negotiations,  audits,
and  oil  and  gas  operations.  From  1990 to  1995  Mr.  Barker  led  business
development,  negotiation,  and marketing efforts at SOCO International  (Snyder
Oil Corporation),  an exploration and production company.  From 1985 to 1990 Mr.
Barker  served  Amoco (BP) in various  negotiation,  marketing  and  engineering
roles. Mr. Barker earned his MBA at the University of Denver and his bachelor of
science in mechanical engineering at Michigan State University.

                                       18
<PAGE>

George Cretecos has served as Nathaniel  Energy's Chief Operating  Officer since
February 2003. He has been a director since April,  2003. Mr.  Cretecos has over
20 years of proven operating and business management experience.  Most recently,
he  served  as  Director  of  Marketing  and  Sales  at a  multi-million  dollar
corporation, Commtract Corporation, from December 2001 to January 2003, where he
spearheaded  profitable new sales and marketing  programs.  From 1997 to 2001 he
served as a  Management  Consultant  setting  up  corporate  infrastructure  for
startup  and early  stage  companies.  Prior to that,  as  Director of Sales and
Marketing at  Schlumberger  Technologies  from August 1994 to January 1997,  Mr.
Cretecos designed all marketing and promotional  materials,  managed  divisional
personnel and had full profit and loss responsibility for all aspects of product
roll-out,  from  design  to  distribution.   Mr.  Cretecos'  versatile  business
expertise includes working as Product Manager for a company developing an energy
management  "load  shedding"  technology that was acquired by then Bell Atlantic
(now  Verizon).  Following  this  success  he was  promoted  to  Vice  President
overseeing  operations.  Mr.  Cretecos  holds a B.A.  cum  laude  from the State
College of Westfield,  with  Master's  courses from Boston State College and has
received  extensive  training  in  sales,  management,   leadership  and  public
speaking.

Brian Culvey was appointed  Nathaniel  Energy's Vice  President  Engineering  in
February  2000. Dr. Culvey was a consulting  engineer for Nathaniel  Energy from
1997 to  2000.  Dr.  Culvey  brings  20  years of  combustion  and air  emission
engineering experience to Nathaniel Energy.  Recognized worldwide as a leader in
the  combustion  engineering  field,  Dr.  Culvey's  problem  solving  abilities
consistently produce innovative cost saving solutions.  Dr. Culvey was Technical
Director of air emission sampling teams  responsible for all Federal,  State and
local air emission  regulatory  compliance along with the design and development
of testing procedures and associated equipment.  Dr. Culvey has gained extensive
experience in the  management of emission  controls and EPA test  methodologies.
Prior to these positions,  Dr. Culvey began his professional  career at Chemical
Waste Management  responsible for hazardous waste technical services and for all
associated  regulatory  compliance  including  EPA, DOT, OSHA and  Department of
Health.  Dr. Culvey earned a B.S in  environmental  chemistry  from the Colorado
School  of Mines in 1977 and went on to earn a Ph.D.  degree in  metaphysics  in
1982.

Dennis Pungitore was appointed  Nathaniel Energy's Vice President  Operations in
January  2004.  Mr.  Pungitore has 20 years of business  development,  sales and
financial transaction experience,  principally in the energy industry.  Prior to
joining  Nathaniel  Energy,  from 2002 to December 2003, Mr. Pungitore served as
Vice  President  of Sales at Serveron  Corporation,  a company  providing  asset
monitoring  equipment to utilities.  In 2001 and 2002, Mr. Pungitore led Cabot's
carbon black energy programs as Director of Energy  Programs.  From 1998 to 2001
Mr. Pungitore developed financing and project acquisition strategies as Director
of Structured  Finance at Republic  Financial  Corp.  Prior to joining  Republic
Financial Corp., Mr. Pungitore served in various business  development and sales
leadership  positions at ABB Power  Generation,  Siemens  Power Corp.  and Voith
Hydro Inc.  Mr.  Pungitore  earned a bachelor  of science  degree in  mechanical
engineering from Pennsylvania State University in 1983.

Audit Committee

Nathaniel Energy does not have an audit committee, and accordingly does not have
an audit  committee  financial  expert.  Currently  Nathaniel  Energy  has three
members of the Board of Directors,  none of whom are  independent.  The Board of
Directors  has  adopted  guidelines  relating to the  oversight  of the audit of
Nathaniel  Energy's  financial  statements which are expected to be incorporated
into a audit committee  charter after an audit committee charter is established.
In that regard,  the Board of Directors  plan to seek  qualified  candidates for
election as independent board and audit committee members.  We cannot anticipate
when we will have independent  board members' elected or will establish an audit
committee.

Compliance with Section 16(a) of the Exchange Act

Directors, officers, and beneficial owners of more than ten percent of Nathaniel
Energy's  common  stock are required to file reports of ownership as required by
Section  16(a) of the  Exchange  Act.  Since the date  Nathaniel  Energy  became
subject to the  reporting  requirements  of the  Exchange  Act, no  directors or
officers  have  filed  any  Forms  3, 4 or 5.  Three  non  officer  or  director
affiliates,  NEC Energy,  LLC,  Richard Strain and Corey  Morrison,  filed their
respective Forms 3 late.

Item 10. Executive Compensation.

The following table sets forth the compensation paid during the past three years
to Nathaniel  Energy's chief  executive  officer and the two additional  highest
paid named executive  officers whose  remuneration  exceeded  $100,000 per year.
Nathaniel  Energy did not pay any  non-cash  current  compensation  or long term
compensation to the officers during the listed years.

                                       19
<PAGE>

                                            Annual Compensation
                           ---------------------------------------------------
Name & Position            Year         Salary              Other Compensation
----------------           ----       ----------            ------------------

Brett Abrams               2003       $ 66,000(1)                $   --
Vice President             2002       $150,000(2)                $   --
Fuel Processing            2001       $118,919(3)                $   --
Division

Stanley Abrams             2003       $125,000(1)                $   --
Chief Executive            2002       $250,000(4)                $   --
Officer                    2001       $210,325(5)                $   --

Cesar Muniz                2003       $ 60,000(1)                $300,000(7)
Former Chief               2002       $150,000(6)                $   --
Information                2001       $150,000(6)                $   --
Officer & Vice
President(8)

During the fourth  quarter of 2003,  cumulative  accrued and unpaid salary as of
September 30, 2003 was paid to each officer as follows:

                                            Cash           Common stock shares
                                            ----           -------------------
Brett Abrams                              $ 40,000             171,632
Stanley Abrams                             300,000             117,733
Cesar Muniz                                    -0-             235,520

(1)  The entire amount was paid in cash.

(2) This entire  amount was accrued.  In September  2003,  Mr. Abrams waived his
right to $90,000.  The remaining  amount was paid in 2003 with a combination  of
cash and shares of common stock.

(3) $114,804 of this amount was accrued.  In September  2003,  Mr. Abrams waived
his right to $90,000 of this accrued  amount.  The remaining  amount was paid in
2003 with a combination of cash and shares of common stock.

(4) This entire  amount was accrued.  In September  2003,  Mr. Abrams waived his
right to $125,000.  The remaining  amount was paid in 2003 with a combination of
cash and shares of common stock.

(5) $203,181 of this amount was accrued.  In September  2003,  Mr. Abrams waived
his right to $85,325 of this accrued  amount.  The remaining  amount was paid in
2003 with a combination of cash and shares of common stock.

(6) This entire  amount was  accrued.  In September  2003,  Mr. Muniz waived his
right to $90,000.  The  remaining  amount was paid in 2003 with shares of common
stock.

(7) Mr.  Muniz  earned  severance  pursuant  to a  Termination  Agreement  dated
effective September 1, 2003 of $15,000 in cash and $285,000 payable with 285,000
shares  of common  stock,  valued at $1.00 per  share,  in  connection  with his
resignation as Chief Information Officer and Vice President in September 2003.

(8) Mr.  Muniz  resigned as a director  and officer of the company in  September
2003.

Employment  Contracts  and  Termination  of  Employment,  and  Change-in-Control
Arrangements

Stanley Abrams

Nathaniel  Energy  and  Stanley  Abrams  entered  into  a five  year  employment
agreement  providing  for Mr.  Abrams  to serve as our Chief  Executive  Officer
commencing  August 15, 2001. Mr. Abram's  employment  agreement  provided for an
annual base salary of $250,000  until  September 22, 2003,  when the company and
Mr. Abrams agreed to reduce the annual base salary to $125,000.

The employment agreement also provides for:

o an  entitlement  to stock options that may be made  available to the company's
executive team.

o an annual  performance  bonus equal to 3% of the company's pretax income of up
to $10 million,  2% of the next $30 million of pretax income, and 1% of the next
$100  million of pretax  income,  provided  Nathaniel  Energy had net  operating
income before income taxes and  extraordinary  items of $500,000 or more for the
immediately preceding fiscal year.

                                       20
<PAGE>

o  payment  of one half of Mr.  Abram's  salary  for the  remaining  term of the
employment  agreement in the event of his death to Mr. Abram's widow,  or as may
be otherwise  directed by his will or estate. o an automobile  allowance of $600
per month and reimbursement for gasoline and insurance costs.

Mr. Abram's employment agreement provides that it may be terminated prior to its
expiration date:

o by Mr. Abrams after six months of service; or
o by the  company  for  "cause",  as that  term  is  defined  in the  employment
agreement.

Brett Abrams

Nathaniel Energy and Brett Abrams entered into a five year employment  agreement
commencing  August  15,  2001.  Mr.  Abrams  serves as our Vice  President  Fuel
Processing. Mr. Abrams's employment agreement provided for an annual base salary
of $150,000.  On September 22, 2003, the company and Mr. Abrams agreed to reduce
his accrued salary to $60,000. Mr. Abrams's current annual salary is $78,000.

The employment  agreement also provides for stock options,  bonuses,  automobile
allowance and  termination  on terms  substantially  similar as those in Stanley
Abrams's employment agreement.

Russell "Gene" Bailey

Nathaniel  Energy and Russell "Gene" Bailey entered into a four year  employment
agreement  commencing February 1, 2000. Mr. Bailey serves as our Vice President.
Mr. Bailey's employment agreement provided for an annual base salary of $60,000.
The  employment  agreement  also provided for stock options and  termination  on
terms substantially similar as those in Stanley Abrams' employment agreement and
a  performance  bonus to be  mutually  agreed upon by  Nathaniel  Energy and Mr.
Bailey.  Mr.  Bailey's  employment  agreement  expired on February 1, 2004.  Mr.
Bailey's current annual salary is $78,000.

Brian G. Culvey

Nathaniel  Energy  and  Brian G.  Culvey  entered  into a four  year  employment
agreement providing for Mr. Bailey to serve as our Chief Environmental  Engineer
commencing February 1, 2000. Mr. Culvey's  employment  agreement provided for an
annual base salary of $60,000.  The employment agreement also provided for stock
options  and  termination  on terms  substantially  similar  as those in Stanley
Abrams' employment  agreement and a performance bonus to be mutually agreed upon
by Nathaniel Energy and Mr. Culvey. Mr. Culvey's employment agreement expired on
February 1, 2004. Mr. Culvey's current annual salary is $78,000.

Cesar Muniz

Nathaniel  Energy and Cesar Muniz  entered into an  employment  agreement  dated
February  1, 2000  which was  terminated  pursuant  to a  termination  agreement
effective as of September 1, 2003. The termination agreement provided for:

o the payment of $15,000 by the company to Mr. Muniz; and

o the  issuance of 285,000  shares of our common  stock,  to be delivered on the
10th day following the date the company  effectuates a contemplated  stock split
of its common  stock (in which case the number of shares  shall be  adjusted  to
give effect to the stock split).

o  Additionally,  Mr.  Muniz  resigned  as a  director  of  Nathaniel  Energy on
September 22, 2003.

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

         Security Ownership of Certain Beneficial Owners and Management

The following  table sets forth,  to the knowledge of the Company,  based solely
upon records available to it, certain  information as of March 4, 2004 regarding
the beneficial ownership of the Company's shares of common stock by

o each  person  who we  believe  to be the  beneficial  owner of more  than five
percent (5%) of outstanding shares of common stock,

o by each current director,

o by each named executive officer, and

                                       21
<PAGE>

o by all current executive officers and directors of the group:

Name and Address                                               Approximate
of Beneficial Owner                 Number of Shares       Percent of Class(1)
------------------------            ----------------       -------------------


NEC Energy,  LLC(1)
73 Deer Park Avenue,
Suite 4 Babylon  Village,
New York 11702                       30,000,000 (2)                 43.0%


Richard Strain
329 Manchester Road
Poughkeepsie, New York 12603          6,718,333 (3)                  9.6%


Brett Abrams (4)                      3,171,632                      3.5%

Stanley Abrams(4)                     2,713,733                      3.0%

Russell "Gene" Bailey(4)                577,964 (5)                   .1%

George Cretecos(4)                        None

All Directors and Executive
Officers as a group (3 persons) (4)   6,463,329 (5)                  7.2%

(1) NEC Energy,  LLC is 50% owned by Richard Strain and 50% owned by Como Group,
LLC, which is an affiliate of Corey Morrison.

(2) Excludes  5,718,331  shares owned by Richard Strain,  500,000 shares held in
the  name of Mr.  Strain's  wife  and  500,000  shares  held in the  name of Mr.
Strain's son. Excludes  20,000,000 shares which NEC has the irrevocable right to
receive pursuant to a Conversion  Agreement at the time that number of shares is
authorized and available for issuance.

(3) Excludes  30,000,000  shares owned by NEC Energy,  LLC and 20,000,000 shares
for which NEC has the  irrevocable  right  pursuant to a  Conversion  Agreement,
which  shall be  issued at the time that  number  of  shares is  authorized  and
available for issuance.  Includes 500,000 shares held in the name of Mr. Stain's
wife and 500,000 shares held in the name of Mr. Strain's son.

(4) The address of this person is 8001 S. InterPort Blvd., Suite 260, Englewood,
Colorado 80112.

(5) Includes 205,882 shares and 205,882 shares underlying  unexercised  warrants
which are exercisable at a price of $.17 per share, held by Mr. Bailey's wife.


Item 12. Certain Relationships and Related Transactions

During 2002 and 2003,  Nathaniel  Energy  engaged in the following  transactions
with its directors, officers and principal stockholders:

On August 26,  2002,  Nathaniel  Energy  borrowed  $1,800,000  from a  principal
stockholder, Richard Strain. Nathaniel Energy used $1,450,000 of the proceeds to
acquire the capital stock of MCNIC Rodeo,  Inc.,  which owned 18.55% interest in
Keyes  Helium  Company,  LLC.  The  balance of the loan has been  earmarked  for
capital  investment at the Keyes,  Oklahoma helium plant. The note bore interest
at 2% over prime per year with no stated maturity.

On April 3, 2003,  Nathaniel  Energy's  subsidiary,  Nathaniel  Energy  Oklahoma
Holdings Corporation,  acquired the remaining 81.45% of interest in Keyes Helium
Company,  LLC. The company  transferred  ownership of MCNIC to Nathaniel  Energy
Oklahoma  Holdings  Corporation.  Mr. Strain was issued 49% of Nathaniel  Energy
Oklahoma  Holdings  Corporation's  common stock in connection with financing for
this acquisition. As a result of this transaction, Nathaniel Energy owns 51% and
Mr. Strain owns 49% of Nathaniel Energy Oklahoma Corporation.

Prior to 2000, Mr. Strain loaned a total of $1,350,000 to Nathaniel  Energy.  In
April 2002, Mr. Strain  converted the outstanding  balance into 8,250,000 shares
of Nathaniel  Energy's  common  stock at a price of $0.20,  which was the market
price at the date of conversion. The shares were not issued until the first week
of January 2003. A portion of these shares were issued to persons  designated by
Mr. Strain.

On October 3, 2003 $10 million dollars of Company indebtedness to Mr. Strain was
converted into an aggregate of 50,000,000  shares of the Company's common stock.
NEC Energy,  LLC, a designee of Mr. Strain,  received 30,000,000 shares, with an
irrevocable right to receive 20,000,000 shares at the time that number of shares
is  authorized  and available for  issuance.  This  transaction  is described in
detail under Item 1 "Business - Change in Control."

                                       22
<PAGE>

In September and October, 2003 Mr. Strain loaned Nathaniel Energy $1,000,000 and
$1,000,000  respectively,  each bearing  interest at the rate of 8% per year. In
October,  2003 the Company  consolidated an aggregate of $6,892,151 in principal
into two promissory notes in the principal  amounts of $2,000,000 and $4,892,151
respectively.  The note for the  $2,000,000  loaned to the Company in 2003 bears
interest at the rate of 8% per year and is payable in four  quarterly  principal
and interest payments of $540,000 each on October 1, 2005 and January 1st, April
1st and July 1st 2006.  The note for the principal  amount of  $4,892,151  bears
interest at the rate of 8% per year.  No payments will be due on this note until
March 31, 2007, at which time the principal and accrued  interest will be repaid
in quarterly payments of $572,876 through December 31, 2009.

On March 17, 2004 Mr. Strain loaned  Nathaniel Energy  $2,000,000  pursuant to a
loan  agreement and  promissory  note. The loan bears interest at the rate of 8%
per year and is payable in four  quarterly  principal  and interest  payments of
$540,000  each on October 1, 2005 and  January 1, April 1 and July 1, 2006.  The
loan agreement provides that the outstanding  principal plus interest under this
loan, and the $6,892,151 outstanding  indebtedness under previous loans from Mr.
Strain to Nathaniel Energy may be converted, at Mr. Strain's option, into shares
of Nathaniel  Energy's  common  stock at a conversion  rate equal to 103% of the
average  closing  price on the five  trading  days  prior  to  March  17,  2004.
Additionally, Nathaniel Energy has agreed to register the shares of common stock
issuable  upon  conversion  of these loans within 180 days of the funding of the
$2,000,000 loan. Furthermore,  the repayment under this loan plus the $6,892,151
indebtedness  under previous  loans is secured by a security  interest in all of
Nathaniel Energy's and its subsidiaries'  assets,  including the shares of stock
of our subsidiaries.

During 2001 Stanley  Abrams  loaned  Nathaniel  Energy  approximately  $250,000,
providing necessary liquidity for the company during its early development stage
after Nathaniel  Energy had made  unsuccessful  diligent  efforts to secure debt
financing from unaffiliated sources. In 2003, accounting  corrections of $77,814
(net), including a financing fee credited to Mr. Abrams of $26,414, was recorded
to the officer  loan  account,  resulting  in a  receivable  from Mr.  Abrams of
$50,484 at December 31, 2003. Mr. Abrams repaid the amount due Nathaniel  Energy
in full on March 15, 2004 by returning 50,484 shares of common stock the company
had issued to him in December 2003 for settlement of accrued and unpaid wages.

The  Company's  ownership  of  technology  is by  assignment  of the patents and
pending  applications  from Stanley Abrams,  Nathaniel  Energy's chief executive
officer,  pursuant to an  agreement  dated July 7, 1998 and amended in September
2003. These patents and the patent  application are for utility patents directed
to devices and methods of uses. The U.S.  patents expire January 2010,  February
2011, and March 2020, respectively.  Under the assignment agreement, the Company
is  required,   upon  written  demand,   to  reassign  the  patents  and  patent
applications to Mr. Abrams in the event both Stanley Abrams and Brett Abrams are
not  employed  as  officers  of the  Company  and neither of them is a director,
except as a result of termination  for cause,  voluntary  resignation,  death or
legal  incompetence.  Furthermore,  the agreement provides for a reassignment of
the technology to Messrs.  Abrams in the event Nathaniel  Energy ceases business
operations  or an order of relief under the federal  bankruptcy  laws is entered
against the company.

During the year ended  December 31, 2003,  the Company paid $750,000 in cash and
issued 233,333 shares of common stock for corporate  marketing and communication
services to Strong & Wilken, LLC, a company affiliated with the Como Group, LLC,
which  in  October  2003  became  a 50%  owner  of NEC  Energy  LLC  which  owns
approximately 55% of Nathaniel Energy common stock.

During the first quarter of 2003, the Company issued  1,066,666 shares valued at
$800,000 to Alternate  Capital  LLC, an affiliate of NEC Energy,  LLC in payment
for  corporate  marketing and financing  services.  NEC Energy became  Nathaniel
Energy's largest investor in October 2003.

The  Company  paid  certain  expenses  related  to site  clean-up  on  behalf of
Ripetouch  Greenhouse LLC, an entity controlled by the Company's chief executive
officer.  During  the  years  ended  December  31,  2002  and 2003  payments  to
Ripetouch,  less  repayments  to  Nathaniel  Energy,  were  $61,170 and $33,642,
respectively.  The balance  receivable  from  Ripetouch at December 31, 2002 and
December 31, 2003 was $226,833 and $260,475, respectively.

The Board of Directors of Nathaniel  Energy  adopted a policy in February,  2004
that all  related  party  transactions  must be  approved  by a majority  of the
disinterested   directors  and  those   transactions  will  be  on  commercially
reasonable  terms which are no less favorable to Nathaniel Energy than Nathaniel
Energy could obtain in arms-length transactions with unaffiliated third parties.

                                       23
<PAGE>

Item 13. Exhibits and Reports on Form 8-K


(a) Exhibits.
2.1       Stock  Exchange  Agreement,  dated as of  December  31,  2002,  by and
          between Nathaniel Energy Corporation, and MNS Eagle Equity Group, Inc.
          and the shareholders of MNS Equity Group, Inc.**
2.2       Stock  Purchase  Agreement,  dated August 26, 2002 but effective as of
          June 30, 2002, by and between MCNIC Pipeline & Processing  Company and
          Nathaniel Energy Corporation**
2.3       Purchase and Sale Agreement, dated as of April 3, 2003, by and between
          CIG  Resources   Company  and  Nathaniel   Energy  Oklahoma   Holdings
          Corporation*
3(i).1    Certificate of Incorporation*
3(i).2    Articles of  Amendment  to Articles  of  Incorporation,  as amended on
          August 6, 1999**
3(i).3    Certificate of Amendment of Certificate of  Incorporation,  as amended
          on April 24, 2002**
3(ii).1   Amended and Restated By-Laws*
10.1      Employment Agreement, dated August 15, 2001, by and between Nathaniel
          Energy Corporation and Stan Abrams*
10.2      Acknowledgment  letter  of  Stan  Abrams,  dated  September  22,  2003
          relating to a reduction of accrued salary*
10.3      Agreement,  dated  October 30, 2003 by and  between  Nathaniel  Energy
          Corporation and Stan Abrams relating to issuance of shares for accrued
          salary*
10.4      Employment Agreement,  dated August 15, 2001, by and between Nathaniel
          Energy Corporation and Brett Abrams*
10.5      Acknowledgment  letter  of Brett  Abrams,  dated  September  22,  2003
          relating to a reduction of accrued salary*
10.6      Agreement,  dated  October 30, 2003 by and  between  Nathaniel  Energy
          Corporation  and Brett  Abrams  relating to the issuance of shares for
          accrued salary*
10.7      Employment Agreement,  dated February 1, 2000 by and between Nathaniel
          Energy Corporation and Russell Eugene Bailey*
10.8      Agreement,  dated  October 30, 2003 by and  between  Nathaniel  Energy
          Corporation  and Russell  "Gene"  Bailey  relating to the  issuance of
          shares for accrued salary*
10.9      Employment Agreement,  dated February 1, 2000 by and between Nathaniel
          Energy Corporation and Brian G. Culvey*
10.10     Agreement,  dated  October 30, 2003 by and  between  Nathaniel  Energy
          Corporation  and Brian  Culvey  relating to the issuance of shares for
          accrued salary*
10.11     Agreement,  dated  October 30, 2003 by and  between  Nathaniel  Energy
          Corporation  and Brian  Culvey  relating to the issuance of shares for
          accrued salary*
10.12     Employment Agreement,  dated February 1, 2000 by and between Nathaniel
          Energy Corporation and Cesar A Muniz*
10.13     Acknowledgment  letter of Cesar A.  Muniz,  dated  September  22, 2003
          relating to a reduction of accrued salary*
10.14     Termination  Agreement,  dated  effective  September 1, 2003,  between
          Cesar Muniz and Nathaniel Energy Corporation*
10.15     Consulting Agreement,  dated March 1, 2002, as supplemented as of June
          7, 2002, by and between  Nathaniel  Energy  Corporation  and Alternate
          Energy, LLC*
10.16     Amended and Restated Patent Assignment  Agreement,  dated September 30
          2003 but effective as of July 7, 1998 between Stanley Abrams and Brett
          Abrams and Nathaniel Energy Corporation
10.17     Conversion  Agreement,  dated October 3, 2003 between Nathaniel Energy
          Corporation and Richard Strain*
10.18     Loan  Agreement,  dated  October 3, 2003  between  Richard  Strain and
          Nathaniel Energy Corporation*
10.19     Promissory  Note,  dated  October  3, 2003  between  Nathaniel  Energy
          Corporation and Richard Strain*
10.20     Contract for Sale and Purchase of Liquid  Helium  between Keyes Helium
          Company, LLC and Air Products Helium, Inc., amended and restated as of
          January 1, 1999 (the "Liquid Helium Agreement")***
10.21     Amendment No. 1 to the Liquid Helium Agreement dated as of January 30,
          2004 ***
14.1      Code of Business  Conduct and Ethics for Officers (Vice  President and
          Senior) and Directors (effective March 8, 2004)*
14.2      Code of Business  Conduct and Ethics for Employees and Officers (other
          than Vice President and Senior)(effective March 8, 2004)*
21.       Subsidiaries
31.       Certification  of Chief  Executive  Officer and  Principal  Accounting
          Officer pursuant to Rule 13a-14(a)or Rule 15d-14(a)as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002
32.       Certification  of Chief  Executive  Officer and  Principal  Accounting
          Officer  pursuant to 18 U.S.C.  Section 1350,  as adopted  Pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002


*Denotes  document  filed as an exhibit to our Annual  Report on Form 10-KSB for
the year ended December 31, 2003 and incorporated herein by reference.

** Denotes document filed as an exhibit to our current Report on Form 8-K for an
event dated December 31, 2002 and incorporated herein by reference.

*** Denotes  documents  that contains  confidential  material  omitted and filed
separately  with the Securities and Exchange  Commission.  Brackets  surrounding
asteriks in this document denote the ommissions.


(b) Reports on Form 8-K:  Nathaniel  Energy did not file any reports on Form 8-K
during the last quarter of 2003.

                                       24
<PAGE>

Item 14. Principal Accountant Fees and Services

Audit Fees

The aggregate  fees billed for our fiscal years ended December 31, 2003 and 2002
by  Comiskey  &  Company,  P.C.  and  Abrams  &  Company,  P.C.,  our  principal
accountants  in 2003  and 2002  respectively,  for the  audit  of our  financial
statements  for each of those years and the review of our  financial  statements
included in our Quarterly  Reports on Form 10-QSB during those  financial  years
were $18,000 and $26,000 respectively.

Audit Related Fees

Our principal accountants did not bill us any fees during our fiscal years ended
December 31, 2003 and 2002 for any assurance and related services.

Tax Fees

Our  principal  accountants  did not bill us any fees  for tax  compliance,  tax
advice and tax planning for our fiscal years ended December 31, 2003 and 2002.

Other Fees

Comiskey & Company,  P.C. billed us $6,583 in our fiscal year ended December 31,
2002 for interim review services relating to our Quarterly Reports filed in 2003
and Abrams & Company,  P.C.  billed us $11,167 in our fiscal year ended December
31, 2002 for interim review services  relating to our Quarterly Reports filed in
2002 and review services relating to certain acquisitions.

Our  principal  accountants  did not bill us for any services or products  other
than as reported  above in this Item 14 during our fiscal  years ended  December
31, 2003 and 2002 respectively.





                                       25


<PAGE>

                  NATHANIEL ENERGY CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE
                  FISCAL YEARS ENDED DECEMBER 31, 2003 AND 2002

                      ------------------------------------

                                      INDEX

                      ------------------------------------

                                                                     Page
                                                                     ----
Independent Auditors' Reports....................................... F-1
Consolidated Balance Sheets......................................... F-2
Consolidated Statements of Operations............................... F-3
Consolidated Statement of Stockholders' Equity (Deficit)............ F-4
Consolidated Statements of Cash Flows............................... F-5
Notes to Consolidated Financial Statements.........................  F-6 to F-17


<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



The  Board  of  Directors  and  Stockholders  of  Nathaniel  Energy  Corporation
Englewood, Colorado


We have audited the accompanying  balance sheet of Nathaniel Energy  Corporation
as of December 31, 2003, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material  misstatement.  An audit includes examining on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Nathaniel Energy Corporation as
of December 31, 2003,  and the results of its  operations,  its cash flows,  and
changes  in  stockholder's  equity for the year then  ended in  conformity  with
accounting principles generally accepted in the United States of America.



Denver, Colorado
January 23, 2004
(except for paragraph 2
of footnote 2 which is
dated March 23, 2004)

                          /s/ Comiskey & Company, P.C.
                              PROFESSIONAL CORPORATION





                                       F1a
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
NATHANIEL ENERGY CORPORATION AND SUBSIDIARIES

We have audited the accompanying  consolidated balance sheet of Nathaniel Energy
Corporation  and   Subsidiaries  as  of  December  31,  2002,  and  the  related
consolidated  statement of operations,  stockholders'  equity (deficit) and cash
flows for the year then ended. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Nathaniel  Energy  Corporation and Subsidiaries as of December 31, 2002, and the
consolidated  results  of its  operations  and its cash  flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 18 to the
financial statements,  the Company has incurred a significant loss approximating
$5.5 million for the year ended  December  31, 2002 and incurred  losses for the
two years ended December 31, 2001. In addition,  the Company has a deficiency in
working  capital  at  December  31,  2002   approximating  $6.9  million  and  a
stockholders'  deficit  approximating  $3.7 million.  The above conditions raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Subsequent to December 31, 2002 the Company  acquired  Keyes Helium Company LLC,
(see Note 4) which the Company expects to provide adequate profits and cash flow
to sustain the Company.  The financial statements do not include any adjustments
that might  result  from the  outcome of this  uncertainty.  Management's  plans
concerning these matters are also discussed in Note 18.

                          /s/ Abrams and Company, P.C.
                        -------------------------------
                            Abrams and Company, P.C.
                          Certified Public Accountants

Melville, New York
April 4, 2003
                                       F1b

<PAGE>
<TABLE>
<CAPTION>

                                      Nathaniel Energy Corporation
                                      Consolidated Balance Sheets

                                                                    December 31            December 31
                                                                       2003                    2002
                                                                   ------------            ------------
<S>                                                               <C>                      <C>
Assets

Current assets:
  Cash                                                             $    504,782            $    202,057
  Accounts receivable                                                   960,555                   4,784
  Inventory                                                             637,174                 248,040
  Prepaid expenses                                                      130,669                   3,396
  Advances receivable                                                    30,718                  25,550
                                                                   ------------            ------------

Total current assets                                                  2,263,898                 483,827

Property, plant and equipment, net of accumulated
  depreciation                                                       11,662,969               1,809,556

Intangible assets, net                                                  339,473                    --
Restricted cash                                                         899,300                    --
Investment                                                                 --                 1,450,000
Related party receivables                                               345,959                 226,833
Deposits                                                                 50,000                  22,500
Other assets                                                             42,794                  16,367
                                                                   ------------            ------------

Total Assets                                                       $ 15,604,393            $  4,009,083
                                                                   ============            ============

Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                                                 $  1,689,072            $    524,498
  Accrued compensation and payroll liabilities                          109,065               1,928,546
  Accrued interest                                                      141,402                 496,563
  Accrued property tax                                                   38,331                    --
  Other accrued expenses                                                 25,018                   1,464
  Notes payable, current portion                                        406,644                 320,541
  Notes payable - stockholders, current portion                            --                 4,095,470
                                                                   ------------            ------------

Total current liabilities                                             2,409,532               7,367,082

Long-term debt                                                          230,989                 292,331
Long-term debt, stockholder                                           6,892,151                    --
                                                                   ------------            ------------

Total liabilities                                                     9,532,672               7,659,413
                                                                   ------------            ------------

Minority interest                                                        34,139                  26,358

Stockholders' equity (deficit):

  Preferred stock, 2,000,000 shares of $.001 par value
          authorized, none issued or outstanding                           --                      --
     Common stock, 75,000,000 shares of $.001 par value
          authorized, 69,719,414 shares and 36,912,664 shares
          issued and outstanding at December 31, 2003 and 2002           69,719                  36,913
Common stock to be issued                                                20,285                    --
Additional paid-in capital                                           64,682,652               6,682,704
Subscription receivable                                                    --                  (175,500)
Accumulated deficit                                                 (58,735,074)            (10,220,805)
                                                                   ------------            ------------

Total stockholders' equity (deficit)                                  6,037,582              (3,676,688)
                                                                   ------------            ------------

Total Liabilities and Stockholders' Equity                         $ 15,604,393            $  4,009,083
                                                                   ============            ============

                          The accountants' reports and accompanying notes are an
                                 integral part of the financial statements.

                                                  F-2
<PAGE>

                                     Nathaniel Energy Corporation
                                Consolidated Statements of Operations

                                                                       For the Year Ended
                                                             December 31,                December 31,
                                                                2003                        2002
                                                            ------------                ------------

Revenue                                                     $  8,424,741                $    175,662

Cost of revenue                                                7,851,841                     449,229
                                                            ------------                ------------

Gross profit (loss)                                              572,900                    (273,567)

Selling, general and administrative expenses                   5,392,789                   4,665,828
                                                            ------------                ------------
Total operating expenses                                       5,392,789                   4,665,828

Loss from operations                                          (4,819,889)                 (4,939,395)

Other income (expense)
  Partnership income                                              20,733                      53,792
  (Loss) gain on disposal of equipment                           (13,207)                     23,163
  Interest expense                                            (1,021,773)                   (569,073)
  Financing costs                                            (42,675,500)                       --
  Investment income                                                1,109                        --
  Other income                                                     2,039                        --
                                                            ------------                ------------

Loss before income taxes and minority interest               (48,506,488)                 (5,431,513)

Income tax expense                                                  --                          --
                                                            ------------                ------------

Loss before minority interest                                (48,506,488)                 (5,431,513)

Minority interest                                                 (7,781)                    (26,358)
                                                            ------------                ------------

Net loss                                                    $(48,514,269)               $ (5,457,871)
                                                            ============                ============

Loss per share, basic and diluted                           $      (1.06)               $      (0.27)
                                                            ============                ============

Weighted average common shares outstanding                    45,913,555                  20,374,776
                                                            ============                ============

                   The accountants' reports and accompanying notes are an
                          integral part of the financial statements.

                                            F-3
<PAGE>

                                                    Nathaniel Energy Corporation
                                          Consolidated Statement of Stockholders' Equity (Deficit)

                                                Additional                                                             Stockholders'
                                                 Paid-In        Shares to be Issued     Subscription   Accumulated        Equity
                         Shares      Amount      Capital          Shares      Amount      Receivable      Deficit        (Deficit)
                       ----------  ---------   ------------     ----------  ----------   -----------    -----------    ------------

Balance,
  December 31, 2001    12,912,623  $  12,912   $  1,754,695           --    $     --     $   (175,500)  $ (4,762,934)  $ (3,170,827)

Debt conversion
  premium,
  warrants
  issued
  January, 2002              --         --           25,000           --          --             --             --           25,000

Issued for
  financing
  incentive               300,000        300         50,700           --          --             --             --           51,000

Issued for
  services             13,912,449     13,912      2,633,537           --          --             --             --        2,647,449

Issued for debt
  conversion            8,544,118      8,544      1,695,010           --          --             --             --        1,703,554

Issued for cash           917,902        919        416,849           --          --             --             --          417,768

Issued for debt
  and accounts
  payable
  settlements             325,572        326        106,913           --          --             --             --          107,239

Net loss                     --         --             --             --          --             --       (5,457,871)    (5,457,871)
                     ------------  ---------   ------------   ------------  ----------   ------------   ------------   ------------

Balance,
  December 31, 2002    36,912,664     36,913      6,682,704           --                     (175,500)   (10,220,805)    (3,676,688)

Issued for MNS             50,000         50           --             --          --             --             --               50

Issued for services     1,500,000      1,500      1,293,500           --          --             --             --        1,295,000

Forgiveness of
  accrued
  compensation
  payable to
  stockholders               --         --        1,088,459           --          --             --             --        1,088,459

Debt conversion        30,000,000     30,000     52,450,000     20,000,000      20,000           --             --       52,500,000

Interest forgiven
  by stockholder             --         --          488,294           --          --             --             --          488,294

Issued for accrued
  compensation          1,256,750      1,256      2,679,695        285,000         285           --             --        2,681,236

Write off of
  subscription
  receivable                 --         --             --             --          --          175,500           --          175,500

Net loss                     --         --             --             --          --             --      (48,514,269)   (48,514,269)
                     ------------  ---------   ------------   ------------  ----------   ------------   ------------   ------------

Balance,
  December 31, 2003    69,719,414  $  69,719   $ 64,682,652     20,285,000  $   20,285   $       --     $(58,735,074)  $  6,037,582
                     ============  =========   ============   ============  ==========   ============   ============   ============

                                           The accountants' reports and accompanying notes are
                                               an integral part of the financial statements.

                                                                  F-4
<PAGE>

                                   Nathaniel Energy Corporation
                              Consolidated Statements of Cash Flows

                                                                     For the Year Ended
                                                            December 31,              December 31,
                                                               2003                       2002
                                                           ------------               -------------
Cash flows from operating activities:
Net loss                                                   $(48,514,269)              $ (5,457,871)
Adjustments to reconcile net loss to net
cash used in operating activities:
  Depreciation and amortization                                 745,438                    156,135
  Stock issued for services                                   2,973,745                  2,690,949
  Stock issued to settle debt                                42,500,000                       --
  Minority interest                                               7,781                     26,358
  Subscription receivable write off                             175,500                       --
Changes in operating assets and liabilities:
  (Increase) decrease in:
    Inventory                                                  (127,757)                  (105,790)
    Accounts receivable                                        (411,259)                    20,759
    Prepaid expenses                                            (61,955)                      --
    Advances receivable                                          (5,168)                      --
    Related party receivable                                   (119,126)                   (74,351)
  Increase in:
    Accounts payable and accrued expenses                       973,791                    579,788
                                                           ------------               ------------
Net cash used in operating activities                        (1,863,279)                (2,164,023)
                                                           ------------               ------------

Cash flows from investing activities:
  Deposits                                                      (27,500)                      --
  Other assets                                                  (26,377)                      --
  Restricted cash                                              (899,300)                      --
  Cash acquired in acquisition                                  590,000                       --
  Investment in Keyes helium project                               --                   (1,450,000)
  Equipment purchases                                          (588,341)                  (956,518)
  Acquisition of assets                                      (9,703,920)                      --
                                                           ------------               ------------
Net cash used in investing activities                       (10,655,438)                (2,406,518)
                                                           ------------               ------------

Cash flows from financing activities:
  Payments on debt                                             (199,601)                  (762,888)
  Proceeds from sale of stock                                      --                      372,698
  Proceeds from issuance of notes and loans                  13,021,043                  5,158,722
                                                           ------------               ------------
Net cash provided by financing activities                    12,821,442                  4,768,532
                                                           ------------               ------------

Net increase in cash                                            302,725                    197,991
Cash and cash equivalents, beginning of year                    202,057                      4,066
                                                           ------------               ------------
Cash and cash equivalents, end of year                     $    504,782               $    202,057
                                                           ============               ============

Cash paid for interest                                     $     93,704               $    569,073
                                                           ============               ============
Cash paid for income taxes                                 $       --                 $       --
                                                           ============               ============
Non cash financing activity
   Issuance of stock to settle debt                        $ 10,000,000               $  1,808,239
                                                           ============               ============
Forgiveness of accrued interest and compensation           $  1,576,753               $       --
                                                           ============               ============

             The accountants' reports and accompanying notes are an
                   integral part of the financial statements.

                                       F-5
</TABLE>
<PAGE>

                          Nathaniel Energy Corporation
                          NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 2003 and 2002

1. Significant Accounting Policies and Nature of Operations

Description of Business

Nathaniel Energy  Corporation (the "Company") is a renewable energy company that
provides industry with an alternative  energy equal to that of fossil fuels. Its
proprietary  patented  technology,  the  Thermal  Combustor(TM),  is  a  2-stage
gasification  system  designed to convert  waste,  biomass,  tires and any other
solid  carbon-based  materials into  inexpensive  electrical and thermal energy,
while  exceeding the most  stringent  EPA and European  Union  regulations.  The
Company focuses its patented technology in three main areas: licensing, creating
energy  infrastructures  and building mini power plants.  The Company intends to
license the Thermal  Combustor(TM)  technology  to  qualified  companies,  joint
venture partners, and distributorships.

The  Company  has been in the fuel  processing  business,  including  used  tire
recycling and collection  services,  since 1997. In two transactions,  on August
26,  2002 and April 3,  2003,  the  Company  acquired  a  minority  and then the
remaining interest in a helium and gas processing  facility in Keyes,  Oklahoma.
49% of the  interest  in the Keyes  helium  operation  was  issued to an outside
investor who had provided funding for the acquisition.  See Note 4 "Acquisition;
Minority  Interest".  In  addition  to the fuel  processing  and  helium and gas
processing operations,  the Company is engaged in the development of alternative
energy conversion  processes and related technologies using its patented Thermal
Combustor(TM) technology.  Nathaniel Energy's short term objective is to use the
fuel  processing  facility  in  Hutchins,  Texas as a fuel  supply for its first
energy  infrastructure  operation  which is planned for  construction  in Keyes,
Oklahoma.  At this site, Nathaniel Energy plans to build a Thermal Combustor(TM)
which  will  obtain  its fuel  from the fuel  processing  facility  and  produce
marketable  byproducts,  including  electricity  that  will be used to power the
helium gas operation.

Business Segments

The Company  operates three separate  segments which are presently  conducted in
three separate facilities:

- a fuel processing  operation in Hutchins,  Texas,- the natural gas processing,
  gas liquids and helium production in Keyes, Oklahoma and
- the alternate energy engineering and corporate offices in Englewood, Colorado.

Principles of Consolidation

The financial  statements  include the accounts of Nathaniel Energy  Corporation
and its subsidiaries.  All material  intercompany accounts and transactions have
been eliminated in consolidation.

Cash and Cash Equivalents

For the  purpose of the  consolidated  statements  of cash  flows,  the  Company
considers all highly liquid debt instruments  purchased with an initial maturity
of three  months  or less to be cash  equivalents.  Cash  balances  used to fund
particular  capital projects,  which are not authorized or available for general
corporate purposes, are classified as restricted cash.

Inventory



Tire  shred  inventory  is valued  at its cost to  produce  using  the  first-in
first-out method,  but in an amount not to exceed  realizable value,  determined
with respect to existing  contractual  sales prices,  less costs to complete the
tire  processing.  The gas processing  facility has helium  inventory in process
stored in the BLM (Bureau of Land Management)  facility in Texas; this inventory
is based on the  first-in-first-out  method.  There is a  contract  with the BLM
which encompasses  activity fees,  compression fees,  storage fees and an annual
fee to the BLM.



        The components of inventory are as follows:

        Helium inventory, valued by first-in, first out method          $363,174
        Tire shred inventory, valued by first-in, first-out method       274,000
                                                                        --------
                                                                        $637,174
                                                                        ========


                                       F-6
<PAGE>

               Nathaniel Energy Corporation Notes to Consolidated
                              Financial Statements
                                  (Continued)

Property, Plant and Equipment and Related Depreciation

Property,  plant and  equipment  purchased or  constructed  is recorded at cost.
Direct costs, such as labor and materials,  and indirect costs, such as overhead
used during construction are capitalized.  Major units of property  replacements
or improvements  are  capitalized and minor items are expensed.  Gain or loss is
recorded in income for the  difference  between  the net book value  relative to
proceeds  received,  if any, when the asset is sold or retired.  Depreciation is
provided for using straight-line and accelerated methods. Estimated useful lives
of the assets used in the computation of depreciation are as follows:

Machinery and equipment                  5 - 20 years
Buildings                                    25 years
Vehicles                                      5 years
Gathering pipeline                           20 years

Revenue Recognition

The Company's fuel processing facility recognizes revenue in several ways. First
when tires are accepted at the facility  ("tipping  fees") and secondly from the
sale of processed  tire shreds.  The revenues from tipping fees are fully earned
when the tires  are  accepted  at the  facility  and the  processed  tire  shred
revenues are recognized when the shreds are delivered to the end user.  Internal
quality controls are in place to ensure that shreds meet the standards  required
in contracts for the delivery of shreds.  This quality  control reduces the risk
of  significant  returns and  allowances of tire shreds sold.  Sales returns are
reprocessed and added back to the existing tire shreds. Sales returns are booked
based on the Company's historical experience.

The Company's helium,  liquid gas and natural gas revenues are recognized in the
period  of  delivery.  The  revenues  are  fully  earned  when  recognized.  The
processing  plant has various  types of quality  control  equipment  in place to
ensure  that the  processed  gases meet the  requirements  of the Bureau of Land
Management  ("BLM"),  the natural gas pipeline  operators  and its wholesale gas
customers. The Company has a month-to-month contract in place with a natural gas
marketing  firm for the natural gas delivered to the pipeline and a contract for
the helium  processed.  The natural gas liquids  processed are currently sold as
produced.

Identifiable Intangible Assets

The  company  reports   identifiable   intangible   assets  net  of  accumulated
amortization.  Accumulated  amortization  on  intangible  assets was $57,171 and
$2,000 at  December  31,  2003 and 2002,  respectively.  The  company  amortizes
intangible  assets,  excluding  goodwill and  trademarks,  over their  estimated
useful lives, which range from three to six years.  Intangible assets consist of
capitalized web site costs and contracts acquired.

Goodwill and Other Intangible Assets


The company adopted the Financial Accounting  Standards Board (FASB),  Statement
of Financial  Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets,  during fiscal year 2002. For years ended December 31, 2002 and 2003 the
Company had no goodwill.  Accordingly the Company did not record goodwill in its
financial statements for those years.


Long-Lived Assets

In accordance with the Financial Accounting Standards Board's ("FASB") Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for  the
Impairment or Disposal of Long-Lived Assets", the Company reviews its long-lived
assets,  including  intangible assets, for impairment whenever events or changes
in  circumstances   indicate  that  the  related  carrying  amount  may  not  be
recoverable.  Recovery of assets to be held and used is measured by a comparison
of the carrying amount of the assets to the future net cash flows expected to be
generated  by the asset.  If such  assets are  considered  to be  impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less the cost
to sell.  The  impairment  review  performed  for fiscal year 2003  indicated no
impairment of long-lived assets.

Advertising

The Company expenses non-direct  advertising costs as incurred.  The Company did
not incur any direct response  advertising costs during the years ended December
31, 2002 and 2003 to be capitalized and deferred to future periods.

                                       F-7
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

Stock-Based Compensation

The FASB's SFAS No. 123, "Accounting for Stock-Based  Compensation"  encourages,
but does not require,  companies  to record  compensation  cost for  stock-based
employee compensation plans at fair value. The Company has chosen to account for
stock-based   compensation  using  the  intrinsic  value  method  prescribed  in
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees",  and related  interpretations.  Accordingly,  compensation  cost for
stock  options is measured as the excess,  if any, of the quoted market price of
the  Company's  stock at the date of the grant over the amount an employee  must
pay to acquire the stock.

The Company  values  shares issued in  consideration  of services at fair value.
Options or warrants issued to  non-employees  and consultants are recorded using
the fair value method, based on a Black-Scholes option-pricing model.

Net Income (Loss) Per Common Share

SFAS No. 128,  "Earnings  Per Share"  requires  presentation  of basic (loss) or
earnings  per share  ("Basic  EPS") and  diluted  (loss) or  earnings  per share
("Diluted EPS").

The  computation  of basic loss per share is computed by dividing loss available
to common  stockholders  by the weighted  average number of  outstanding  common
shares  during the period.  Diluted  loss per share gives effect to all dilutive
potential  common  shares  outstanding  during the period.  The  computation  of
diluted  EPS does not assume  conversion,  exercise  or  contingent  exercise of
securities  that  would have an  anti-dilutive  effect on  earnings.  During the
periods  presented,   the  Company  had  no  potentially   dilutive   securities
outstanding.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents,  accounts  receivable,  short-term
debt  and  accounts  payable  approximate  cost  because  of  the  immediate  or
short-term  maturity  of these  financial  instruments.  The  fair  value of the
Company's  long-term  note and  interest  receivable  from  officers and related
parties does not significantly differ from cost at December 31, 2003 and 2002.

Income Taxes

Under  SFAS  109,  "Accounting  for  Income  Taxes,"  deferred  tax  assets  and
liabilities  are  generally  determined  based  on the  difference  between  the
financial  statements and the tax bases of assets and liabilities  using enacted
tax rates in  effect  for the years in which the  differences  are  expected  to
reverse. Recognition of a deferred tax asset is allowed if future realization is
more-likely-than-not.  The Company has provided a full  valuation  allowance for
its   deferred   tax  asset   because   its   realization   is  not   considered
more-likely-than-not.

Use of Estimates

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted accounting  principles  requires the Company's  management to
make estimates and assumptions that affect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

Reclassifications

Certain amounts reported in the 2002 financial statements,  as amended and filed
on February 23, 2004,  have been  reclassified  to conform to the current period
presentation.   These   reclassifications   had  no  effect  on  net  income  or
stockholders'  equity.  Certain  expenses  reported in the  Company's  Quarterly
Report on Form 10-QSB for the period ended June 30, 2003 have been  reclassified
and adjusted to conform to the current period  presentation and to be consistent
with the financial  data  presented in the March 31, 2003 and September 30, 2003
quarterly reports on Form 10QSB. These  reclassification and adjustments reduced
June 30, 2003 year to date net income by $195,000.

                                       F-8
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

Recent Accounting Pronouncements

In January  2003,  The FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities",  an interpretation of Accounting Research Bulletin
("ARB")  No. 51,  "Consolidated  Financial  Statements".  Interpretation  No. 46
addresses  consolidation by business  enterprises of variable interest entities,
which  have  one or  both  of the  following  characteristics:  (i)  the  equity
investment  at risk is not  sufficient  to  permit  the  entity to  finance  its
activities without additional  subordinated support from other parties, which is
provided  through  other  interest  that will absorb some or all of the expected
losses  of the  entity;  (ii)  the  equity  investors  lack  one or  more of the
following essential  characteristics of a controlling  financial  interest:  the
direct or  indirect  ability to make  decisions  about the  entities  activities
through  voting  rights or  similar  rights;  or the  obligation  to absorb  the
expected  losses of the entity if they occur,  which  makes it possible  for the
entity to finance its  activities;  the right to receive the  expected  residual
returns of the entity if they occur,  which is the  compensation for the risk of
absorbing the expected losses.

Interpretation  No.  46  also  requires  expanded  disclosures  by  the  primary
beneficiary (as defined) of a variable interest entity and by an enterprise that
holds a significant  variable  interest in a variable interest entity but is not
the primary  beneficiary.  Interpretation No. 46 applies immediately to variable
interest  entities  created  after  January 31, 2003,  and to variable  interest
entities  in which an  enterprise  obtains an  interest  in after that date.  It
applies in the first  fiscal  year or interim  period  beginning  after June 15,
2003,  to variable  interest  entities in which an  enterprise  holds a variable
interest that it acquired before February 1, 2003.  Interpretation No. 46 may be
applied  prospectively  with a  cumulative-effect  adjustment  as of the date on
which it is first applied or by restating previously issued financial statements
for one or more years with a cumulative-effect adjustment as of the beginning of
the  first  year   restated.   Management   does  not  expect  the  adoption  of
Interpretation  No. 46 to have a material  impact on the Company's  consolidated
financial  position  or results  of  operations.  The  company  has no  variable
interest entities.

In June 2003,  the FASB  issued an Exposure  Draft for  proposed  SFAS  entitled
"Qualifying  Special  Purpose  Entities  ("QSPE") and  Isolation of  Transferred
Assets", an amendment of SFAS No. 140 ("The Exposure Draft"). The Exposure Draft
is a proposal that is subject to change and as such,  is not yet  authoritative.
If the proposal is enacted in its current  form,  it will amend and clarify SFAS
140. The Exposure  Draft would prohibit an entity from being a QSPE if it enters
into an agreement that obliged a transferor of financial assets, its affiliates,
or its  agents  to  deliver  additional  cash or other  assets  to  fulfill  the
special-purposes entity's obligation to beneficial interest holders.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS  No.  149  amends  and
clarifies under what circumstances a contract with initial investments meets the
characteristics  of a  derivative  and when a  derivative  contains a  financing
component.  SFAS No. 149 is  effective  for  contracts  entered into or modified
after June 30,  2003.  The Company does not expect that the adoption of SFAS No.
149  will  have a  significant  effect  on  the  Company's  financial  statement
presentation or disclosures.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities  and  equity.  SFAS No.  150  requires  that an  issuer  classify  a
financial  instrument  that is within its scope as a  liability  (or an asset in
some circumstances)  because that financial instrument embodies an obligation of
the issuer. SFAS No. 150 is effective for financial  instruments entered into or
modified  after May 31, 2003 and  otherwise is effective at the beginning of the
first  interim  period  beginning  after  June 15,  2003.  SFAS No. 150 is to be
implemented  by  reporting  the  cumulative  effect  of a change  in  accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still  existing  at the  beginning  of the interim  period of  adoption.
Restatement is not  permitted.  The Company does not expect that the adoption of
SFAS No. 150 will have a significant effect on the Company's financial statement
presentation or disclosures.

2. Material Subsequent Events and Contingencies


On January 9, 2004 Nathaniel  Energy completed a new contract with a third party
company to receive  additional gas through its existing  pipeline for processing
at the Company's  facilities.  According to the contract,  Nathaniel Energy will
extract  helium and natural gas  liquids  from this new gas stream.  The Company
believes that the new contract and the $1.1 million spent on equipment  upgrades
in the first quarter of 2004 will enable the Company to increase gas volumes and
production  at the  processing  plant.  Incremental  gross  profit  from the new
contract and upgrades is expected to be approximately $1.7 million per year, and
$1.2 million in 2004.  The equipment  upgrades were customer  financed with loan
repayments  due over an 18 month period  ending in September  2005.  See Note 14
"Commitments and Contingencies".

                                      F-9
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

On March 17, 2004 Richard Strain loaned Nathaniel Energy $2,000,000  pursuant to
a loan agreement and promissory  note. The loan bears interest at the rate of 8%
per year and is payable in four  quarterly  principal  and interest  payments of
$540,000  each on October 1, 2005 and  January 1, April 1 and July 1, 2006.  The
loan agreement provides that the outstanding  principal plus interest under this
loan, and the $6,892,151 outstanding  indebtedness under previous loans from Mr.
Strain to Nathaniel Energy may be converted, at Mr. Strain's option, into shares
of Nathaniel  Energy's  common  stock at a conversion  rate equal to 103% of the
average  closing  price on the five  trading  days  prior  to  March  17,  2004.
Additionally, Nathaniel Energy has agreed to register the shares of common stock
issuable  upon  conversion  of these loans within 180 days of the funding of the
$2,000,000 loan.

3. Recapitalization

Effective  October 3, 2003, a Company change in control  occurred as a result of
the closing of a Conversion  Agreement  between the Company and Richard  Strain.
Pursuant to the Conversion Agreement, $10 million dollars of indebtedness of the
Company to Mr. Strain  converted  into an aggregate of 50,000,000  shares of the
Company's  common  stock to be issued to NEC  Energy,  LLC,  a  designee  of Mr.
Strain.

4. Acquisition; Minority Interest

On April 3, 2003 the Company  completed the acquisition of the remaining  81.45%
Keyes Helium Company,  LLC ("Keyes Helium") from Colorado Interstate Gas/El Paso
("CIG") through its subsidiary  Nathaniel Energy Okalahoma  Holding  Corporation
("NEC OK"). The Company  purchased its initial  18.55%  interest in Keyes Helium
Company on August 26, 2002 which is  discussed in more detail below in this Note
4. On April 3, 2003 we also acquired the Keyes gathering  system and Sturgis gas
processing  plant and compressor  station.  These facilities are located on a 15
acre site in Keyes, Oklahoma.  These facilities receive and process natural gas,
remove  liquid gases and helium and then send the natural gas into a natural gas
pipeline.  The Company transferred 49% of the ownership of NEC OK to a principal
investor in  consideration  of an aggregate of  $11,997,476 of debt financing to
effecuate the acquisition.  Accordingly,  the Company's interest in Keyes Helium
Company and the helium operations is through a 51% ownership of NEC OK that owns
100% of Keyes Helium Company.

The following table represents unaudited proforma income statement for the years
ended  December 31, 2003 and December 31, 2002,  including the operations of the
2003  acquisitions,  as if the  acquisitions  were owned for the  entire  period
shown.

                                           For the year ended
                                    December 31,         December 31,
                                       2003                  2002
                                   ------------          ------------
Revenue                            $  9,837,741          $  6,172,662

Net income (loss)                  $(48,295,269)         $ (6,067,871)

Loss per share                     $      (1.05)         $      (0.30)

The  2003  acquisitions  were  accounted  for as a  purchase  with an  aggregate
purchase price of $9,947,215. The acquisitions were funded with cash provided by
the issuance of debt by a related party investor,  Richard Strain.  The purchase
price has been allocated as follows:

Cash                                                                $   590,000
Receivables                                                             545,000
Inventory                                                               261,000
Property and Equipment                                                8,746,571
Intangible assets                                                       246,644
Other assets                                                             65,000
Payables                                                               (507,000)
                                                                    -----------
Total                                                               $ 9,947,215
                                                                    ===========

On August 26, 2002,  the Company  acquired  outstanding  common  shares of MCNIC
Rodeo Gathering,  Inc., which held an 18.55% membership interest in Keyes Helium
Company, LLC., for $1,450,000. MCNIC Rodeo Gathering, Inc. was purchased from

                                      F-10
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

MCNIC  Pipeline & Processing  Corp. An outside  investor  provided total cash of
$1,800,000 to finance the acquisition.  Including loans related to this project,
this  individual  held  $3,950,000  of the  Company's  debt,  and had  converted
$1,350,000  of  additional  debt to equity as of December 31, 2002.  The Company
subsequently  transferred  ownership in MCNIC to its 51%  subsidiary NEC OK. The
remaining 49% of NEC OK is owned by the outside investor.

5. Property, Plant and Equipment

Following is a summary of property, plant and equipment at December 31, 2003 and
2002:

                                                 December 31,       December 31,
                                                     2003              2002
                                                 ------------      ------------

 Machinery and equipment                         $  8,915,532      $  1,404,111
 Pipeline                                           2,755,488              --
 Buildings                                            100,000           100,000
 Vehicles                                             251,115           212,835
 Land                                                 290,000           290,000
 Furniture, fixtures and equipment                    131,540            18,759
 Improvements                                         200,070            79,672
                                                 ------------      ------------
                                                   12,643,745         2,105,377
Less accumulated depreciation                        (980,776)         (295,821)
                                                 ------------      ------------
Net book value                                   $ 11,662,969      $  1,809,556
                                                 ============      ============

Depreciation  expense  recorded in the  financial  statements  was  $688,267 and
$156,135 for the year ended December 31, 2003 and 2002, respectively.

6. Notes Payable

(a) At  December  31,  2003 and 2002,  the  Company  is  obligated  under  three
promissory  notes  payable to  individuals  with a total face amount of $72,000.
Interest  was  payable  quarterly  at  rates  of  10-11%  until  the due date in
September 2001, after which a 15% interest rate went into effect.

(b) At  December  31,  2003 and  2002  the  Company  was  obligated  under a 12%
unsecured demand note with an outstanding balance of $18,250.

(c) At December  31, 2003 the Company is  obligated  to Mr.  Richard  Strain for
$6,892,151 in loans with an average interest rate of 8.0%. This  indebtedness is
memorialized  in a promissory  note in the principal  amount of $2,000,000 and a
loan agreement in the amount of $4,892,151  respectively.  The  $2,000,000  note
represents  loans  to the  Company  in 2003  and is  payable  in four  quarterly
principal and interest  payments of $540,000 each on October 1, 2005 and January
1st, April 1st and July 1st 2006.  The loan  agreement for the principal  amount
due to the creditor of $4,892,151  bears interest at the rate of 8% per year. No
payments  will be due under this loan  agreement  until March 31, 2007, at which
time the principal and accrued interest will be repaid in quarterly  payments of
$572,876 through December 31, 2009. At December 31, 2002, this creditor was owed
$3,950,000 bearing interest at 12% per year.

(d) Notes  payable,  current  portion  (excluding  note  payable -  stockholder)
consists of the following components:

                                                December 31   December 31
                                                   2003           2002
                                                 --------       --------
Current portion:
Installment debt                                 $316,394       $320,541
Promissory notes (a)                               72,000           --
Unsecured demand note (b)                          18,250           --
                                                 --------       --------
Total notes payable, current portion             $406,644       $320,541
                                                 ========       ========

                                      F-11
<PAGE>
<TABLE>
<CAPTION>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

The Company has the following installment debt outstanding at December 31st:

                                                                2003          2002
                                                              -------        -------
<S>                                                           <C>           <C>
13.75% installment note, secured by trailer, monthly
payments of $859 principal and interest through
October 2003                                                       --        13,956

13.75% installment note, secured by trailer, monthly
payments of $1,016 principal and interest through
May 2002                                                           --         1,940

4.5% installment note, secured by equipment,
mnthly payments of $2,531 principal and interest
through September 2007                                         96,146       118,400

22.56% installment obligation, secured by
equipment, monthly payments of $1,397 principal
and interest through January 2006                              29,367        38,367

14% installment note, secured by land and
equipment, monthly interest only payments of
$2,567 principal and interest due January 1, 2004             220,000(1)    220,000

10.25% installment note, secured by vehicle,
monthly payments of $730 principal and interest
through August 2004                                             6,888        13,860

1.90% installment note, secured by equipment,
monthly payments of $707 principal and interest
through November, 2005                                         16,682        24,771

8.45% installment note, secured by equipment,
monthly payments of $454 principal and interest
through November, 2006                                         18,097        22,130

10.58% installment note, secured by equipment,
monthly payments of $3,231 principal and interest
through February, 2005                                        118,271       143,242

9.50% installment note, secured by equipment,
monthly payments of $1,148 principal and interest
through March, 2004                                             4,480        16,206

8.45% installment note, secured by vehicle,
Monthly payments of $663 principal and interest
through November, 2007                                         26,455            --

8.00% installment note, secured by vehicle,
monthly payments of $308 principal and interest
through May, 2007                                              10,997            --
                                                           ----------    ----------
Total Debt:                                                  $547,383      $612,872

Current Portion:                                            ($316,394)    ($320,541)
                                                           ----------    ----------
Long-term Portion:                                           $230,989      $292,331
                                                           ==========    ==========
</TABLE>

(1)  The $220,000 secured by land and equipment due January 1, 2004 was not paid
     as of the date this report was filed and is due immediately.

Maturities of debt are as follows:
           December 31,                          Amount
           -----------                         ----------
             2004                              $  406,644
             2005                                 594,217
             2006                               1,582,336
             2007                               1,948,701
             2008                               2,050,413
             Thereafter                           947,473
                                               ----------
                                               $7,529,784
                                               ==========

                                      F-12
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

7. Income Taxes

     The components of the provision for income taxes are as follows:

     For the years ended December 31:
                                                          2003            2002
                                                       ----------       --------
        Current tax expense (benefit)                  $     --         $   --

        Deferred tax (Income)
        U.S. federal                                         --             --
        State and local                                      --             --
                                                       ----------       --------
        Total deferred                                       --             --
                                                       ----------       --------
        Total tax provision (benefit)
        from continuing operation                      $     --         $   --
                                                       ==========       ========
         The actual and expected tax rates are similar for both years.

The Company's  deferred tax assets and  liabilities  as of December 31, 2003 and
2002 are as follows:

                                                       2003             2002
                                                   -----------      -----------
Deferred income tax assets:
Due to net operating loss carryforwards            $ 4,323,200      $ 1,166,000
Due to deductible temporary differences                (99,300)         552,000
         Less valuation allowance                   (4,223,900)      (1,718,000)
                                                   -----------      -----------
Total deferred income tax asset                    $      --        $      --
                                                   -----------      -----------

As of  December  31,  2003,  the Company has  approximately  $12,715,000  in net
operating loss carry forwards available to offset future taxable income expiring
between 2018 and 2023. A portion of these losses may be limited under the change
in control  provisions  of Internal  Revenue Code Section 382.  Also,  Nathaniel
Energy's   majority  owned   subsidiary,   Nathaniel   Energy  Oklahoma  Holding
Corporation,  must file a tax return separate from the  consolidated tax return.
Any future undistributed  taxable income from the subsidiary will not offset the
loss carry forwards.


During 2003, the company incurred expenses aggregating approximately $45,639,000
which will not be deductible  forfederal  income tax purposes;  these costs have
not been included in the  computation  of the net  operating  loss carry forward
amount.


8. Stockholders' Equity

Preferred Stock
The  Company  has  2,000,000  shares  of  Preferred  Stock,  $0.001  par  value,
authorized for issuance. As of December 31, 2003, no preferred stock was issued.

Common Stock
The company has  75,000,000  shares of stock  $0.001 par value,  authorized  for
issuance.  As of March 4, 2004 69,719,414 shares of common stock were issued and
outstanding.

Effective  October 3, 2003, a Company change in control  occurred as a result of
the closing of a conversion  agreement  between the Company and Richard  Strain.
Pursuant to the conversion  agreement,  $10 million  dollars of  indebtedness of
Nathaniel Energy to Mr. Strain converted into an aggregate of 50,000,000  shares
of the  Company's  common  stock  issued to NEC  Energy,  LLC, a designee of Mr.
Strain.

Nathaniel Energy has 75,000,000  shares of common stock authorized for issuance.
Prior to the conversion transaction, the Company had 38,262,664 shares of common
stock issued and outstanding. Accordingly, the Company did not have a sufficient
number of shares of common  stock  authorized  for  issuance to issue all of the
shares of common stock in the conversion. The conversion agreement provided that
to the extent that the Company did not have  sufficient  shares of common  stock
authorized  to issue all of the  shares in the  conversion,  NEC  Energy has the
irrevocable  right to the shares that could not be issued.  Nathaniel Energy has
issued 30,000,000  shares of common stock to NEC Energy,  and NEC Energy has the
irrevocable right to an additional 20,000,000 shares of common

                                      F-13
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

stock. In the conversion agreement, Nathaniel Energy agreed to take all required
corporate  action to seek the  stockholders'  approval to increase the number of
authorized  shares to a number which is at least  sufficient  for the Company to
deliver all of the shares of common stock issuable to NEC Energy pursuant to the
conversion agreement.

Giving  effect to the  issuance  of all of the shares of common  stock under the
conversion agreement, NEC Energy owns 55.7% of the issued and outstanding shares
of common stock of the Company.

In  connection  with the  conversion,  NEC Energy  received  the right to demand
registration  of the  resale of the  shares at any time  after  January 3, 2004.
Additionally,  NEC Energy was granted piggyback  registration rights relating to
certain  registration  statements  which Nathaniel Energy files after January 3,
2004, if any.

As of March 1, 2004,  Nathaniel Energy had  approximately  1031  stockholders of
record.

Effective  April 24, 2002, the Company  increased its authorized  common shares,
$0.001 par value, from 20,000,000 to 75,000,000.

At December 31, 2003 and 2002, the Company had outstanding  warrants to purchase
205,882 shares at $0.17 per share which expire on March 24, 2004.

At December  31, 2003 there are  options to  purchase  500,000  shares of common
stock with a cashless  exercise right at the rate of $3.00 per share. The number
of shares to be issued upon  exercise  vary with the market  price of the stock.
The options expire December 31, 2004.

9. Non Cash Financing Activities

During the third quarter of 2003, certain employees who are officers,  directors
and  stockholders  waived  accrued  compensation  aggregating  $1,088,459.   The
employees  agreed that the remaining  accrued  compensation due them of $864,885
could be paid,  at the  option  of the  Company,  either in cash or in shares of
common stock.  During the fourth  quarter of 2003, the Company paid an aggregate
of $340,000 in cash to two of the  employees  and issued  289,365  common  stock
shares in  payment of the  remaining  accrual  to these two  employees.  A third
employee  was issued  235,520  common  stock  shares to pay  $235,520 in accrued
compensation.  The company and two other  employees  were issued  731,865 common
stock  shares in payment of $314,213  of accrued  wages.  Non cash  compensation
totaling $1,472,495 million was recorded in the fourth quarter for shares issued
to  employees  in payment  of accrued  compensation.  The non cash  expense  was
calculated  using the fair market value of the shares on each issuance date. Non
cash employee and professional service expense for the years ended 2003 and 2002
was $2,973,745 and $2,690,949,  respectively. The $2,973,745 non-cash expense in
2003  includes  $1,472,495  for  accrued  compensation,  $356,250  for  employee
severance and $1,145,000 for professional services paid to non-employees.

10. Related Party Transactions

The Company acquired three patents and a pending patent application  relating to
the  Company's  ownership of  technology  by  assignment  from  Stanley  Abrams,
Nathaniel Energy's chief executive officer,  pursuant to an agreement dated July
7, 1998 and amended in  September  2003.  Under the  assignment  agreement,  the
Company is  required,  upon written  demand,  to reassign the patents and patent
applications to Mr. Abrams in the event both Stanley Abrams and Brett Abrams are
not  employed  as  officers  of the  Company  and neither of them is a director,
except as a result of termination  for cause,  voluntary  resignation,  death or
legal  incompetence.  Furthermore,  the agreement provides for a reassignment of
the technology to Messrs.  Abrams in the event Nathaniel  Energy ceases business
operations or becomes bankrupt.

The  Company  paid  certain  expenses  related  to site  clean-up  on  behalf of
Ripetouch  Greenhouse  LLC,  ("Ripetouch   Greenhouse",   or  "RTG")  an  entity
controlled  by the Company's  chief  executive  officer.  During the years ended
December  31,  2002 and 2003 net  payments  to RTG  were  $61,170  and  $33,642,
respectively.  The balance receivable from RTG at December 31, 2002 and December
31, 2003 was $226,833 and $260,475, respectively.

During the year ended  December 31, 2003,  the Company paid $750,000 in cash and
issued  233,333  common stock shares for corporate  marketing and  communication
services to Strong  Wilken,  LLC affiliated  with the Como Group,  LLC, which in
October 2003 became a 50% owner of NEC Energy LLC.

                                      F-14
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

During the March 2003 quarter,  the Company  issued  1,066,667  shares valued at
$800,000 for corporate  marketing and  financing  services to Alternate  Capital
LLC, which at the time of issuance of those shares,  was a principal investor in
Nathaniel Energy.

Effective  October 3, 2003 $10 million dollars of Nathaniel Energy  indebtedness
to Richard  Strain,  a principal  stockholder,  converted  into an  aggregate of
50,000,000  shares of the  Company's  common stock issued to NEC Energy,  LLC, a
designee  of Mr.  Strain.  Mr.  Strain also  loaned the  Company  $1,000,000  in
September  2003 and $1,000,000 in October 2003. At December 31, 2003 the Company
is obligated to Mr.  Richard Strain for  $6,892,151  million in unsecured  loans
with an average interest rate of 8.0%. See Note 8.

11. Intellectual Property

Nathaniel  Energy  owns three U.S.  patents  and a European  patent  application
covering  the  Thermal  Combustor(TM)  technology.   These  patents  and  patent
applications  are for utility  patents  directed to devices and methods of uses.
The three U.S. patents expire September 6, 2011,  December 4, 2012, and February
4, 2022,  respectively.  Nathaniel  Energy  acquired these patents by assignment
from Stanley Abrams,  Nathaniel  Energy's Chief Executive to the Company.  Under
the agreement relating to the patent assignment,  the Company is required,  upon
written demand, to reassign the patents and patent applications to Mr. Abrams or
his son Brett Abrams in the event both  Stanley  Abrams and Brett Abrams are not
employed as officers of the Company and neither of them is a director, except as
a  result  of  termination  for  cause,  voluntary  resignation,  death or legal
incompetence.  Furthermore,  the agreement  provides for a  reassignment  of the
technology to Messrs. Abrams in the event the Company ceases business operations
or becomes bankrupt.

12. Economic Dependency - Major Customer

During 2002 the Company's  primary sales were to several local customers and two
major  users  of its  tire-derived  fuel  ("TDF").  The  two  major  users  each
represented approximately 20% of its fuel processing sales activities.  With the
acquisition  of the  Keyes  helium  and the  Sturgis  gas  processing  plant and
compressor  station and Keyes gathering  system,  the majority of the sales stem
from helium  sales and  processed  natural  gas sales,  while there will be some
additional  sales of liquid  gases and monthly fees from a take and pay blending
contract with  Colorado  Interstate  Gas. The various  products have enabled the
Company to reduce its  dependency  on any one  customer,  however  Air  Products
Helium Inc.  purchases all of the helium  produced under contract  through 2021,
subject to earlier termination in 2008 and 2015 if either party requests a price
determination  that is not agreed to by the other party.  If the contract is not
terminated by either party in 2021, it will  continue  unless  extended upon two
years' advance notice by either party.  Should this contract terminate or expire
there are other major  companies  which have a stated interest in purchasing the
helium.


During  2003,   two   customers,   representing   approximately   37%  and  19%,
respectively,  accounted for 56% of the Company's  revenue.  During 2002,  three
customers, representing approximately 22%, 17% and 15%, respectively,  accounted
for 54% of the Company's revenue.


13. Consulting Agreement

On March 1, 2002 Alternate Capital, LLC (the "Consultant")  provided an $800,000
loan to the company and agreed to provide consulting  services to the Company in
consideration  for  13,500,000  Company  unregistered  shares  of  common  stock
representing  at least 50% of the total  outstanding  stock of the  Company on a
fully diluted basis.  At that time, the Consultant met its  obligations  and the
shares were issued.  Also at that time, the Consultant  distributed these shares
among its members in proportion to their  ownership  interest in the Consultant.
The company repaid the loan to the Consultant.  The term of the agreement is for
25 years.  Under this agreement the Consultant was responsible  for, among other
things,  (a) arranging  for $650,000,  or greater,  of purchase  money  mortgage
financing to purchase certain  equipment,  (b) providing for a lease arrangement
for such  equipment or (c) arranging  financing for a financial  project for the
Company or in which the Company has a financial interest.

Additionally, in consideration for the services the Consultant shall continue to
render to the Company,  the Company  shall pay to the  Consultant,  a continuing
consulting fee equal to ten percent (10%) of pre-tax  profits of the Company and
any subsidiary the Company owns at least one percent of, before depreciation and
amortization and before deductions for stock based compensation (including,  but
not  limited  to stock  options)  and  before any  non-cash  expenditures.  Such
consulting fee, to the extent there is a profit,  shall be paid to Consultant in
quarterly  installments within sixty (60) days after each calendar quarter, with
a yearly adjustment after the Company's annual financial statement is completed,
but not later than April 15 of the following year. In the event the agreement is
terminated by the Company,  the Company is obligated to pay the  consulting  fee
for the remaining term of the agreement.

The Company  granted to the  Consultant a right of first  refusal on all funding
the Company seeks, whether in the form of loans or capital infusion. The Company
will  provide  to the  Consultant  notification  of such  funding  needs and the
Consultant  shall have twenty (20) days after  receipt of such  notification  to
provide  to the  Company  a Letter of  Intent,  with the  proposed  term of such
funding.
                                      F-15
<PAGE>
                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

In  connection  with  the  Consulting  Agreement,  the  Consultant  agreed  to a
$2,000,000  penalty if the  Consultant  did not provide  funding  for  Nathaniel
Energy  Corporation  (arranging  financing  for  a  financial  project)  in  the
Financing  Services  section of the agreement.  In connection with a "Compliance
Acknowledgement" of June 7, 2002 the Consultant shall be permitted to retain the
13,500,000  shares of the  Company's  common stock  without any penalty  related
thereto,  and  the  Company  agrees  that it has no  right,  title  or  interest
whatsoever in said shares of the Company's common stock.

14. Commitments and Contingencies

Commitments

Nathaniel Energy has an agreement with Regency Gas Services,  LLC which requires
Nathaniel  Energy  to  purchase  all  crude  helium  production  from the  Lakin
processing  plant  until 2016 at  contractual  rates and  subject to the maximum
volumes produced by the plant. Crude helium purchases from Regency Gas Services,
LLC under this agreement were approximately, $1,400,000 during 2003.

Nathaniel  Energy has an agreement with a group led by Energy Alliance  Company,
Inc.  (EAC) that  requires  EAC to produce and deliver  natural gas to Nathaniel
Energy  throughout  the life of the leases for up to 8,000 Mcf  (thousand  cubic
feet) of natural  gas per day.  Nathaniel  Energy is  entitled to remove for its
benefit  at a cost of $0.10 per Mcf,  the gas  stream  delivered  to the  plant.
During  2003,  Nathaniel  Energy  recorded  costs  totaling  $70,000  under this
agreement. Under this agreement, the maximum annual cost through the life of the
EAC leases is $292,000.

On January 9, 2004  Nathaniel  Energy signed a renewable 10 year  agreement with
Nexus  Energy  LLC  (an EAC  Group  member).  This  agreement  provides  for the
installation of field gas compression at the Company's Spelunker CDP, which will
provide up to 4,000 Mcf of natural gas per day.  Nathaniel Energy is entitled to
extract the helium content for its benefit at a cost of between $0.05 per mcf to
$0.10 per mcf based on the percent of helium  content in the natural gas.  Nexus
pays a  gathering  fee to  Nathaniel  Energy of $0.05 per mcf,  in addition to a
compression  fee equal to 4% of all the  decatherms  compressed at the Company's
Spelunker CDP. Under this agreement, the maximum annual cost through the life of
the Nexus leases is approximately $235,000.

Litigation and Claims

The Company was a defendant in ABM Fabrication and Machining, LLC, vs. Nathaniel
Energy  Corporation,  Case No. 2002 CV 0094,  District Court, County of Douglas,
Colorado.  The plaintiff  alleged damages of  approximately  $100,000 for unpaid
labor and materials invoices.  Nathaniel Energy settled the claim for $35,000 on
December 19, 2003.

The Company is subject to a variety of  litigation  and claims  relating to past
due  payments  for  goods  and  services.  The  Company  is in  the  process  of
negotiating   settlement   arrangements  for  these  items,  and  the  estimated
settlement amounts are recorded on the books in accounts payable.

15. Segment Data
<TABLE>
<CAPTION>

                                                               Year ended December 31, 2003
                                              --------------------------------------------------------------
                                              Helium and Gas               Fuel
                                               Processing               Processing                  Total
                                              ------------             ------------             ------------
<S>                                           <C>                      <C>                      <C>
Revenue                                       $  7,851,531             $    573,210             $  8,424,741

Significant non cash expenses
  -compensation and
   professional services                              --               $  2,973,745             $  2,973,745
  -depreciation and amortization              $    438,177                  307,261                  745,438
  -interest expense forgiven                                                488,294                  488,294

Net loss                                           (24,743)            $(48,489,526)            $(48,514,269)

Capital expenditures                          $    124,943             $    463,398             $    588,341
Acquisition of assets                         $  9,703,920             $       --               $  9,703,920
Total assets as of Dec 31, 2003               $ 11,763,679             $  3,840,714             $ 15,604,393
</TABLE>

                                                   F-16
<PAGE>

                          Nathaniel Energy Corporation
             Notes to Consolidated Financial Statements (Continued)

For the year ended  December 31, 2002  Nathaniel  Energy managed its business as
one operating segment. For the year ended December 31, 2003 the alternate energy
segment did not generate any revenue and incurred minimal expenses.

16. Intangible Assets

During 2003 the Company capitalized website development costs,  pursuant to EITF
00-2. The total costs capitalized were $150,000,  which are being amortized over
three years.  The company also allocated  $246,644 of the Keyes Helium  purchase
price to intangible  assets during 2003.  Intangible  assets acquired  represent
long term contracts  transferred to Nathaniel Energy,  which are being amortized
over six years.  Amortization  expense for the twelve months ended  December 31,
2003 and December 31, 2002 was $57,171 and $2,000 respectively.

17. Lease Commitments

Nathaniel Energy leases certain office facilities under non cancelable operating
leases  that  expire at various  dates  through  2008.  At  December  31,  2003,
Nathaniel Energy was obligated for future minimum lease payments under operating
leases  that have  initial or  remaining  non-cancelable  terms in excess of one
year, as follows:

        2004                                          $ 58,513
        2005                                            60,268
        2006                                            62,076
        2007                                            63,938
        2008                                            16,102
                                                      --------
        Total minimum lease payments                  $260,897
                                                      --------

Rent  expense  for  operating  leases was  $63,774  and $60 for the years  ended
December 31, 2003 and 2002, respectively.

18. Going Concern as of December 31, 2002

The audit report  relating to our audited  financial  statements  for the fiscal
year ended December 31, 2002 contained a going concern qualification.  This note
relates to our audited  financial  statements for the fiscal year ended December
31, 2002.

The auditors' report relating to our audited financial statements for the fiscal
year ended December 31, 2003 does not contain a going concern qualification.

As of December 31, 2002 the Company had experienced  repeated  operating losses,
resulting in minimal capital resources  presently available at that time to meet
obligations  which  normally were expected to be incurred by similar  companies,
and to carry out its then  planned  operations.  It had  deficiency  in  working
capital at December 31, 2002  approximating  $6.9 million,  and a  stockholders'
deficit   approximating  $3.7  million.   Management  has  negotiated  financing
arrangements to provide cash flow for the Company's  continued  operations.  For
the first  three  quarters of 2002,  the  Company  arranged  debt  financing  of
approximately $3,500,000, which was used to acquire equipment and an interest in
a Helium  project,  which at that time was  expected to generate  positive  cash
flow.  In addition,  the Company had at that time both  formally and  informally
renegotiated  repayment  terms  for  existing  obligations  which  were  then in
default.

As of April 4, 2003, management had plans to increase revenues in its facilities
in its Texas tire recycling plant and in its Oklahoma helium plant and gathering
station by expanding current  operations.  The Hutchins,  Texas tire reclamation
facility  has been  outfitted  to 90% of its maximum  manufacturing  capacity by
means of new  equipment  purchased in 2002,  innovative  design,  and  strategic
placement of existing  equipment.  These developments will allow the facility to
increase its revenue streams.  On April 3, 2003 the Nathaniel Energy Corporation
acquired  the  remaining  81.45%  of Keyes  Helium  Company,  LLC from  Colorado
Interstate  Gas/ElPaso.  The  company  beneficially  owns  51% of  Keyes  Helium
Company,  LLC. On the same date,  the Company also acquired the Keyes  gathering
system and the Sturgis gas processing plant and compressor station from Colorado
Interstate  Gas. These  facilities  are located in Keyes,  OK on a 15 acre site.
Keyes Helium Plant operates a three-stage helium extraction,  purification,  and
liquefaction  plant  that  is  strategically  connected  on the  Bureau  of Land
Management's  (BLM) helium reserve and pipeline  system making it beneficial for
companies to utilize our services. On April 3, 2003 the Company executed a "Take
and Pay" Operational  Agreement with Colorado Interstate Gas (CIG) for a minimum
three year term for the  processing  and sale of low Btu gas for their  pipeline
needs.  As of April 4,  2003,  the  Company  was  negotiating  new leases to add
revenues to the already  profitable  operation that was to increase cash flow to
the Company. As of April 4, 2003, the Company had entered into negotiations with
third  party  companies  (Producers)  for  gathering  and  processing  gas  from
additional wells and gathering fields.

                                      F-17

<PAGE>


                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Nathaniel Energy Corporation
(Registrant)






                By:  /s/ George A. Cretecos, COO
                    -------------------------------------------
                    George A. Cretecos, Chief Operating Officer
                    and Principal Financial and Accounting
                    Officer

Date:  January 24, 2005



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



                By:  /s/ George A. Cretecos, COO
                    -------------------------------------------
                    George A. Cretecos, Chief Operating Officer
                    and Director
                Date:  January 24, 2005



                By:  /s/ Russell Gene Bailey
                    -------------------------------------------
                    Russell Gene Bailey, Vice President and
                    Director
                Date:  January 24, 2005