UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-KSB  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the Fiscal Year Ended December 31, 2004  [ ] 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
      (State or other jurisdiction of
      Incorporation or organization)
    84-1572525
      (I.R.S. Employer
      Identification No.)8001 South InterPort Blvd. Suite 260, Englewood,
      Colorado
      (Address of Principal executive Offices)
    80112
      (Zip Code)
  (303)690-8300 Issuer's telephone number, including area code  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 (2004): $14,036,793  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 28, 2005 was $4,948,878.  The
number of shares outstanding of each of the issuer's classes of common equity,
as of March 28, 2005 is 70,698,263 shares.  DOCUMENTS INCORPORATED BY REFERENCE: None  Part
III (Items 9, 10, 11 and 12) of this Annual Report on Form 10-KSB incorporates
by reference information from the registrant’s Definitive Proxy Statement for
its Annual Meeting of Stockholders to be held during 2005.  NATHANIEL ENERGY CORPORATION  TABLE OF CONTENTS  PageForward
      Looking
      Statements                                                                                                                                                                                                 
          3PART IItem
      1.
    Description
      of
      Business.......................................................................................................................................................
    4Item
      2.
    Description
      of
      Property.....................................................................................................................................................................
    11Item
      3.
    Legal
      Proceedings................................................................................................................................................................................
    11Item
      4.
    Submission
      of Matters to a Vote of Security
      Holders........................................................................................................................
    12PART IIItem
      5.
    Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      of Purchase of Equity Securities
    13Item
      6.
    Management's
      Discussion and Analysis or Plan of
      Operation...........................................................................................................
    19Item
      7.
    Financial
      Statements...........................................................................................................................................................................
    25Item
      8.
    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
    25Item
      8A.
    Controls
      and
      Procedures.....................................................................................................................................................................
    25PART IIIItem
      9
    Directors
      and Executive Officers of the
      Registrant.............................................................................................................................
    26Item
      10
    Executive
      Compensation.....................................................................................................................................................................
    26Item
      11
    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters...........................................
    26Item
      12
    Certain
      Relationships and Related
      Transactions................................................................................................................................
    26Item
      13
    Exhibits
      List and Reports on Form
      8-K.............................................................................................................................................
    26Item
      14
    Principal
      Accountant Fees and
      Services.............................................................................................................................................
    28
    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
CombustorTM technology, including building Thermal CombustorsTM 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 pay debt service on loans as they come due. 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.   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. Our proprietary patented
technology, the Thermal Combustor(TM), is a 2-stage gasification system designed
to convert waste, biomass, tires and any other solid, hydrocarbon-based
materials into inexpensive electrical and thermal energy, while exceeding the
most stringent EPA and European Union regulations.  We
have been in the fuel processing business, including used tire recycling and
collection services, since 1997. We have operated a 27 acre tire fuel processing
facility in Hutchins, Texas since 1999 and have operated a helium and gas
processing facility in Keyes, Oklahoma since April 2003. During the year ended
December 31, 2004, our helium and gas processing facility, and our tire fuel
processing business, have generated 96% and 4% of our total revenue,
respectively.  We
plan to focus our patented technology, the Thermal CombustorTM in three main
areas; licensing, creating energy infrastructures and building, owning and
operating small power plants.  We
plan to license the Thermal CombustorTM technology to qualified companies, joint
venture partners, and distributorships. We plan to build energy infrastructures
for certain industries that have a need to dispose of hydrocarbon based
materials and seek an independent source of energy in the form of heat, steam or
electricity. These energy infrastructures would be built on the businesses'
premises ("inside the fence") and can reduce the dependence a business has on
fossil fuels and power from the local utility. In some cases, the energy
infrastructures can become a business' self sustaining utility. We plan to
identify new and existing sites where we can build, own and operate small power
plants through our own resources or in conjunction with joint venture
partners.  Our
short term objective is to complete the start up and testing of our two Thermal
CombustorsTM recently constructed in Cologna Veneta, Italy. We plan to utilize
the operating Thermal CombustorTM units in Italy in our sales, marketing and
research efforts during 2005. Upon completion and acceptance of the second of
two Thermal CombustorsTM and payment by our customer in Italy, we will recognize
revenue on those units. We have recognized no revenue from the sale or delivery
of our Thermal CombustorTM through our year ended December 31, 2004.  Description
of Thermal CombustorTM Technology  The
Thermal CombustorTM uses waste, such as waste tires (tire-derived fuel - TDF),
fuel derived from municipal and industrial waste streams (refuse-derived fuel -
RDF), wood waste and agricultural waste (biomass). Fuel for the Thermal
CombustorTM 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 of approximately three thousand
degrees Fahrenheit, and produces 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 CombustorTM, pollutants are in very small quantities, well below
current EPA environmental standards. The Thermal Combustor'sTM high temperatures
destroy 99.9% of hazardous air pollutants emitted from refuse-derived fuel and
tire-derived-fuel, including PCBs, dioxins, and furans. Most gaseous pollutants
are captured by scrubbers or catalytic converters and the remaining pollutants
fall well below EPA standards.  The
construction of the Thermal CombustorTM is relatively straight forward and, our
process control system features modern computer technology. The process control
system monitors and controls all aspects of fuel and air volume to maintain
optimal combustion. This system provides for semi-automated functionality
lessening the manpower needed to supervise the Thermal Combustor’s TM operation.
The 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.    While
the Thermal CombustorTM is adaptable to any combustible material, the Rubber
Manufacturers Association has reported that tire-derived-fuel has a higher heat
energy by weight than most types of coal, with lower moisture content, more
combustible matter and less fixed carbon as compared to most types of coal. We
believe that the abundance of discarded tires in the United States and the
resulting environmental hazard they represent provides an opportunity to expand
our collection and shredding of waste tires, useable as fuel for the Thermal
CombustorTM.  Environmental
Testing  In
May 2000 Bord Na Mona Environmental Limited, an environmental management company
conducted a comprehensive environmental test on our behalf of a Thermal
CombustorTM temporarily installed at a facility in County Louth, Ireland. During
this testing the Thermal CombustorTM 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 CombustorTM 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
allowable European limits, less than 10% of standard in all cases, with many
compounds completely absent.  Marketable
Byproducts  Most
byproducts of the Thermal CombustorTM can be marketable.  Primary
byproducts include: ·  
Heat - useable for heating purposes, such as heating and cooling adjacent
facilities, or for steam generation. ·  
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: ·  
Carbon black, which can be sold for tire manufacturing, water filtration, and
for use in the cosmetics industries. ·  
Carbon dioxide, which can be sold to greenhouse operators for use in growth
enhancement or for other industrial processes involving carbonation. ·  
Sulfur dioxide, which can be sold in the form of gypsum. ·  
Nitrogen, which can be sold for industrial and cryogenic uses.  Our
ability to market any of these secondary byproducts is dependent upon the demand
for those byproducts in the local business community and our ability to produce
and distribute them at competitive prices.  We
believe the marketable byproducts produced by the Thermal CombustorTM 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 heating adjacent structures or for co-generation of
electricity. We have generated no revenue from the sale of Thermal CombustorsTM
or any byproducts from the operation of a Thermal CombustorTM to date.  Business
Model  We
focus our patented technology in three main areas: licensing, creating energy
infrastructures and building, owning and operating small power plants.  We
plan to license the Thermal CombustorTM technology to qualified companies, joint
venture partners, and distributorships. Our primary plan is to seek qualified
joint venture partners to build, own and operate small power plants or utilize
our technology under a license where we will become a participant in the
project. Our joint venture percentage ownership will vary with each joint
venture. We are focused on forming joint ventures with partners who possess one
or more of the following attributes:  financial capability, governmental
resources, technical expertise, and host business applications that will support
a successful operation. We have not generated any revenue from licensing or
joint ventures to date.  We
intend to increase the processing capability of our tire fuel processing
business during 2005, and are currently negotiating new contracts that will
justify planned financing arrangements for capital improvements and operations.
  We are also seeking additional contracts.  Should we be
successful in increasing our operating capacity and improving the quality of the
tire-derived-fuel with the addition of new equipment , we would expect to
increase the volume of waste tires we accept, the resultant tipping fee 
revenue (fee paid per tire received) and improve the pricing for and volume of
processed tire-derived-fuel sold.  Proposed
Expansion of Business  We
plan to complete the start up and testing of our two Thermal CombustorsTM
installed in Cologna Veneta, Italy and obtain our customer’s acceptance of these
units. We plan to utilize our relationship with our customer and the operating
Thermal CombustorTM units in our sales, marketing and research efforts during
2005.  We
have a contract to supply two MFC-1800 BHP Thermal CombustorsTM for a Refuse
Derived Fuel (RDF) project in Cologna Veneta, Italy. The Thermal CombustorsTM are
to be used in a co-generation waste-to-energy plant. Our contracts for this
project have been amended several times.  We have one agreement with L
& R Energy Co. LLC, who is the equipment supply contractor for the Thermal
CombustorsTM and the boilers for the project. L & R has assigned to us the
right to receive proceeds under a letter of credit in the amount of the
compensation due to us under the contract.  We also have a
contract with EcoIdea s.r.l., L&R and others for our work on the project.
 Under the terms of the agreement, we are required to have both Thermal
CombustorsTM operating on RDF and capable of producing 19,240 Kilograms of steam
per hour, by June 30, 2005.  Our responsibilities
to perform our obligations under the new agreement were subject to other parties
involved in the project fulfilling their respective obligations, which need to
be completed before we can perform certain aspects of our obligations.  The
June 30, 2005 completion date will be further extended if conditions to our
performance are not fulfilled by the other parties to the contract.  Our compensation
under the agreement is $2,100,000. We are also entitled to reimbursement of
approximately $275,000 for costs incurred for shipping, transport and packaging
costs, and monthly payments of $40,000 to provide technical support for the
final start up testing and training of the Thermal CombustorsTM.  The contract also
provides for financial penalties if the performance of the Thermal CombustorsTM
do not meet performance output guarantees specified in the agreement. These
penalties reduce our payments by $11,000 for each tenth of a percentage point if
the unit’s steam output is less than the output indicated in the agreement up to
$649,000. If the steam output deficiency is greater than 15%, there is an
additional penalty of $14,510 for each 1% deficiency in output below 15%.
 These penalties apply unless our inability to perform is related to
another party’s performance, specifically, delivery of fuel in accordance with
specifications which have a direct relationship to the Thermal CombustorTM steam
output. We have the right to test fuels provided to determine whether such fuels
meet the contracted fuel specification.  Under the contract,
any intellectual property and know-how related to any change or update to any
part of the Thermal CombustorTM is owned and retained by us and we will have
future access to the facility for demonstration, marketing and research
purposes, including access to operating data, fuel samples and other information
related to the operation of the facility.  We have accomplished
the following milestones in the Colgna Veneta project:  On July 29, 2004 we placed one Thermal CombustorTM in service with natural
  gas and the plant provided at least one kilowatt of electricity.  In November 2004 one Thermal CombustorTM was successfully gasifying using
  RDF producing one megawatt of electricity.  Management believes that this
  proved our technology is viable for commercialization in the 1-50 megawatt
  markets.  As of March 28,
2005, we have been paid a total of $300,000 toward the contract price.  Although we believe
we have performed in accordance with our contract and are working to collect the
full contract price, the amount of payment, other than those received, and date
of collection is uncertain at this time.  Tire
Fuel Processing Operation  Since
1999 we have operated a tire fuel processing facility in Hutchins, Texas. Under
Texas State regulations we are licensed as a tire processor and tire storage
facility. We are paid a tipping fee (fee paid per tire received) for accepting
waste tires. We sell the output of our tire 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 us to purchase
tire-derived fuel on an as-needed basis, primarily for use by paper mill plants.
We expect to increase the volume of waste tires we accept, the resultant tipping
fees, and the volume of output of our tire-derived-fuel during 2005, if we are
successful in obtaining financing for our planned capital improvements and for
operating capital. We expect revenue to increase proportionately to the
increased volume of tire-derived-fuel we produce and believe there is a market
for the increase in production.  Intellectual
Property  We
own three U.S. patents, the latest issued in March 2003, and have two U.S.
 and two European patents pending.  Our two initial patents apply to the construction
methodology and design of our Thermal CombustorTM biomass burner and were issued
in 1993 and 1994. These patents expire in 2011 and 2012, respectively. One
additional patent for our gasifier system and method of gasification was issued
in 2003 and expires in 2018. Our patents cover the design of a fuel efficient
dual combustion chamber and a unique computerized method of mixing air with
combustible gas.  We also have two US patent applications pending,
one filed during 2002 related to improvements in our gasifier system which
reduces air and water pollutants and the second, filed in 2004, related to our
oxygen-based biomass combustion system and controls. In addition, two European
patent applications are currently pending on our gasifier system and method of
gasification and our oxygen based biomass combustion system.  Government
Approval / Environmental Laws and Regulation  Operation
of a Thermal CombustorTM, a tire 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 our environmental compliance are the U.S.
Environmental Protection Agency (EPA), Department of Environmental Quality and
comparable regulatory agencies and departments in the states where we establish
operations. We are subject to the air quality programs under federal and state
law.  Our
helium and gas processing operations in Keyes, Oklahoma are subject to EPA rules
and regulations regarding air, water and soil quality which are administered by
the Oklahoma Department of Environmental Quality (DEQ). DEQ personnel inspect
our operations annually, perform quarterly reviews, and occasionally perform
unannounced spot checks. We maintain records of all DEQ matters. Our current
operating permit requires inspection of emissions for each individual piece of
equipment in our Keyes, Oklahoma operation, however, we have applied for a
permit which would consolidate all of our equipment within one operating permit.
We have engaged a consulting firm, expert in dealing with EPA and DEQ filings
and permits, to manage the permit process on our behalf. In addition, the
Occupational Safety and Health Administration, OSHA, periodically inspects our
facility for compliance with worker safety and training programs. We maintain
records on our compliance with OSHA regulations at the Keyes, Oklahoma
facility.  We believe that the Keyes, Oklahoma operation is in compliance
with the EPA, DEQ and OSHA rules and regulations.  Our
tire fuel processing operation in Texas is subject to regulation by the Texas
Commission of Environmental Quality.  We are registered with the Texas
Commission on Environmental Quality which allows us to receive, store, transport
and process used or waste tires. Our registration expires December 20, 2007 and
is renewable based upon our compliance with the Texas Commission’s rules
governing waste tire management. While we have been cited for certain compliance
issues during the year, we believe the tire fuel processing operation is now in
compliance with those rules. We continually maintain our fuel processing
facility to meet the requirements of the Texas Commission of Environmental
Quality’s regulations, however, should we be unable to continue to fund our
compliance, we could loose our permit to operate the facility.  During
2004, we incurred approximately $3,700 of expense related to disposal of
un-salable tire shreds.  Before
we can begin any Thermal CombustorTM or tire fuel processing operations at any
location, we are required to obtain air emission permits, as well as, obtain
appropriate construction and other necessary permits.  Failure
to comply with the laws promulgated by these authorities could result in
monetary sanctions, liability for environmental clean up, and other remedies. To
maintain our compliance, we may make occasional changes in the Company's waste
generation and disposal procedures, Thermal CombustorTM operation or other
operations. We believe these laws and regulations will not have a material
adverse effect on our capital expenditures or competitive position. We believe
that our 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
2004, we spent $68,729 for research and development related to our Thermal
CombustorTM technology, which is expensed as operating expense. In addition, we
capitalized $13,410 of patent related costs and $299,339 of cost related to
technical documentation, drawings, design engineering on our Thermal CombustorTM
technology. We have also spent over $100,000 in engineering salaries dedicated
to internal product development in each of our years ended December 31, 2004 and
2003, included as operating expense. During 2003 we spent $37,409 on outside
resources for research and development, included as operating expense. We plan
to continue increasing internal product research and development with a goal of
offering our customers the best and most efficient product opportunities.  Market
Opportunity  Demand
for licensing the Thermal CombustorTM technology and creating energy
infrastructures or small power plants using the Thermal CombustorTM, 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 more reliable "inside the fence" energy source infrastructures that can be
provided utilizing the Thermal CombustorTM.  According
to the Rubber Manufacturers Association (RMA), there are up to 275 million waste
tires in stockpiles in the United States. The RMA estimates that in 2003 alone,
290 million tires were scrapped. Of these 290 million tires, about 130 million
were used as fuel, 123 million were recycled, and 57 million were disposed of or
buried in landfills.  The
use of waste tires for fuel is currently the largest single use of waste 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 pieces as
tire-derived-fuel. In 2003, cement kilns, pulp and paper mills, electric
utilities, waste-to-energy plants, and industrial boilers burned approximately
130 million tires. However, management expects new regulations will be enacted
which will reduce the percentage of waste tires used to fuel cement kilns due to
issues over emissions. Although only a select few 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.  Our
Thermal CombustorTM technology provides a viable method of utilizing waste tires,
reducing landfill and stockpile accumulations while generating clean dependable
energy and other marketable byproducts in an environmentally friendly manner.  Competition  The
expanding alternative fuel industry is a rapidly changing field of technology.
We compete within a broad spectrum of products as this industry continues to
expand including: traditional solid waste burners, fluidized bed boilers, wind
and solar technology and various forms of gasification technologies. We
recognize that to be competitive, we must continue to expand the application and
utilization of the Thermal CombustorTM.  Our management believes that the
modularity,  flexibility of multi-fuel capability, associated low
emissions, the advanced state of our development and competitive pricing for the
manufacture and installation of the Thermal CombustorTM, positions us to capture
a share of the waste-to-energy market.  There
are numerous examples of laboratory scale and pilot plant operations, however,
very few successful commercial scale facilities have been constructed to extract
the energy contained in solid waste materials. The technologies that attempt to
do so fall within a few basic categories.  Mass
Burners/Incinerators  These
represent more than 95% of the installed base of energy extraction facilities.
These facilities take the solid material and burn it in a heated air stream. The
primary purpose of these facilities is to reduce the volume of the solid
material prior to disposal or to render the solid material less hazardous. Heat
produced by this burning may be extracted by a boiler or it may be released
directly into the environment. Most of the installed facilities are nearing the
end of their useful lives and are not considered for replacement primarily due
to the emission of air pollution associated with this equipment. To our
knowledge, no new mass burner facilities are proposed or are being
constructed.  Gasifiers  Gasifiers
represent the next generation in the evolution of mass burners and incinerators.
The solid material is heated in an oxygen-starved gas stream where the gaseous
components of the solid material are released. These gaseous components or fuel
gases  retain the heat producing qualities of the solid material. The fuel
gases are used to heat a boiler for steam, power an internal combustion engine
or power a gas turbine. The only successful commercial gasifiers use the heat to
produce steam in a boiler. There have been laboratory and pilot plant scale
examples of gasifiers that collect the fuel gases to power internal combustion
engines or turbines which require further engineering and development to prove
economical to use. Currently there are approximately 12 companies investigating
gasifier technology that have laboratory scale or pilot plant models.  Plasma
Conversion  Plasma
conversion uses electrically generated plasma to produce temperatures high
enough to gasify solid fuels. The most successful version uses plasma to
maintain a bath of molten iron in which the solid fuel is added. The fuel then
gasifies and the fuel gases are withdrawn to extract  the heat energy.
Plasma conversion has the potential to become a successful commercial technology
and represents potential competition for our technology.  Capital costs for
plasma conversion are competitive, however, the operating costs are
significantly higher than our operating costs.  Fluidized
Bed Reactors  Fluidized
bed reactors function by injecting the solid fuel into a bed of heated sand that
is fluidized with air or a non-reactive gas.  The heated fluidized sand and
solid fuel releases the fuel gases for extraction of the heat energy. 
Fluidized bed reactors have been used for many decades but have not gained
recognition as a viable solid fuel conversion technology due to the myriad of
engineering difficulties that have not been solved.  We do not believe that
fluidized bed reactors will play an important role in the solid fuel energy
extraction field.  Retorts  Retorts are vessels in which the solid fuel is
placed.  The vessel is then heated until the fuel gases are released and
collected.  The vessel is cooled, the remaining solid debris is removed and
the process repeated.  Retorts have been used in a number of
industrial-scale applications and all have proved economically, environmentally
and technically unworkable for energy extraction from solid fuels.  To our
knowledge, no new installations of retorts are proposed or are being
constructed.   The following table shows the state of the market
at the end of 2004.  Solid Fuel Conversion
    TechnologyTechnology
    Installed Base (MW)(1)
    % Change from 2003 Increase
    (Decrease)Mass Burners/Incinerators
    795
    (87)Gasifiers
    175
    15Plasma Conversion
    15
    8Fluidized Bed Reactors
    280
    (30)Retorts
    50
    (90)
 Source: National Renewable Energy Laboratory,
2005 (1) Total megawatts produced.  We
are not aware of any gasifier technology companies marketing equipment for the 1
- 50 megawatt power market. We do compete for waste-to-energy business with
different competitors in each addressed market. Our competitors, however, may
have financial and marketing resources far greater than those available to us
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, we compete 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, we compete 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.  For
municipalities, we may compete against other alternative energy sources,
especially if the municipality seeks to meet their regulated percentage of
alternative or "green" energy sources. In this market, we may also compete
against the local utility, incinerators or waste management companies, depending
on the municipality, regulatory environment and political pressures to employ
alternative energy sources.  Helium
Production Operation  We
have a 51% ownership interest in a helium and gas processing facility in Keyes,
Oklahoma. This facility processes approximately 2,100,000 Mcf (thousand cubic
feet) of natural gas annually, 5,700 Mcf of natural gas daily and 5,900 gallons
of natural gas liquids daily. A more detailed ownership description of our Keyes
operation is contained under the heading "Corporate History" below. We also own
130 miles of pipeline that collects natural gas for the plant from over 50 gas
wells. We have a take-and-pay contract with Air Products and Chemicals, Inc. for
the helium production. We also have an operating agreement with Colorado
Interstate Gas Company to provide blending services using our processed natural
gas through 2006. The natural gas liquids recovered by the plant are sold to
various parties.  We
have 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 increased gas flow contributed to our increase in
 gross profit from our helium operations during 2004.  Major
Suppliers  We
currently have four main suppliers in our helium and gas processing operations
which account for approximately 96% of our sales. Nexus Energy Company supplies
us with natural gas under a 10-year agreement, executed January 9, 2004, which
renews for an additional 10-year term if Nexus can produce commercial quantities
of natural gas. Additionally, Nexus pays us 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 life of lease
contract with EOG Resources, Inc. (EOG) for all gas produced. 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 2021
at which time either party may terminate the agreement.  If it is not
terminated at that time, it may be terminated subsequently at any time upon two
years’ advance notice by either party.  This contract can be terminated in
2008 and 2015 if either party requests pricing that is not agreed to by the
other party. We have an operating agreement with Colorado Interstate Gas Company
which has a term that expires in December 2006, to provide blending services and
as part of that agreement, they provide the helium and gas operations with fuel
gas and we supply natural gas containing nitrogen.  Either Nathaniel Energy
as CIG may terminate this agreement upon six months notice if Nathaniel deems
the continued operation of its helium plant to be uneconomical. 
Alternatively in this case, CIG can choose to assume the operation of our helium
plant at CIG’s cost, upon six months notice.  CIG also has the right to
terminate the agreement upon three months notice if the volume of gas which we
supply to CIG under this agreement falls below specified standards for a period
of 90 days.  If
we lose any or a combination of these contracts, it could substantially affect
our ability to continue the operations of our natural gas and crude helium
business.  Additionally, a loss of any of these contracts could
substantially affect the volume of helium and liquid gas products which we are
able to produce for our own account. However, if this occurred, existing
contracts provide for processing crude helium for third parties to the capacity
of the helium plant (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 96% of our sales stem from helium, natural gas
liquids and natural gas sales. 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 subsequently at any time upon two years' advance notice by either
party. This contract can be terminated in 2008 and 2015 if either party requests
pricing 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 short term agreements with
Tenaska Marketing, Inc. 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. Our top three customers accounted for 74% of our total
revenue in 2004. We believe 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, however, we can not
guarantee that we will be able to replace those contracts with contracts whose
terms will generate revenue equivalent to revenue we currently recognize.  Personnel  We
have 31 full time employees, with eight located in Englewood, Colorado, 11 in
Hutchins, Texas and 12 in Keyes, Oklahoma. We believe that we will need to add
one full time employee, a senior engineer, for our energy infrastructure or
small power plant business and one full time senior sales person for the tire
fuel processing business. We anticipate that significant personnel additions
will be required if we conclude project related contracts and obtain additional
project funding for the energy infrastructure or small power plant business.  Corporate
History  Nathaniel
Energy Corporation was incorporated in Delaware in 1996 under the name of Ajax
Reinsurance Limited. Ajax had no active trade or business on or subsequent to
its date of incorporation. Nathaniel, Ltd. was incorporated in Colorado in 1992.
Nathaniel, Ltd. started its waste 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. G-VII had no active trade or business at the
time of the merger. 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 tire fuel
processing facility which sells its output of shredded rubber to others
primarily for use as an alternative fuel. 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 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. (MNS) 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 our indebtedness to Mr.
Strain converted into an aggregate of 50,000,000 shares of our common stock to
be issued to NEC Energy, LLC, a designee of Mr. Strain.  We
have 75,000,000 shares of common stock authorized for issuance. Prior to the
conversion transaction, we had 38,262,664 shares of common stock issued and
outstanding. Accordingly, we 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 we
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. We have 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, we 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.  NEC
Energy owns 42.7% of our issued and outstanding shares of common stock without
the issuance of the additional 20,000,000 shares of common stock.  Giving
effect to the issuance of all of the shares of common stock under the conversion
agreement, NEC Energy will own 55.4% of the issued and outstanding shares of our
common stock.  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 we file after January 3, 2004, if any.  At
the time of the conversion of the debt into common stock, our stock price was
very volatile.  We used a three-day average price of $1.05 per share in the
transaction.  The closing prices of our 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 conversion 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  We
have two wholly owned subsidiaries: ·  
MNS Eagle Equity Group IV, Inc., which currently has no operations, and ·  
Cleanergy, Inc. which was formed for the purposes of entering into a joint
venture agreement with Mandala Energy International, LLC for a proposed Thermal
CombustorTM joint venture project which is currently in the pre-development
planning stages.  We
have 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. Nathaniel Energy
Oklahoma Holdings Corporation also owns all of MCNIC Rodeo Gathering
Corporation, its sole asset being an 18.55% interest in Keyes Helium Company,
LLC.  Available
Information  The
SEC maintains an internet site at www.sec.gov that contains the reports, proxy
and information statements, and other information regarding us. In addition, we
provide easy access to these reports free of charge via our internet website,
www.nathanielenergy.com. Information on our website is not part of this report.  We
maintain a codes and policies page on our 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.  We
own approximately 27 acres of property in Hutchins, Texas and a 10,000 square
foot covered structure located on the property where we operate the tire fuel
processing division. The structure is approximately 13 years old and has been
maintained in good condition. We believe it is suitable for its existing waste
tire reclamation and processing operations at that location. This property has a
mortgage loan, secured by a certificate of deposit, which has a principal
balance of $227,310 and bears interest at an annual rate of 3.85%.  We
lease 3,815 square feet of Class A office facility for our corporate offices in
Englewood, Colorado and believe this space will meet our corporate business
needs in 2005.  We
beneficially own 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 helium refining plant, along with an associated 130 miles of gas
gathering pipelines and two delivery pipelines.  We
beneficially own 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
development of this site by June 20, 2006. If we do not meet this deadline, the
seller may elect to have the property revert back to their ownership. At this
time we have not commenced any development of the property.  Item 3. Legal Proceedings.  We
are involved in routine litigation which is incidental to our business, none of
which is anticipated to have a material adverse effect on our financial
condition, operations or prospects.      Item 4. Submission of Matters to a Vote of
Security Holders.  None   PART II  Item 5. Market for Common Equity and Related Stockholder
Matters and Small Business Issuer Purchases of Equity Securities.  Our
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 our 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, 2003:First Quarter
    $             
      2.45
    $             
      1.75Second Quarter
    $             
      2.05
    $             
      0.85Third Quarter
    $             
      1.80
    $             
      0.70Fourth Quarter
    $             
      2.55
    $             
      0.80Fiscal
      Year Ended December 31, 2004:First Quarter
    $             
      1.15
    $             
      0.65Second Quarter
    $             
      0.55
    $             
      0.30Third Quarter
    $             
      0.45
    $             
      0.14Fourth Quarter
    $             
      0.24
    $             
      0.10
  Stockholders
of Record  As
of March 28, 2005, we had approximately 1,023 stockholders of record.  Dividends  We
have never declared or paid any dividends on its common stock. We currently
intend to retain any earnings for use in the business and therefore do 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. We have 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 our earnings, our capital requirements and our
financial condition, as well as other factors, which the Board of Directors
deems relevant.  Equity
Compensation Plan Information  At
the end of the fiscal year 2004 our 2003 Equity Compensation Plan was in
effect.  This plan was not approved by our stockholders.  No options,
rights or other securities were granted or issued under this plan.  In
March 2004 we cancelled this plan and adopted our 2005 Equity Participation
Plan.  No option, rights or other securities have been or issued under this
plan.  We plan to seek stockholder approval of this plan as reflected in
our Preliminary Information Statement which we held with the Securities and
Exchange Commission on March 11, 2005.  The
material features of our 2005 Equity Compensation Plan are as follows:  General Information  The plan provides for the granting of restricted stock and options to
purchase up to a maximum of 40,000,000 shares of Nathaniel Energy.  The
plan provides that no shares of common stock may be issued unless there are a
sufficient number of shares of common stock authorized and reserved for such
issuance.  We anticipate that we will have a sufficient number of shares
available for issuance under the plan as a result of a proposed increase in the
number of shares of our common stock or as a result of other actions which we
could take.  The plan was adopted by our Board of Directors on March 1,
2005.  The plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, nor is it a “qualified” plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
“Code”).  The plan provides for appropriate adjustments in the number of
reserved shares in the event of stock dividends, stock splits, recapitalizations
and other changes in our capital structure.  The plan also provides for
reload options (which are described below under the heading “Reload Feature”)
and alternate stock appreciation rights.  Purpose  The purpose of the plan is to advance the interests of Nathaniel Energy
by inducing individuals or entities of outstanding ability and potential to join
and remain with, or provide consulting or advisory services to, us and our
subsidiaries, by encouraging and enabling eligible employees, non‐employee
directors, consultants and advisors, and non‐employees to whom an offer of
employment has been extended, to acquire proprietary interests in Nathaniel
Energy, and by providing such employees, non‐employee directors, consultants,
advisors, and non‐employees with an additional incentive to promote the success
of Nathaniel Energy.  Administration  The plan provides for its administration by the Board or by a committee
consisting of at least two individuals chosen by the Board.  The Board or
the committee has authority (subject to the provisions of the plan) to select
from the group of eligible employees, non‐employees to whom an offer of
employment has been extended, non‐employee directors, consultants and advisors
the individuals or entities to whom restricted stock or options will be granted,
and to determine the times at which and the exercise price for which options
will be granted.  The Board or the committee is authorized to interpret the
plan and the interpretation and construction by the Board or the committee of
any provision of the plan or of any option granted thereunder shall be final and
conclusive. The receipt of options or restricted stock by directors or any
members of the committee shall not preclude their vote on any matters in
connection with the administration or interpretation of the plan.  We
currently do not have a committee to administer the plan.  Accordingly the
Board administers the plan at this time.  Eligibility - Generally  Subject to certain limitations and conditions in the plan, restricted
stock and options to purchase shares may be granted to persons who, in the case
of incentive stock options, are employees of, either Nathaniel Energy or any
parent or subsidiary of Nathaniel Energy including directors and officers of
Nathaniel Energy and non‐employees to whom an offer of employment has been
extended, or in the case of nonstatutory stock options and restricted stock
grants, are employees including directors and officers or non-employee directors
or certain consultants or advisors to, either Nathaniel Energy or any parent or
subsidiary of Nathaniel Energy and non-employees to whom an offer of employment
has been extended.  At March 28, 2005, 31 employees were eligible to
receive options or restricted stock grants under the plan.  Stock Options  Nature of Options  The Board or the committee may grant options under the plan which are
intended to meet the requirements of Section 422 of the Code relating to
“incentive stock options.” The Board or committee may also grant option under
the plan that do not so qualify which we refer to as “nonstatutory stock
options”.  The federal income tax consequences of the grant and exercise of
incentive stock options and nonstatutory stock options are described below under
“Federal Income Tax Consequences.”  Reload Feature  The Board or the committee may grant options with a reload feature
subject to the terms of the plan, applicable only when options being exercised
by a holder are paid by delivery of shares of common stock or by having
Nathaniel Energy reduce the number of shares otherwise issuable to a holder
(“Net Exercise”).  The reload stock option allows the holder to exercise an
option (the “First Option”) and to receive another option (the “Reload Option”)
for  ·                    
the number of shares of common stock used to pay for the First
Option (or not issued in the case of Net Exercise), and  ·                    
with respect to nonstatutory stock options, the number of shares of
common stock used to satisfy any tax withholding requirement incident to the
exercise of those nonstatutory stock options.  A Reload Option may also have a reload feature.  The reload feature
must be included in the stock option agreement entered into by Nathaniel Energy
and the holder of the option. The term of the Reload Option shall be equal to
the remaining option term of the First Option.  Option Price  The option price of the shares underlying an incentive stock option may
not be less than the fair market value (as such term is defined in the plan) of
the shares of common stock on the date upon which the option is granted. 
In addition, in the case of a recipient of an incentive stock option who, at the
time the option is granted, owns more than 10% of the total combined voting
power of all classes of stock of Nathaniel Energy or of a parent or subsidiary
corporation of Nathaniel Energy (a “10% Stockholder”), the option price of the
shares subject to that option must be at least 110% of the fair market value of
the shares of common stock on the date upon which that option was
granted.  The option price of shares of common stock underlying nonstatutory stock
options will be determined by the Board or the committee, in its discretion, at
the time of grant and need not be equal to or greater than the fair market value
for shares of our common stock.  Exercise of Options  Option holders may exercise options granted under the plan by delivering
a written notice to Nathaniel Energy indicating of the number of shares of
common stock with respect to which the option is being exercised. The notice
shall be accompanied, or followed within 10 days, by payment of the full option
price for the shares of common stock which shall be made by the holder’s
delivery of  ·                    
a check payable to the order of Nathaniel Energy in such amount, or  ·                    
previously acquired shares of common stock, the fair market value
of which shall be determined as of the date of exercise, or  ·                    
if provided for in the stock option agreement, a check in an amount
at least equal to the par value of the common stock being acquired, together
with a promissory note, in the form and upon such terms as are acceptable to the
Board or the committee, in an amount equal to the balance of the exercise price,
or  ·                    
a combination of any of the above methods.  Duration of Options  No incentive stock option granted under the plan shall be exercisable
after the expiration of ten years from the date of its grant. However, if an
incentive stock option is granted to a 10% Stockholder, that option shall not be
exercisable after the expiration of five years from the date of its grant.  Nonstatutory stock options granted under the Plan may be of a duration
that the Board or the committee determines.  Non-Transferability  Options granted under the plan are not transferable otherwise than by
will or the laws of descent and distribution and generally, those options are
exercisable, during an optionee’s lifetime, only by the optionee.  A
nonstatutory stock option may be transferred, upon the approval of the Board or
the committee, in whole or in part during a holder’s lifetime, to a holder’s
family members, through a gift or domestic relations order, subject to the terms
and conditions of the plan.  Death, Disability or Termination of Employment  Subject to the terms of the stock option agreement pursuant to which
options are granted, if the employment of an employee or the services of a
non‐employee director, consultant or advisor to, Nathaniel Energy or a parent or
subsidiary corporation of Nathaniel Energy shall be terminated for cause, or
such employment or services shall be terminated voluntarily by the employee,
non‐employee director, consultant or advisor, or a non‐employee to whom an offer
of employment was extended declines the offer, or Nathaniel Energy withdraws the
offer of employment to that non-employee to whom an offer of employment has been
extended, any options held by those persons or entities shall expire
immediately.  If such employment or services shall terminate other than by
reason of death or disability, voluntarily by the employee, non-employee
director, consultant or advisor, or for cause, then, subject to the terms of the
stock option agreement pursuant to which options are granted, such option may be
exercised at any time within three months after such termination, but in no
event after the expiration of the option.  For purposes of the plan, the
retirement of an individual either pursuant to a pension or retirement plan
adopted by Nathaniel Energy or at the normal retirement date prescribed from
time to time by Nathaniel Energy is deemed to be a termination of such
individual’s employment other than voluntarily by the employee or for
cause.  Subject to the terms of the stock option agreement pursuant to which
options are granted, if an option holder under the plan  ·                    
dies while employed by Nathaniel Energy or a parent or subsidiary
corporation of Nathaniel Energy or while serving as a non-employee director of,
or consultant or advisor to, Nathaniel Energy or a parent or its subsidiary
corporation of Nathaniel Energy, or  ·                    
dies within three months after the termination of his employment or
services other than voluntarily or for cause,  then such option may be exercised by the estate of the employee,
non-employee director, consultant or advisor, or by a person who acquired such
option by bequest or inheritance from the deceased option holder, at any time
within one year after his death.  Subject to the terms of the stock option agreement pursuant to which options are
granted, if the holder of an option under the plan ceases employment or services
because of permanent and total disability (within the meaning of Section
22(e)(3) of the Code) while employed by, or while serving as a non-employee
director of, or consultant or advisor to, Nathaniel Energy, or a parent or
subsidiary corporation of Nathaniel Energy, then that option may be exercised at
any time within one year after his termination of employment, termination of
directorship, or termination of consulting or advisory arrangement or agreement
due to the disability.   Restricted Stock Grants  Nature of Restricted Stock Grants  The Board or the committee may authorize restricted stock grants under
the plan.  Restricted stock grants may be made either alone or in addition
to stock options granted under the plan.  Vesting  The Board or the committee may specify the vesting periods of the
restricted stock grant and other terms and conditions which the Board or
committee deems appropriate.  In determining vesting requirements of restricted stock grants, the Board
or committee may impose restrictions which it may deem advisable including among
other things, length of service of the grantee, corporate performance and
attainment of individual or group performance objectives.  Ownership  During the period while the restricted stock grants are subject to
restriction or have not vested, the grantee will be the record owner of the
shares of common stock underlying the restricted stock grant.  Accordingly,
the holder is entitled to vote those shares.  However, any dividends or
other distributions on those shares of common stock will be held by Nathaniel
Energy or a third party subject to the same restrictions as the restricted stock
grant.  Forfeiture  Unless the Board or committee determines otherwise at the time of the
restricted stock grant, generally, a grantee will forfeit all shares of common
stock underlying restricted stock grants which have not previously vested, if
the grantee is no longer employed or engaged by, or serves as a director of,
Nathaniel Energy or its parent or its subsidiary.  All forfeited shares of
common stock shall be returned to Nathaniel Energy, along with any dividends or
other distributions on those shares, if any.  However, if the Board
approves a plan of liquidation, or merger or consolidation in which more than
50% of the continued voting power of Nathaniel Energy or the entity surviving in
the transaction is no longer represented by voting securities in Nathaniel
Energy, the restricted stock grant will automatically vest.  Non-Transferability  Shares of common stock underlying restricted stock grants are not
transferable until those shares vest.  Amendment and Termination  The plan (but not options or restricted stock granted under the plan)
shall terminate on February 28, 2015, ten years from the date that it was
adopted by the Board.  Subject to certain limitations, the plan may be
amended or modified from time to time or terminated at an earlier date by the
Board or by the stockholders.  Plan Benefits  At March 28, 2005 there were no grants of options
to purchase shares of our common stock or stock grants under the plan.   Recent
Sales of Unregistered Securities  Holder
      Name
    
    Issuance
      Date
    Common
      Stock Shares
    
    Total
      Price
    
    
    Type
      of
      ConsiderationKay
      Rhodes
    01/05/02
    
    294,000
    
    $
    50,000
    
    
    Conversion
      of Debt per NoteAlvin
      Mordoh
    02/12/02
    
    275,000
    
    $
    121,000
    
    
    Financing
      IncentivePaula
      Lowry(1)
    02/12/02
    
    10,000
    
    $
    4,400
    
    
    Cash
      InvestmentLinda
      Mordoh(1)
    02/12/02
    
    5,000
    
    $
    2,200
    
    
    Cash
      InvestmentSam
      Epstein(1)
    02/12/02
    
    5,000
    
    $
    2,200
    
    
    Cash
      InvestmentSolomon
      Mordoh(1)
    02/12/02
    
    5,000
    
    $
    2,200
    
    
    Cash
      InvestmentAlternate
      Capital LLC
    03/15/02
    
    13,500,000(2
    )
    $
    800,000
    
    
    Financial
      ServicesRichard
      Strain
    04/19/02
    
    8,250,000
    
    $
    1,650,000
    
    
    Conversion
      of DebtManagerial
      Advisory Services
    07/11/02
    
    198,000
    
    $
    136,620
    
    
    Investor
      Relation ServicesJackson
      Morris
    07/11/02
    
    200,000
    
    $
    188,000
    
    
    Legal
      ServicesBodden
      Int'l
    07/11/02
    
    600,000
    
    $
    564,000
    
    
    Financing
      ServicesMel
      Siegal
    07/11/02
    
    200
    
    $
    200
    
    
    Conversion
      of Note InterestSol
      Adler
    07/11/02
    
    200,000
    
    $
    140,000
    
    
    Consulting
      ServicesBob
      and Peggy Isom
    07/11/02
    
    29,690
    
    $
    29,690
    
    
    Manufacture
      of EquipmentJudy
      Bailey
    07/16/02
    
    205,882
    
    $
    35,000
    
    
    Conversion
      of DebtMichael
      Musich
    08/09/02
    
    10,000
    
    $
    6,000
    
    
    Cash
      InvestmentKen
      Lucas
    08/09/02
    
    50,000
    
    $
    50,000
    
    
    Financing
      ServicesRusty
      Bailey
    10/17/02
    
    12,249
    
    $
    12,249
    
    
    Internet
      ServicesAlvin
      Mordoh
    10/17/02
    
    13,333
    
    $
    13,333
    
    
    Cash
      InvestmentHerman
      J. Calderon(1)
    10/17/02
    
    2,000
    
    $
    2,000
    
    
    Cash
      InvestmentHarry
      Greenberg(1)
    10/17/02
    
    1,000
    
    $
    1,000
    
    
    Cash
      InvestmentPaula
      Lowry(1)
    10/17/02
    
    1,000
    
    $
    1,000
    
    
    Cash
      InvestmentGilbert
      Cohen(1)
    10/17/02
    
    1,000
    
    $
    1,000
    
    
    Cash
      InvestmentG.
      M. Fornmarino
    10/17/02
    
    8,000
    
    $
    8,000
    
    
    Cash
      InvestmentKay
      Rhodes
    10/17/02
    
    100,000
    
    $
    50,000
    
    
    Conversion
      of DebtRoberta
      Clark
    11/14/02
    
    21,428
    
    $
    12,856
    
    
    Cash
      InvestmentHarry
      Greenberg(1)
    12/24/02
    
    2,000
    
    $
    2,000
    
    
    Cash
      InvestmentAlternate
      Capital LLC
    02/18/03
    
    1,066,667
    
    $
    800,000
    
    
    Marketing
      and Financing ServicesStrong
      Wilken LLC
    02/18/03
    
    233,333
    
    $
    175,000
    
    
    Marketing
      ServicesMike
      Libeer
    05/09/03
    
    100,000
    
    $
    195,000
    
    
    Sign-on
      Bonus (4
    )Robert
      Barnett
    09/22/03
    
    100,000
    
    $
    125,000
    
    
    Legal
      ServicesNEC
      Energy, LLC
    10/03/03
    
    30,000,000(3
    )
    $
    6,000,000
    
    
    Conversion
      of DebtStan
      Abrams
    10/30/03
    
    117,733
    
    $
    217,806
    
    
    Accrued
      Compensation PaymentBrett
      Abrams
    10/30/03
    
    171,632
    
    $
    317,519
    
    
    Accrued
      Compensation PaymentGene
      Bailey
    10/30/03
    
    166,200
    
    $
    307,470
    
    
    Accrued
      Compensation PaymentBrian
      Culvey
    10/30/03
    
    565,665
    
    $
    1,046,480
    
    
    Accrued
      Compensation PaymentCesar
      Muniz
    10/30/03
    
    235,520
    
    $
    435,712
    
    
    Accrued
      Compensation PaymentSol
      Adler
    9/21/04
    
    27,250
    
    $
    27,250
    
    
    Conversion
      of DebtAlvin
      Mordoh
    9/21/04
    
    450,000
    
    $
    162,000
    
    
    Conversion
      of DebtIsaac
      Nedd
    9/21/04
    
    52,083
    
    $
    18,750
    
    
    Conversion
      of Debt
   (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, we 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. The warrants
expired unexercised.  Each
of the above issuances was 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 us to persons with whom its management had direct contact and
personal relationships, o
to persons who were introduced to us by members of our management, and o
to attorneys, consultants and others in compensation for services.   Item 6. Management's Discussion and
Analysis or Plan of Operation.  Results of Operations  Supplemental
Quarterly Results of Operations  The
following tables set forth certain unaudited quarterly results of operations of
Nathaniel Energy for 2004. The quarterly operating results are not necessarily
indicative of future results of operations.    Three Months Ended 2004(unaudited)  March 31
    
    
    
    
    
    June
      30
    
    
    Sept.
      30
    
    
    Dec.
      31
    
    
    Year
      ended
      Dec.
      31,
      2004Revenue
    
    $
    3,346,792
    
    $
    3,609,352
    
    $
    3,433,929
    
    $
    3,646,720
    
    $
    14,036,793Cost
      of revenue
    
    
    2,891,376
    
    
    3,122,239
    
    
    2,833,250
    
    
    3,288,607
    
    
    12,135,472Gross
      profit (loss)
    
    
    455,416
    
    
    487,113
    
    
    600,679
    
    
    358,113
    
    
    1,901,321Selling, general and administrative expense
    
    
    675,007
    
    
    727,790
    
    
    653,974
    
    
    673,489
    
    
    2,730,260Write-down of inventory (1)
    
    
    --
    
    
    274,000
    
    
    --
    
    
    2,321,213
    
    
    2,595,213Impairment of assets (2)
    
    
    --
    
    
    1,403,046
    
    
    --
    
    
    --
    
    
    1,403,046Total
      operating expenses
    
    
    675,007
    
    
    2,404,836
    
    
    653,974
    
    
    2,994,702
    
    
    6,728,519Loss
      from operations
    
    
    (219,591
    )
    
    (1,917,723
    )
    
    (53,295
    )
    
    (2,636,589
    )
    
    (4,827,198
    )Write-off of related party receivable (3)
    
    
    --
    
    
    (264,587
    )
    
    --
    
    
    (11,438
    )
    
    (276,025
    )Interest expense, net
    
    
    (144,582
    )
    
    (131,068
    )
    
    (146,926
    )
    
    (141,485
    )
    
    (564,061
    )Loss on disposal of equipment
    
    
    --
    
    
    (18,912
    )
    
    
    
    
    2,118
    
    
    (16,794
    )Other non-operating  income (expense)
    
    
    6,000
    
    
    65,800
    
    
    --
    
    
    --
    
    
    71,805Loss
      before income taxes and minority interest
    
    
    (358,173
    )
    
    (2,266,490
    )
    
    (200,221
    )
    
    (2,787,389
    )
    
    (5,612,273
    )Income tax expense
    
    
    (127,411
    )
    
    (131,272
    )
    
    (151,695
    )
    
    386,794
    
    
    (23,584
    )Minority interest
    
    
    (93,647
    )
    
    (99,638
    )
    
    (111,495
    )
    
    284,293
    
    
    (20,487
    )Net
      loss
    
    $
    $
      579,231
    $
      )
    $
    $(2,497,400
    $)
    $
    $(463,411
    $)
    $
    $
      (2,116,302
    $
      )
    $
    $
      (5,656,344
    $
      )Weighted-average
      common shares
      outstanding-diluted
    
    
    69,719,414
    
    
    69,676,697
    
    
    70,198,263
    
    
    70,198,263
    
    
    69,950,156Shares
      outstanding at end of period
    
    
    69,719,414
    
    
    69,668,930
    
    
    70,198,263
    
    
    70,198,263
    
    
    70,198,263
  (1) During the quarter ended June 30, 2004, tire
shred inventory at the tire fuel processing facility was written down to a net
realizable value of zero. The net realizable value was calculated using
estimated selling prices less costs to process the inventory into a salable
form. During the quarter ended December 31, 2004, we reduced the carrying value
of the two Thermal CombustorsTM we are building in Italy, under a contract for
resale, which have been completed and are in the operating start up and testing
phase.  Such reduction was included in research and development expense in
the accompanying financial statements.  The Thermal CombustorsTM are valued
at that portion of the contract price we reasonably expect to receive upon
completion and acceptance by our customer, reduced by our contractual exposure
to penalties contained in the contract which could be incurred if our Thermal
CombustorsTM do not produce the volume of steam specified in the contract.  (2) During the quarter ended June 30, 2004,
management changes prompted a review and update of the expected cash flows on
long lived assets.  Based on this review, operating costs were higher than
previously estimated, and an impairment of $1,403,046 was recognized on the
assets at the tire fuel processing facility in Hutchins, Texas.  We
discounted the cash flows expected from the impaired long lived assets to
determine their current value and the impairment amount.  We are working to
add new contracts to increase the tire fuel processing facility revenue, but any
new contracts cannot be assured, and have not been considered in the most recent
cash flow expectations.  (3)
During the quarters ended June 30, 2004  and December 31, 2004, we wrote
off a $264,587  related  party receivable from Ripetouch 
Greenhouse LLC, an entity controlled by our former  chief 
executive  officer,  Stan Abrams and a related party receivable of
$11,438 due from Stan Abrams, respectively since debt  collection  has
been determined to be uncertain.  The Ripetouch receivable arose in 2003
and the first quarter of 2004 and Stan Abrams, receivable arose in 2003.  Year
ended December 31, 2004 and 2003  Company
Overview  Our
mission is to provide a lower cost, clean dependable energy alternative to
fossil fuels worldwide. Our operational plan focuses on three major business
models in the commercialization of our Thermal CombustorTM technology: licensing,
creating energy infrastructures and building, owning and operating small power
plants. In 2004 and 2003 revenue generated by our largest business, the helium
and gas processing business, provided operating capital funds for our tire fuel
processing and further commercialization of our Thermal CombustorsTM. Our helium
and gas processing business, generated 96% and 93% of our revenue, or
$13,475,220 and $7,851,531 during 2004 and 2003, respectively. The tire fuel
processing operation generated 4% and 7% of the revenue, or $561,573 and
$573,210 during 2004 and 2003, respectively.  We have recognized no revenue
from our Thermal CombustorTM business segment during 2004 and 2003.  Our
long term goal is to produce the majority of our revenue and cash flow from the
commercialization of our Thermal CombustorTM technology. As a result, the
majority of our resources are focused on this business model.  Historically,
we have 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
our success will be wisely choosing among project opportunities and focusing
resources on projects with the greatest chance of success and returns for
stockholders. We are investigating numerous opportunities including a facility
using municipal solid waste (MSW) as fuel for our Thermal CombustorTM to produce
electricity and a facility to produce electricity and steam in connection with
an ethanol plant.  We
enter 2005 with a patented proprietary technology deployed in a commercial
application. Once we have obtained acceptance for the two Thermal CombustorTM
units in Cologna Veneta, Italy, we will have access to a commercial operating
facility to use for marketing, testing and additional research and development
efforts. Our current year mission is to contract and initiate implementation as
a partner or joint venture member, commercial operations utilizing our Thermal
CombustorTM technology.  At
the same time, we are developing the infrastructure and business development
activities to secure energy infrastructure and small power plant opportunities
that utilize our Thermal CombustorTM technology. Additionally, we will seek
project funding that will be based on the size, configuration and business
structure of the project. We anticipate that the timeframe from identification
of a project to completion will be 12 to 24 months, provided we obtain the
requisite project financing.  We
also plan to improve operations at our tire fuel processing facility in
Hutchins, Texas during 2005. The tire fuel processing facility is currently the
only storage and processing facility licensed by the State of Texas to operate
in the Dallas Metro area. If we successfully obtain funding for our planned
capital improvements and once these capital improvements are in place, the
facility will be able to increase the number of waste tires it accepts,
increasing tipping fee revenue, and increasing revenue from the sale of tire
shreds it produces. The tire fuel processing facility’s ability to increase
revenue and generate operating cash flows has been hindered by the general poor
quality of the existing equipment, which requires constant repair and
maintenance due to the age of the equipment and the resulting low pricing on
tire shreds it produces. The addition of new equipment combined with existing
equipment and certain facility improvements provides an opportunity to sign new
contracts for the acceptance and disposal of waste tires. The new contracts are
expected to increase the tipping fee revenues.  We believe that the new
equipment would improve the quality of the tire shreds, which would result in
higher pricing for the tire shreds.  Furthermore, we believe that facility
improvement would allow us to increase the volume of the tire shreds
produced.  Operating
results 2004 compared to 2003  For
the year ended December 31, 2004 revenue increased from $8,424,741 in 2003, to
$14,036,793 in 2004, an increase of $5,612,052 due to the inclusion of a full
year of operations of the Keyes helium plant, the Sturgis gas plant and the
Keyes gathering system which were acquired on April 3, 2003 and were
consolidated for nine months in our total revenues and expenses for the year
ended December 31, 2003.  Revenues from the helium and gas processing
operations were $13,475,220 for the year ended 2004, an increase of $5,623,689
over $7,851,531 for the year ended 2003, due primarily to the inclusion of a
full year’s operations of the Keyes helium and gas plant and gathering system,
approximately $1,986,000 on a pro forma basis. In addition, sales of gas and
natural gas liquids increased by approximately $2,154,000, sales of helium
increased approximately $1,868,000 and gathering and other fees increased
approximately $1,013,000 due to increased volume processed and market prices for
gas and natural gas liquids which are sold on a month to month contract basis.
Revenues from tire fuel processing operations were $561,573 for 2004, a slight
decrease of $11,637 from $573,210 for 2003.  Gross
profit increased by $1,328,421 to $1,901,321 for the year ended December 31,
2004 from $572,900 for the year ended December 31, 2003. Gross margin increased
to 13.5% for the year ended December 31, 2004 compared to 7% for the year ended
December 31, 2003. Gross profit increased in our helium and gas processing
operations by approximately $1,364,000 offset by a decrease in gross profit from
the tire fuel processing operation of approximately $36,000.  The increase
in gross profit is due primarily to inclusion of the helium and gas processing
operations for the entire year ended December 31, 2004 compared to nine months
during the year ended December 31, 2003, approximately $155,000 on a pro forma
basis, increased gross profit on gas and natural gas liquid revenue due to
increases in market pricing for those products, and increased volumes through
our gas gathering process which increased those revenue at nominal incremental
cost. On January 9, 2004 we entered into a contract with Nexus Energy Company to
receive additional gas through our existing pipeline for processing at our
facilities and extraction of  helium and natural gas liquids from this new
gas stream. In addition, we spent approximately $870,000 on equipment
upgrades in the first quarter of 2004 to enable us to increase gas volumes and
production at the processing plant which began in the second
quarter of 2004. During 2004, the helium and gas processing operating gross
margin improved to 16.4% from 11% during 2003, offset by a negative margin from
tire fuel processing operations of 55.3% for 2004 compared to a negative 48%
margin for 2003. The negative gross margin generated at the tire fuel processing
operations is primarily due to the use of our older equipment, which produces
approximately one third the volume of finished product produced by new equipment
and at a lower quality. The combination of low volumes and low quality product
result in our negative gross margins for our tire fuel processing operation.
Both businesses have plans to improve gross margins in 2005.  Total
selling, general and administrative expenses decreased $2,693,849 or 50.3% to
$2,661,531 for the year ended December 31, 2004 from $5,355,380 for the year
ended December 31, 2003. The decrease is due primarily to reductions in payroll
and payroll related expense and professional service compensation of
approximately $2,233,000. During 2003, non-cash employee and professional
service compensation was $2,973,745, none of which was incurred during 2004. The
2003 non-cash expense included $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 to our financial statements 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.  During
the year ended December 31, 2004, management determined that the net realizable
value of the tire shred inventory was nominal and wrote down the inventory by
$274,000. In addition, during the fourth quarter of 2004, management assessed
the collectability of the contract price for two Thermal CombustorsTM we are
starting up and testing in Cologna Veneta, Italy, which are included as work in
progress inventory, resulting in a reduction in the carrying value of that
inventory by $2,321,213 which is included in research and development expense.
 After this reduction, the Thermal CombustorsTM are valued at that portion
of the contract price we reasonably expect to receive upon completion and
acceptance by our customer, reduced by our contractual exposure to penalties
contained in the contract which could be incurred if our Thermal CombustorsTM do
not produce the volume of steam specified in the contract.  During
the quarter ended June 30, 2004, management changes prompted a review and update
of the expected cash flows on long lived assets.  Based on this review,
operating costs were higher than previously estimated, and an impairment of
$1,403,046 was recognized on the assets at the tire fuel processing facility in
Hutchins, Texas. We discounted the cash flows expected from the impaired long
lived assets to determine their current value and the impairment amount.  We
paid certain expenses related to site clean-up on behalf of Ripetouch Greenhouse
LLC, an entity controlled by our former chief executive officer, Stan Abrams,
during 2003 and 2004, which were recorded as related party receivables. During
2004, we wrote off $264,587 due from Ripetouch and $11,438 due from Stan Abrams,
as collection was determined to be uncertain. See Note 10 to our financial
statements for further discussions of these related party transactions.  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 a $175,500 non-cash write off
of stock subscriptions receivable.  We incurred no financing expenses
during 2004.  Interest
expense decreased by $457,712 from $1,021,773 for the year ended December 31,
2003 to $564,061 for the year ended December 31, 2004 resulting primarily from a
$10 million conversion of indebtedness to Richard Strain into equity.  Liquidity and Capital Resources  As
of December 31, 2004 Nathaniel Energy owed $462,800 to financial institutions
under installment notes with a blended interest rate of 6.38%, which were
secured by equipment. The remaining $9,694,062 in total debt consists of
$8,892,151 in secured loans from Richard Strain with an average interest rate of
5.94%, which are described in more detail below, unsecured notes due a vendor
for services they provided us building and installing our Thermal Combustors TM
in Italy of $759,577 with an interest rate of 6.5% and two unsecured notes to
unaffiliated third parties of $42,333 with interest rates of 15%.  Effective
October 3, 2003, 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 an
irrevocable right to the other 20,000,000 shares was granted, to Mr. Strain’s
designee NEC Energy, LLC.  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 3.33%
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. In
March 2004 Richard Strain loaned Nathaniel Energy an additional $2,000,000. The
loan bears interest at the rate of 3.49% 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.  Other
debt financing due this investor of $4,892,151 as of December 31, 2004 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.  All
the indebtedness to Richard Strain is secured by a first lien on the assets of
Nathaniel and its subsidiaries.  As of December 31, 2004, we have negative working
capital of $2,078,217. The primary reason for our negative working capital
balance are principal and interest payments due in October 2005 to our major
creditor and one of our largest beneficial stockholders, Richard Strain. The
principal payments due in October are reflected in our balance sheet as notes
payable to a stockholder currently payable of $1,080,000. In addition, included
in accrued interest is $627,823 on outstanding loans from Mr. Strain. On April
14, 2005, Mr. Strain agreed to restructure payment terms on the outstanding debt
and accrued interest due from us so that no payments will be required during our
fiscal year ending 2005. The terms and conditions of the debt restructuring have
not yet been completed; however, we believe these terms and conditions will be
favorable to us.  We have excluded from current assets our
restricted cash balance of $237,000. The restricted cash balance was set aside
by our board of directors during our fiscal year 2003 for the purpose of funding
the construction of two Thermal CombustorsTM in Cologna Veneta, Italy and to
provide marketing and communication funds. We are in the start up and testing
phase for the Thermal Combustors TM in Italy and do not expect to incur any
additional significant expenses for which we are not reimbursed. In addition, we
have no future plans to spend funds on marketing and communication from this
restricted cash balance. During 2005, the restrictions on this cash balance will
be removed.  For the year ended December 31, 2004, our tire
fuel processing operation in Hutchins, Texas generated a cash operating loss of
approximately $325,000, which were funded by increasing our current liabilities,
primarily accounts payable and accrued expenses. Our negative working capital
includes this cash operating loss. We plan to obtain funding for the purchase of
new equipment and make facility improvements at our tire fuel processing
operation. The addition of new equipment, combined with existing equipment and
certain facility improvements provides an opportunity for tire fuel processing
to sign new contracts for the acceptance and disposal of waste tires. We believe
the new contracts will increase the tipping fee revenues and the resulting
delivery of tire shreds that are used as fuel, with improved pricing on that
fuel due to the higher quality of tire shreds produced from the new equipment.
Although we cannot assure that we will be able to obtain the funding required or
that expected increases in revenue and operating profits will be realized in
2005, we believe we will be able to eliminate cash operating losses by the third
quarter of 2005 should we be successful in obtaining the necessary funding and
making the planned capital improvements during the second quarter of 2005.  The
following is a summary of Nathaniel Energy's cash flows sources (uses) from
operating, investing, and financing activities during the periods indicated:   Year Ended December 31,2004Operating
      activities
    
    $
    (1,367,253)
    
    $
    2003
      (2,816,456)Investing
      activities
    
    
    (1,208,927)
    
    
    (9,702,261)Financing
      activities
    
    
    2,639,549
    
    
    12,821,442Net
      effect on cash
    
    $
    $
      63,369
    
    $
    $
      302,725
    For
the period ended December 31, 2004, net cash used in operating activities of
$1,367,253 is primarily due to a cash loss for the year of $2,821,330, an
increase in inventory of $655,854 due primarily to costs incurred relative to
the delivery of two Thermal CombustorsTM in Italy, increase in accounts
receivable of $379,674 in the helium and gas processing operations offset by a
decrease in our restricted cash of $662,300 and an increase in our accounts
payable and accrued expenses of $1,775,702. The cash loss of $2,821,330
represents our net loss of $5,656,344 reduced by non cash expenses of
$2,835,014, which include depreciation and amortization, loss on related party
receivable, write down of inventory, impairment of assets, and other net
non-cash expenses. Net cash used in investing activities of $1,208,927 consists
of equipment purchases primarily for our helium and gas processing operations
and our investment in technical documentation, drawings and design engineering
of our Thermal CombustorTM. Net cash provided by financing activities of
$2,639,549 is primarily due to issuance of a note payable due Richard Strain for
$2,000,000 and issuance of notes payable to a vendor for services provided on
the Thermal CombustorTM project in Italy in the aggregate amount of $786,916
offset by payments on debt principal of $169,160.  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 cash used in investing activities of $9,702,261 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 cash provided by financing activities of $12,821,442 is due to
$13,021,043 issuance of debt, offset by payments on debt principal of $199,601.  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.  We
had cash of $568,151 at December 31, 2004 which will be used to fund our
operations, pay current debts and partially fund completion of our Thermal
CombustorTM project in Italy.  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 the
straight-line method. 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.  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  We
do not expect the adoption of recent accounting pronouncements will have a
significant effect on our financial statement presentation or disclosures. See
"Recent Accounting Pronouncements" in Note 1 to the financial statements.  Other
Considerations  We
are subject to many risk 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.  Our
business model depends on obtaining several million dollars in funding.  We
will require several million dollars in capital investments to further develop
our Thermal CombustorTM business, which is the business segment on which we plan
to focus. Capital investments could be in the form of debt, equity, government
grants or guaranteed loans. There can be no assurance that we 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 maintenance, repair
and upgrades.  Future
revenue and gross margin increases are dependent on continuous equipment
maintenance, repairs and upgrades.  Significant upgrades were completed to
our helium and gas processing operations in the first quarter of 2004. We
anticipate receiving new gas production, requiring processing over the next
several months. There can be no assurance that future upgrades will meet our
expectations to provide the capacity to process higher volumes of gas or that we
will receive the new gas production as anticipated.  Our
2005 business plan contemplates improving our tire processing operations based
on new equipment, the repair of existing equipment and planned facility
improvements. New equipment purchases, repair of existing equipment  and
planned facility improvements will require additional funding, however, there is
no assurance that we will be successful in obtaining such funding.  Results
of operations are dependent upon our contractual arrangements.  Although
we have long term contracts in place for delivery of crude helium gas, current
markets for helium and natural gas liquids may create opportunities for other
participants which are better capitalized than we are and these participants may
attempt to interfere with our existing contracts. Such interference may require
litigation to resolve, which could negatively impact our results of operations.  We
depend on a small number of large customers and suppliers.  Our
top three customers accounted for 74% of 2004 revenue and this percentage
dependency is likely to rise in 2005. Although we believe we could replace these
customers if lost, if we do not maintain positive relationships with these
customers, these customers change their business strategy, or their financial
position deteriorates, our revenue and operating results could be materially and
negatively impacted.  If
we lose any of our major suppliers we could suffer a material disruption to our
natural gas and crude helium business which could have a material adverse affect
on our business and prospects.  If
we fail to satisfy customer expectations, existing and continuing business could
be adversely affected.  If
we fail to satisfy customer expectations, our reputation and ability to retain
existing customers and attract new customers may be damaged. In addition, if we
fail to perform adequately on projects, we 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.  If
we fail to successfully use patented technology in commercialized applications,
our business may not become profitable.  If
we fail to identify the latest alternative energy solutions or fail to
successfully apply the technology to customer demand, our reputation and ability
to compete for customers and the best employees could suffer. If we 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 we must adjust our business plan giving
consideration to our own research, experience, technology evolution and market
demand. Accepting unforeseen business opportunities may also result in a
business model change. We 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 our 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 us than our current technology. We 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.  We
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. We are committed to full regulatory compliance
and high standards of corporate governance and expect legal accounting and
professional fees to increase in 2005. 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 could own over 50% of outstanding shares and control a
vote of stockholders.  One
stockholder, NEC Energy, LLC, an affiliate of Richard Strain and Corey Morrison,
will beneficially own over 50% of outstanding shares if and when it is issued an
additional 20,000,000 to which it is entitled under a stock conversion agreement
which is described under the heading “Change in Control” in the Description of
Business of this report.  This is percentage is based on a Schedule 13D
filed by that stockholder with the SEC. Accordingly, when those shares are
issued 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.  The Company is currently taking
steps to authorize a sufficient number of shares of common stock to enable it to
issue the additional 20,000,000 shares to which NEC Energy is entitled but it
cannot predict when this will be accomplished.  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.  Item 8. Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure.  In
March, 2003 and in January 2004, we 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  Our
Principal Executive Officer and Principal Financial and Accounting Officer,
after evaluating the effectiveness of our 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, 2004, (the "Evaluation Date"), has
concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective to ensure the timely collection, evaluation, and
disclosure of information relating to us 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.    PART III  Item 9. Directors and Executive Officers
of the Registrant  Information
called for by Item 9 of Part III is incorporated by reference from the Company’s
definitive Proxy Statement to be filed in connection with its 2005 Annual
Meeting of Stockholders pursuant to Regulation 14A.  Item 10. Executive Compensation.  Information
called for by Item 10 of Part III is incorporated by reference from the
Company’s definitive Proxy Statement to be filed in connection with its 2005
Annual Meeting of Stockholders pursuant to Regulation 14A.  Item 11. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.  Information
called for by Item 11 of Part III is incorporated by reference from the
Company’s definitive Proxy Statement to be filed in connection with its 2005
Annual Meeting of Stockholders pursuant to Regulation 14A.  Item 12. Certain Relationships and Related
Transactions  Information
called for by Item 12 of Part III is incorporated by reference from the
Company’s definitive Proxy Statement to be filed in connection with its 2005
Annual Meeting of Stockholders pursuant to Regulation 14A.  Item 13. Exhibits List 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 February 1, 2000 by and between Nathaniel Energy
      Corporation and Russell Eugene Bailey**10.5
    Agreement,
      dated October 30, 2003 by and between Nathaniel Energy Corporation and
      Russell "Gene" Bailey relating to the issuance of shares for accrued
      salary**10.6
    Employment
      Agreement, dated February 1, 2000 by and between Nathaniel Energy
      Corporation and Brian G. Culvey**10.7
    Agreement,
      dated October 30, 2003 by and between Nathaniel Energy Corporation and
      Brian Culvey relating to the issuance of shares for accrued
  salary**10.8
    Consulting
      Agreement, dated March 1, 2002, as supplemented as of June 7, 2002, by and
      between Nathaniel Energy Corporation and Alternate Energy, LLC**10.9
    Amended
      and Restated Patent Assignment Agreement, dated September 30 2003 but
      effective as of July 7, 1998 between Stan Abrams and Brett Abrams and
      Nathaniel Energy Corporation**10.10
    Conversion
      Agreement, dated October 3, 2003 between Nathaniel Energy Corporation and
      Richard Strain**10.11
    Loan
      Agreement, dated October 3, 2003 between Richard Strain and Nathaniel
      Energy Corporation*10.12
    Promissory
      Note, dated October 3, 2003 between Nathaniel Energy Corporation and
      Richard Strain**10.13
    Promissory Note II, dated March 16, 2004
      between Nathaniel Energy Corporation and Richard Strain ***10.14
    Loan
      Agreement II, dated March 16, 2004 between Nathaniel Energy Corporation
      and Richard Strain ***10.15
    Compression Facility Agreement, dated
      January 9, 2004 between Nathaniel Energy Corporation and Nexus Energy
      Company***10.16
    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”)****10.17
    Amendment
      No. 1 to the Liquid Helium Agreement dated as of January 30, 2004
      ****10.18
    Agreement
      dated as of June 25, 2004 between Stan Abrams and Nathaniel Energy
      *****10.19
    Agreement
      dated July 16, 2004 among EcoIdea S.r.l., Electronic Solar S.r.l.,
      European Waste Solutions, Ltd., L&R Energy Company, LLC and Nathaniel
      Energy Corporation (the “Italy Project Parties”) *****10.20
    Agreement
      dated as of July 16th, 2004 between Nathaniel Energy
      Corporation and L&R Energy Corporation, LLC. *****10.21
    Agreement
      dated August 25, 2004 amending an agreement dated July 16, 2004 on the
      Italy Project Parties. ******10.22
    Contract
      dated January 12, 2005, among the Italy Project Parties10.23
    Contract
      dated February 22, 2005, among the Italy Project Parties14.1
    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.
    Subsidiaries31.
    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 200232.
    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 document filed as an exhibit to our Quarterly Report on Form 10-QSB for
the period ended March 31, 2004 and incorporated herein by reference.  **** 
Denotes documents filed as an exhibit to our Amended Annual Report on Form
10-KSB/A Amendment No. 1 for the year ended December 31, 2003 and incorporated
herein by reference.  Such document contains confidential material omitted
and filed separately with the Securities and Exchange Commission.  Brackets
surrounding asterisks in this document denote the omission.  *****
Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB for
the period ended June 30, 2004 and incorporated herein by reference.  ******
Denotes documents filed as an exhibit to our Quarterly Report on Form 10-QSB for
the period ended September 30, 2004 and incorporated herein by reference.  (b)
Reports on Form 8-K:  In
the last quarter of 2004 Nathaniel Energy filed the following Current Reports on
Form 8-K:  Date of Earliest Event
      Reported
    Item
      ReportedNovember 2, 2004
    8.01
  Item 14. Principal Accountant Fees and Services  Audit
Fees  The
aggregate fees billed for our fiscal years ended December 31, 2004 and 2003 by
Comiskey & Company, P.C., our principal accountants in 2004 and 2003, 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 $23,572 and $25,790 respectively.  Audit
Related Fees  Our
principal accountants did not bill us any fees during our fiscal years ended
December 31, 2004 and 2003 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, 2004 and 2003.  Other
Fees  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, 2004
and 2003 respectively.    NATHANIEL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2004 AND 2003   INDEX    PageReport
      of Independent Registered Public Accounting
      Firm.........................................................
    F-1Consolidated
      Balance
      Sheets............................................................................................................
    F-2Consolidated
      Statements of
      Operations..........................................................................................
    F-3Consolidated
      Statement of Stockholders' Equity
      (Deficit)............................................................
    F-4Consolidated
      Statements of Cash
      Flows.........................................................................................
    F-5Notes
      to Consolidated Financial
      Statements..................................................................................
    F-6
      to F-17
  
  COMISKEY & COMPANY   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board
of Directors and Stockholders of Nathaniel Energy Corporation Englewood, Colorado  We have audited the
accompanying consolidated balance sheets of Nathaniel Energy Corporation as of
December 31, 2004 and 2003, and the related consolidated statements of
operations, cash flows and stockholders’ equity (deficit) for each of the years
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 audits.  We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require that we plan and perform the
audit to obtain reasonable assurance that 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 our audits provide a
reasonable basis for our opinion.  In our opinion, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Nathaniel Energy Corporation as of
December 31, 2004 and 2003, and the consolidated results of its operations, cash
flows, and changes in stockholders’ equity (deficit) for each of the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.  As discussed in Note 2 to
the financial statements, the Company has an informal agreement with its major
stockholder to restructure debt.   March 3, 2005 Denver, Colorado  /s/ Comiskey
& Company PROFESSIONAL
CORPORATION        Certified Public Accountants & Consultants 789 Sherman Street, Suite 440, Denver,  CO 80203 (303) 830-2255 Fax (303) 830-0876 info@comiskey.com
www.comiskey.com   Nathaniel Energy Corporation Consolidated Balance Sheets  December 31,
      2004
    December 31,
      2003AssetsCurrent
      assets:Cash
    $   
      568,151
    $   
      504,782Accounts
      receivable
    1,340,229
    960,555Inventory
    1,019,028
    637,174Prepaid
      expenses
    136,022
    130,669Advances
      receivable
    529
      __________
    30,718
      __________Total
      current assets
    3,063,959
    2,263,898Property,
      plant and equipment, net of accumulated
      depreciation
    10,304,828
    11,662,969Intangible
      assets, net
    597,014
    382,267Restricted
      cash
    237,000
    899,300Related
      party receivables
    --
    345,959Deposits
    85,477
    50,000Total
      Assets
    $
      14,288,278
    $
      15,604,393Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts payable
    $ 
      2,686,524
    $ 
      1,689,072Accrued compensation and payroll liabilities
    97,300
    109,365Accrued interest
    640,033
    141,402Accrued property tax
    37,080
    38,331Accrued income tax
    23,584
    --Other accrued expenses
    41,520
    25,018Notes payable, current portion
    536,135
    406,644Notes payable - stockholder, current portion
    1,080,000
    --Total
      current liabilities
    5,142,176
    2,409,532Long-term
      debt
    728,571
    230,989Long-term
      debt, stockholder
    7,812,151
    6,892,151Total
      liabilities
    13,682,898
    9,532,672Minority
      interest
    54,626
    34,139Stockholders'
      equity:
    --
    --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, 70,198,263 shares and 69,719,414 shares
      issued
      and outstanding at December 31, 2004 and 2003
    --
      
      
      70,198
    --
      
      
      69,719Common
      stock to be issued
    20,318
    20,285Additional
      paid-in capital
    64,851,656
    64,682,652Accumulated
      deficit
    (64,391,418)
    (58,735,074)Total
      stockholders' equity
    550,754
    6,037,582Total
      Liabilities and Stockholders' Equity
    $
      14,288,278
    $
      15,604,393
   The accompanying notes are an integral part of the financial
statements.      Nathaniel Energy Corporation Consolidated Statements of Operations   For the Year EndedDecember 31,
      2004
    December 31,
      2003Revenue
    $
      14,036,793
    $
         8,424,741Cost
      of revenue
    12,135,472
    7,851,841Gross
      profit
    1,901,321
    572,900Selling,
      general and administrative expenses
    2,661,531
    5,355,380Research
      and development expense
    2,389,942
    37,409Write
      down of inventory
    274,000
    --Impairment
      of assets
    1,403,046
    --Total
      operating expenses
    6,728,519
    5,392,789Loss
      from operations
    (4,827,198)
    (4,819,889)Other
      income (expense)Partnership income
    --
    20,733Loss on disposal of equipment
    (16,794)
    (13,207)Interest expense
    (564,061)
    (1,021,773)Write off of related party receivable
    (276,025)
    --Financing costs
    --
    (42,675,500)Investment income
    --
    1,109Other income
    71,805
    2,039Loss
      before income taxes and minority interest
    (5,612,273)
    (48,506,488)Income
      tax expense
    (23,584)
    --Loss
      before minority interest
    (5,635,857)
    (48,506,488)Minority
      interest
    (20,487)
    (7,781)Net
      loss
    $
      (5,656,344)
    $
      (48,514,269)Loss
      per share, basic and diluted
    $(0.08)
    $
      (1.06)Weighted
      average common shares outstanding
    69,950,156
    45,913,555
  The accompanying notes are an integral part of the financial
statements.      Nathaniel Energy Corporation Consolidated Statement of Stockholders' Equity (Deficit)  Shares
    Amount
    Additional
      Paid-In
      Capital
    Shares to be Issued
    Subscription
      Receivable
    Accumulated
      Deficit
    Stockholder
      Equity 
      (Deficit)Shares
    AmountBalance,
      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
    --
    --
    --
    --
    --
    50Issued
      for
      services
    1,500,000
    1,500
    1,293,500
    
    
    --
    --
    1,295,000Forgiveness
      of
      accrued
      compensation
      payable
      to stockholders
    --
    --
    1,088,459
    --
    --
    --
    --
    1,088,459Debt
      conversion
    30,000,000
    30,000
    52,450,000
    20,000,000
    20,000
    --
    --
    52,500,000Interest
      forgiven
      by
      stockholder
    --
    --
    488,294
    --
    --
    --
    --
    488,294Issued
      for accrued
      Compensation
    1,256,750
    1,256
    2,679,695
    285,000
    285
    --
    --
    2,681,236Write
      off of
      Subscription
      Receivable
    --
    --
    --
    --
    --
    175,500
    --
    175,500Net
      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)
    6,037,582Cancellation
      of shares
    (50,484)
    (50)
    (38,467)
    --
    --
    --
    --
    (38,517)Debt
      conversion
    529,333
    529
    195,504
    --
    --
    --
    --
    196,033Issued
      for interest
    --
    --
    11,967
    33,000
    33
    --
    --
    12,000Net
      loss
    --
    --
    --
    
    
    --
    (5,656,344)
    (5,656,344)__________
    __________
    __________
    __________
    __________
    __________
    __________
    __________Balance,
      December
      31, 2004
    70,198,263
    $
      70,198
    $
      64,851,656
    20,318,000
    $
      20,318
    $--
    $ (64,391,418)
    $
      550,754
   The accompanying notes are an integral part of the financial
statements.  Nathaniel Energy Corporation Consolidated Statements of Cash Flows  For the Year EndedDecember 31,
      2004
    December 31,
      2003Cash
      flows from operating activities:
      Net
      loss
    $
      (5,656,344)
    $
      (48,514,269)Adjustments
      to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization
    922,462
    745,438Loss on related party receivable
    276,025
    --Write down of inventory
    274,000
    --Impairment of assets
    1,403,046
    --Stock issued for services
    --
    2,973,745Minority interest
    20,487
    7,781Stock issued to settle debt
    --
    42,500,000Loss on disposition of equipment
    16,794
    --Non-cash settlement of debt
    (77,800)
    --Subscription receivable write off
    --
    175,500Changes
      in operating assets and liabilities:
      (Increase) decrease in:
      Inventory
    (655,854)
    (127,757)Accounts
      receivable
    (379,674)
    (411,259)Prepaid
      expenses
    (5,353)
    (61,955)Other
      receivable
    30,189
    (5,168)Restricted
      cash
    662,300
    (899,300)Related
      party receivable
    19,450
    (119,126)Other
      assets
    7,317
    (53,877)Increase
      in:
      Accounts payable and accrued expenses
    1,775,702
    973,791Net
      cash used in operating activities
    (1,367,253)
    (2,816,456)Cash
      flows from investing activities:
      Cash acquired in acquisition
    --
    590,000Equipment and intangible asset purchases
    (1,208,927)
    (588,341)Acquisition of assets
    --
    (9,703,920)Net
      cash used in investing activities
    (1,208,927)
    (9,702,261)Cash
      flows from financing activities:
      Payments on debt
    (169,160)
    (199,601)Proceeds from issuance of notes and loans
    2,808,709
    13,021,043Net
      cash provided by financing activities
    2,639,549
    12,821,442Net
      increase in cash
    63,369
    302,725Cash
      and cash equivalents, beginning of year
    504,782
    202,057Cash
      and cash equivalents, end of year
    $
      568,151
    $      
      504,782Cash
      paid for interest
    $ 
      53,430
    $        93,704Cash
      paid for income taxes
    $
      --
    $  
      --Non
      cash financing activity Issuance of stock to settle debt
    $
      220,000
    $
      10,000,000Equipment purchased with debt
    $  
      25,741
    $ 
      --Forgiveness
      of accrued interest and compensation
    $
      --
    $ 
      1,576,753
  The accompanying notes are an integral part of the financial
statements.    Nathaniel Energy Corporation Notes to Financial
Statements  For
the years ended December 31, 2004 and 2003  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 CombustorTM, is a 2-stage
gasification system designed to convert waste, biomass, tires and any other
solid hydrocarbon-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 and operating small power plants.
The Company intends to license the Thermal CombustorTM 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 CombustorTM technology.
Nathaniel Energy's short term objective is to complete the start up and testing
of a commercial scale waste-to-energy facility in Cologna Veneta, Italy and use
that facility as a marketing site to demonstrate the technology’s operating
capabilities and generate additional contracts for development of
waste-to-energy facilities.  Business
Segments  The
Company operates three separate segments which are presently conducted in three
separate facilities:  -
tire fuel processing operation in Hutchins, Texas, -
natural gas processing, gas liquids and helium production in Keyes, Oklahoma and -
alternative 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 tire shred inventory value at December 31, 2004 is zero. 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
BLM fees are expensed as incurred. We
are also building two Thermal CombustorsTM in Italy, under a contract for resale,
which have been completed and are in the operating start up phase. The Thermal
CombustorsTM are valued at that portion of the contract price we reasonably
expect to receive upon completion and acceptance by our customer, reduced by our
contractual exposure to penalties contained in the contract which could be
incurred if our Thermal CombustorsTM do not produce the volume of steam specified
in the contract.We are reimbursed for our out of pocket expenses incurred
during this start up phase and we record those expenses and the reimbursement of
those expenses in cost of revenue.
  The components of inventory are as follows:  Helium
      inventory, valued by first-in, first-out method Construction in progress,
      valued by first-in, first-out method
    $  
       337,905
      681,123
      $
      1,019,028
  Research
and Development  Research
and development expenses, all of which relate directly to the design and
development of our Thermal CombustorTM technology, are expensed as
incurred.  For the years ended December 31, 2004 and 2003, we incurred
$2,389,942 and $37,409 for outside resources for research and development
expense.  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 yearsBuildings
    25 yearsVehicles
    5 yearsGathering
      pipeline
    20 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 2004 indicated an
impairment of long-lived assets at the Hutchins, TX tire processing
facility.  At the time of the impairment review, net realizable value for
these assets was determined to be $300,000, resulting in a net impairment
adjustment of $1,403,046. Management uses significant judgments, assumptions and
estimates to calculate future cash flows expected to be generated by the assets
under impairment review.  Revenue
Recognition  The
Company's tire 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 under a month to month contract.  We
recognize revenue from the sale of our Thermal CombustorsTM upon completion,
delivery and acceptance by the customer, using the completed contract method of
accounting.   Identifiable
Intangible Assets  The
Company reports identifiable intangible assets net of accumulated amortization.
Accumulated amortization on intangible assets was $155,174 and $57,171 at
December 31, 2004 and 2003, respectively. The company amortizes intangible
assets, excluding goodwill and trademarks, over their estimated useful lives,
which range from three to ten years. Intangible assets consist of patents,
capitalized web site costs, contracts acquired, and engineering drawings,
designs and manuals for our Thermal CombustorTM technology.    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.  The Company has no recorded goodwill at
December 31, 2004 and 2003.  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,
2003 and 2004 to be capitalized and deferred to future periods.  Stock-Based
Compensation  The
Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25,  "Accounting for Stock Issued to Employees," and complies with 
the  disclosure   provisions  of  SFAS  No. 
123,  "Accounting for Stock-Based Compensation," as amended by SFAS No.
148,  "Accounting for Stock-Based Compensation Transactions and
Disclosure--an amendment of SFAS No. 123." Under APB Opinion No. 25,
compensation expense for employees is based on the excess, if any, on the date
of grant, between the fair value of the Company's stock over the exercise
price.  No stock options were issued during 2004 or 2003.  The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF")
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.  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, 2004 and 2003.  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  We
have reclassified certain prior period amounts to conform to the current period
presentation.   Recent
Accounting Pronouncements  In
November 2004, the FASB issued SFAS No. 151, "Inventory Costs – an amendment of
ARB No.43, Chapter 4."  This Statement clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials.  This Statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005.  The initial application of
SFAS No. 151 will have no impact on the Company's financial statements.  In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets -
an amendment of APB Opinion No. 29." This Statement eliminates the
exception  for  nonmonetary  exchanges  of 
similar  productive  assets and replaces it with a general 
exception for exchanges of  nonmonetary  assets that  do 
not  have  commercial  substance.  A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange.  This Statement is
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The Company does not expect application of SFAS No. 153 to
have a material affect on its financial statements.  In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”
(SFAS 123R), which replaces SFAS 123 and supercedes APB Opinion No. 25. 
SFAS 123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on
their fair values.  The proforma disclosures previously permitted under
SFAS 123 no longer will be an alternative to financial statement
recognition.  For the Company, SFAS 123R is effective for periods beginning
after December 15, 2005.   Early application of SFAS 123R is
encouraged, but not required.  We plan to adopt SFAS 123R on January 1,
2006 using the modified prospective application method described in the
statement.  Under the modified prospective application method, we will
apply the standard to new awards, and to awards modified, repurchased, or
cancelled after the required effective date.  Additionally, compensation
cost for the unvested portion of awards outstanding as of the required effective
date will be recognized as compensation expense as the requisite service is
rendered after the required effective date.  We
are evaluating the impact of adopting SFAS 123R and expect that we will not
record substantial non-cash stock compensation expenses.  The adoption of
SFAS 123R is not expected to have a significant effect on our financial
condition, results of operations, and cash flows.  The future impact of the
adoption of SFAS 123R cannot be predicted at this time because it will depend on
levels of share-based payments granted by us in the future.  2.
Material Subsequent Events and Contingencies  Effective January 12, 2005 the Company, EcoIdea
s.r.l., Electronic Solar s.r.l., European Waste Solutions, Ltd. and L&R
Energy Company, LLC entered into a contract which amended and supplemented the
Company’s July 16, 2004 agreement relating to the supply of two MFC 1800 BHP
Thermal CombustorsTM for a refuse-derived fuel project in Cologna Veneta, Italy.
Under the amended contract the original $3,000,000 contract amount payable to
Nathaniel was reduced by $900,000 to cover costs borne by Ecoldea s.r.l. in the
project for implementation of modifications relating to the Thermal CombustorsTM
that were agreed to by the Company. An advance payment of $300,000 of the
contract price was paid to the Company at the time the agreement was signed. In
addition, $750,000 of the contract price was to have been paid within three days
of a positive outcome for the acceptance test of the first Thermal CombustorTM.
The amended contract specified a date for completion and testing of the first
Thermal CombustorTM of January 31, 2005. The remaining $1,050,000 of the contract
price was to have been paid within three days of a positive outcome of the
acceptance test of the second Thermal CombustorTM. The amended contract specified
a date for completion and testing of the second Thermal CombustorTM of February
28, 2005. These completion dates were subject to an extension of time if
conditions necessary to our performance were not fulfilled by the other parties
to the contract. The Company also was to be reimbursed approximately $275,000
for shipping and handling costs on the date of a positive outcome of the
acceptance test of the second Thermal CombustorTM. In addition, Nathaniel was to
have been paid an additional $80,000 for costs relating to assistance in the
start up of the Thermal CombustorsTM by certain of the parties within 30 days of
the signing of the contract. The specifications for gasification which have to
be met to deem the testing of the Thermal CombustorsTM successful and the quality
and grade of fuel which must be used to operate the Thermal CombustorsTM, were
set forth. The contract price may be reduced by up to $649,000 if the steam
output are from five to eleven percent lower than the testing specifications.
The reductions to the purchase price will be in increments of $11,000 for each
one tenth of one percent between five percent and the eleven percent deficiency
threshold. The Company is acknowledged to be the owner of all intellectual
property and any changes or upgrades to the intellectual property relating to
the Thermal CombustorsTM and grants a non transferable, royalty free perpetual
license to the Company’s intellectual property to operate and maintain the power
plant. The Company will be allowed access to the power plant to observe the
Thermal CombustorsTM and for marketing and research purposes.  Effective February 22, 2005, the parties entered
into an amendment to the January 12, 2005 agreement.  Under the amendment,
the date upon which the first and second Thermal CombustorsTM must be completed
and tested was extended from January 31, 2005 and February 28, 2005,
respectively, to June 30, 2005, subject to an extension of time if conditions
necessary to the Company’s performance are not fulfilled by the other parties to
the contract. Upon the signing of the February 22, 2005 amendment, the Company
was paid $50,000.  The Company was to have been paid an additional $250,000
on March 15, 2005.  This amount remains unpaid.  Both these payments
are advances on the contract price.  The provisions in the contract relating to
reductions in the contract price due to insufficient energy output were revised
in the February 22, 2005 contract.  In addition to the $649,000 reduction
in the contract purchase price set forth in the January 12, 2005 contract
amendment the contract price may be further reduced by up to an additional
$1,233,350 if the steam output is more than 15% lower than the guaranteed
output. The reductions to the purchase price will be in increments of $14,510
for each one percent deficiency below the 15% deficiency threshold. The Company
will be paid $40,000 per month to provide technical assistance for the final
start up and testing of the Thermal CombustorsTM. The remaining terms of the
January 12, 2005 agreement continue in effect.  On April 12, 2005 the Company terminated its
October 1, 2004 Consulting Agreement with CJM Group, Inc. and its relationship
with Strong Wilken, Inc.  See also Note 10.  On April 14, 2005, Mr. Strain and the Company
agreed to restructure loans due Mr. Strain in the total amount of $4,000,000
which were made during September and October 2003 in the amounts of $1,000,000
each and March 2004 in the amount of $2,000,000. These loans, without
restructuring the payment terms, are payable in four quarterly principal and
interest payments of $1,080,000 each on October 1, 2005 and January 1, April
1st and July 1st 2006.  The specific terms and
conditions of the restructuring have not been agreed at this time, however, Mr.
Strain has consented to extend the date of the first and subsequent principal
and interest payments beyond January 1, 2006. The Company expects the
restructured payment terms will represent obligations that the Company will be
able to satisfy from future operating and financing cash flows.  See also
Note 10.  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 Oklahoma Holdings 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
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 effectuate 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 pro forma income statement for the year
ended December 31, 2003  including the operations of the 2003 acquisitions,
as if the acquisitions were owned for the entire period shown.  For the year ended
      December 31,
      2003Revenue
    $ 
        9,837,741Net
      income (loss)
    $
      (48,295,269)Loss
      per share
    $  
            (1.05)
   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
    $
      590,000Receivables
    545,000Inventory
    261,000Property
      and Equipment
    8,746,571Intangible
      assets
    246,644Other
      assets
    65,000Payables
    (507,000)Total
    $
      9,947,215
   5.
Property, Plant and Equipment  Following
is a summary of property, plant and equipment at December 31, 2004 and 2003:  December 31,
      2004
    December 31,
      2003Machinery
      and equipment
    $     
           8,283,493
    $ 
       8,915,532Pipeline
    2,784,743
    2,755,488Buildings
    15,607
    100,000Vehicles
    78,081
    251,115Land
    51,085
    290,000Furniture,
      fixtures and equipment
    150,951
    131,540Improvements
    68,434
    200,07011,432,394
    12,643,745Less
      accumulated depreciation
    (1,127,566)
    (980,776)Net
      book value
    $     10,304,828
    $
      11,662,969
  Depreciation
expense recorded in the financial statements was $824,459 and $688,267 for the
year ended December 31, 2004 and 2003, respectively.  6.
Notes Payable  (a)
At December 31, 2004 and 2003, we are obligated under promissory notes payable
to certain individuals with a total face amount of $42,333 and $72,000,
respectively. 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 we were obligated under various unsecured demand
obligations with an aggregate outstanding principal balance of $183,250 plus
accrued but unpaid interest.  During the year ended December 31, 2004,
these demand notes were settled in exchange for 529,333 shares of common
stock.  (c)
At December 31, 2004, we are obligated to Mr. Richard Strain for $8,892,151 in
loans with an average interest rate of 5.94%. On March 17, 2004, we borrowed
$2,000,000 with an interest rate of 3.49% per year and entered into Promissory
Note II, which provides repayments of $540,000 on each of the following dates:
October 1, 2005, January 1, 2006, April 1, 2006 and July 1, 2006. The
outstanding principal and interest under the Note may be converted at any time,
at Mr. Richard Strain’s election, into common stock. The conversion price of any
or all of the indebtedness is equal 103% of the average closing price of our
common stock for the five trading days prior to the date of the election.  This
remainder of the 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.  (d)
Notes payable, current portion (excluding note payable - stockholder) consists
of the following components:  December 31
      2004
    December 31
      2003Current
      portion:Installment
      debt
    $         
      493,802
    $          
      316,394Promissory
      notes (a)
    42,333
    72,000Unsecured
      demand note (b)
    --
    18,250Total
      notes payable, current portion
    $          
      536,135
    $         
      406,644
   The Company has the following installment debt outstanding at
December 31st:  2004
    20036.50%
      unsecured promissory note, monthly payments of $14,512 principal and
      interest through October 2006
    $        
                
298,442
    $   -0-6.50%
      unsecured promissory note, monthly payments of $20,542 principal and
      interest through December 2006
    461,135
    -0-4.50%
      installment note, secured by equipment, monthly payments of $2,531
      principal and interest through September 2007
    71,816
    96,14622.56%
      installment obligation, secured by equipment, monthly payments of $1,397
      principal and interest through January 2006
    18,675
    29,3673.85%
      promissory note, secured by land, monthly payments of $1,742, principal
      and interest through April 2009 with a final payment of $174,605 due April
      2009
    227,317
    -0-14.00%
      installment note, secured by land and equipment, monthly interest only
      payments of $2,567 principal and interest due January 1, 2004
    -0-
    220,00010.25%
      installment note, secured by vehicle, monthly payments of $730 principal
      and interest through August 2004
    -0-
    6,8881.90%
      installment note, secured by equipment, monthly payments of $707 principal
      and interest through November, 2005
    7,744
    16,6828.45%
      installment note, secured by equipment, monthly payments of $454 principal
      and interest through November, 2006
    14,083
    18,09710.58%
      installment note, secured by equipment, monthly payments of $3,231
      principal and interest through February, 2005
    90,715
    118,2719.00%
      installment note, secured by vehicle, monthly payments of $641 of
      principal and interest through October, 2008
    24,378
    -0-9.50%
      installment note, secured by equipment, monthly payments of $1,148
      principal and interest through March, 2004
    -0-
    4,4808.45%
      installment note, secured by vehicle, monthly payments of $663 principal
      and interest through November, 2007
    -0-
    26,4558.00%
      installment note, secured by vehicle, monthly payments of $308 principal
      and interest through May, 2007
    8,072
    10,997Total
      Debt:
    $  1,222,377
    $             
      547,383Current
      Portion:
    (493,802)
    (316,394)Long-term
      Portion:
    $   728,575
    $             
      230,989
      Maturities
of debt, including notes payable to shareholders, are as follows:   December 31,
    Amount2005
    $
      1,616,1352006
    3,389,4892007
    1,695,3442008
    1,649,6882009
    1,806,201Thereafter
    -0-$10,156,857
  7.
Income Taxes  The
components of the provision for income taxes are as follows:  For the years ended December 31:2004
    2003Current
      tax expense (benefit)
    $
      23,584
    $         
                     
      --Deferred
      tax (Income)U.S.
      federal
    --
    --State
      and local
    --
    --Total
      deferred
    --
    --Total
      tax provision (benefit)from
      continuing operations
    $
      23,584
    $         
      --
   The
actual and expected tax rates are similar for both years.  The
Company's deferred tax assets and liabilities as of December 31, 2004 and 2003
are as follows:  2004
    2003Deferred
      income tax assets:Due
      to net operating loss carry forwards
    $
      6,521,000
    $
       4,323,000Due
      to deductible temporary differences
    (1,546,000)
    (99,300)Less valuation allowance
    (4,975,000)
    (4,223,900)Total
      deferred income tax asset
    $
      --
    $
      --
  As
of December 31, 2004, the Company has approximately $19,102,000 in net operating
loss carry forwards available to offset future taxable income expiring between
2018 and 2024. Approximately $9,800,000 of these losses are limited under the
change in control provisions of Internal Revenue Code Section 382. Losses so
limited are available to offset future taxable income at a rate of approximately
$250,000 per year until their expiration. Also, Nathaniel Energy's majority
owned subsidiary, Nathaniel Energy Oklahoma Holdings 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. For these
and other reasons, the Company considers it less likely than not that all net
operating losses and deductible temporary difference will be realized in future
tax years, and has established a valuation allowance equal to the entire
deferred tax asset generated by the losses and deductible temporary
differences.  During
2003, the company incurred expenses aggregating approximately $45,039,000 which
will not be deductible for federal 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, 2004, 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 December 31, 2004, 70,698,263 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 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 55.5% 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 28 2005, Nathaniel Energy had approximately 1023 stockholders of
record.  At
December 31, 2003, the Company had outstanding warrants to purchase 205,882
shares at $0.17 per share which expired unexercised on March 24, 2004.  At
December 31, 2003 there were 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 varies with the market price of the stock. The
options expired unexercised on 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. 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 2004 and 2003 was $-0- and $2,973,745,
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  On
October 1, 2004, the Company entered into a consulting agreement with CJM Group,
Inc., a company affiliated with Corey Morrison, to provide senior management and
consulting services, contract negotiation and deal structure services, and
business and planning services. The agreement has a term of 24 months, unless
terminated by either party, and provides that the consultant receive a
consulting fee of $12,500 monthly for services provided.  See Note 2 for
discussion about the termination of this contract.  The
Company acquired three patents two pending U.S. patent application , and two
pending Europena patent applications relating to the Company's ownership of
technology by assignment from Stan 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 Stan 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. On June
25,  2004,  as a result of Stan  Abrams' and Brett 
Abrams'  voluntary retirement and resignation from the Company,  all
rights they had in, or to the return of, any of these patents,  under the
Amended and  Restated Patent Reassignment  Agreement made as of
September 30, 2003 but effective as of July 7, 1998  between  Stan
Abrams,  Brett  Abrams,  and  Nathaniel  Energy, 
or otherwise, expired and were waived.  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, 2004 and
2003 net payments to RTG were $0 and $33,642, respectively. The balance
receivable from RTG at December 31, 2004 and December 31, 2003 was $0 and
$260,475, respectively. During 2004, the Company wrote off $264,587 due from RTG
and $11,438 due from Stan Abrams, as collection was determined to be
uncertain.  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 which is also affiliated with Corey Morrison.  Mr. Strain also
loaned the Company $1,000,000 in September 2003 and $1,000,000 in October 2003.
On March 17, 2004, Mr. Strain loaned the Company an additional $2,000,000. At
December 31, 2004 the Company is obligated to Mr. Strain for $8,892,151 million
in loans with a weighted average interest rate of 5.94%. See also Note 2 and
Note 6.  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, Inc., an entity affiliated with Corey Morrison.  As of
and for the year ended December 31, 2004, an additional $250,000 in marketing
and communication related expenses was accrued to Strong Wilken, Inc., which was
paid during January 2005.  See Note 2 for a discussion of the termination
of the Company’s relationship with Strong Wilken, Inc.  11.
Intellectual Property  Nathaniel
Energy owns three U.S. patents, two pending U.S. patent applications and two
patent European applications covering the Thermal CombustorTM 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 Stan Abrams, Nathaniel Energy's former Chief
Executive of 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 Stan 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. On June 25,  2004, as a
result of Stan  Abrams' and Brett  Abrams'  voluntary retirement
and resignation from the Company,  all rights they had in, or to the return
of, any of the patents,  under the Amended and  Restated Patent
Reassignment  Agreement made as of September 30, 2003 but effective as of
July 7, 1998  between  Stan Abrams,  Brett  Abrams, 
and  Nathaniel  Energy,  or otherwise, expired and were
waived.  12.
Economic Dependency - Major Customers  Air
Products Helium Inc. purchases all of the helium produced from our Keyes helium
plant 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
2004, two customers, representing approximately 37% and 24%, respectively,
accounted for 61% of the Company’s revenue.  During 2003, two customers,
representing approximately 37% and 19%, respectively, accounted for 56% of the
Company’s revenue.  13.
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 2021 at which time either party may terminate the agreement.  If it
is not terminated at that time, it may be terminated subsequently at any time
upon two years’ advance notice by either party.  This contract can be
terminated in 2008 and 2015 if either party requests pricing that is not agreed
to by the other party.  Crude helium purchases from Regency Gas Services,
LLC under this agreement were approximately, $2,100,000 and $1,400,000 during
2004 and 2003, respectively.  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 2004 and
2003, Nathaniel Energy recorded costs totaling $128,800 and $70,000,
respectively, 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. In 2004, the Company expensed $57,188 for
upgrades to the field gas compression unit related to this agreement.  During
2004, repairs and improvements to the Helium processing facility were provided
by a customer, Air Products and Chemicals, Inc. and are repayable out of the
sale of Helium. The outstanding balance under this arrangement at December 31,
2004 is $236,626.  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.  14.
Segment Data Year ended December 31, 2004  Helium and Gas
      Processing
    Fuel
      Processing
    Alternate
      Energy
    TotalRevenue
    $  
       13,475,220
    $     561,573
    --
    $ 14,036,793Significant
      non cash expenses
      -write down of inventory
      -impairment of assets
      -depreciation and amortization
      -loss
      on related party receivable
    --
      --
      $     
           618,285
      11,438
    $    
       274,000
      1,403,046
      304,177
      264,587
    --
      --
      --
      --
    $
              274,000
      1,403,046
      922,462
      276,025Net
      income (loss)
    $ 
                 19,136
    $ (2,057,252)
    $(3,618,228)
    $   (5,656,344)Capital
      expenditures
    $
                870,159
    $       64,260
    --
    $        934,419Total
      assets as of Dec 31, 2004
    $    
       12,341,403
    $      
      926,315
    $
      1,020,560
    $
          14,288,278
   Year ended December 31, 2003  Helium and Gas  Processing
    Fuel
      Processing
    TotalRevenue
    $
        7,851,531
    $
           573,210
    $
             8,424,741Significant
      non cash expenses compensation and professional services
      -depreciation and amortization
      -interest expense forgiven
    --
      $
           438,177
      --
    $
        2,973,745
      307,261
      488,294
    $ 
            2,973,745
      745,438
      488,294Net
      loss
    $
            (24,743)
    $
      (48,489,526)
    $    
      (48,514,269)Capital
      expenditures
    $ 
          124,943
    $
            463,398
    $   
             588,341Acquisition
      of assets
    $ 
       9,703,920
    --
    $
             9,703,920Total
      assets as of Dec 31, 2004
    $
      11,763,679
    $ 
        3,840,714
    $
           15,604,393
   For
the year ended December 31, 2003 the alternate energy segment did not generate
any revenue and incurred minimal expenses.  15.
Intangible Assets  For
the year ended December 31, 2004, we capitalized $299,339 of engineering design
and configuration documentation related to our Thermal CombustorTM technology. In
addition, we capitalized $13,410 of related patent application costs.
Engineering design and configuration documentation will be amortized over three
years on a straight line basis beginning on the date that our Thermal
CombustorsTM are accepted by our customer in Italy. Patent application costs are
amortized over ten years on a straight line basis.  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, 2004 and December 31, 2003 was
$98,003 and $57,171, respectively.  16.
Lease Commitments  Nathaniel
Energy leases certain office facilities under non cancelable operating leases
that expire at various dates through 2008. At December 31, 2004, 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:  2005
    $     
      60,2682006
    62,0762007
    63,9382008
    16,1022009
    --Total
      minimum lease payments
    $   
      202,384
   Rent
expense for operating leases, including month to month rentals, was $112,416 and
$63,774 for the years ended December 31, 2004 and 2003, respectively.
  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
      George A. Cretecos, Principal Executive
      Officer, Chief Operating Officer Principal
      Financial and Accounting Officer and Director
   Date: 
April 15, 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
      George A. Cretecos, Principal Executive
      Officer, Chief Operating Officer Principal
      Financial and Accounting Officer and Director
      
      Date:  April 15, 2005
      
      
      By:
      /s/ Russell Gene Bailey
      Russell “Gene” Bailey, Vice President
      and Director
      
      Date:  April 15, 2005