First National Energy Corp. - FORM 10-K/A

Attached files

file	filename
EX-21 - SUBSIDIARIES OF THE REGISTRANT - First National Energy Corp.	fnec_ex21.htm
EX-31.1 - CERTIFICATION - First National Energy Corp.	fnec_ex311.htm
EX-31.2 - CERTIFICATION - First National Energy Corp.	fnec_ex312.htm
EX-32.1 - CERTIFICATION - First National Energy Corp.	fnec_ex321.htm
EX-23.1 - CONSENT - IND. REG. PUB. ACCOUNTANT - First National Energy Corp.	fnec_ex231.htm
EX-32.2 - CERTIFICATION - First National Energy Corp.	fnec_ex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 2)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2009

Commission File Number: 333-62588

FIRST NATIONAL ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		66-0349372
(State of other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2000 Webber Street, Sarasota, Florida		34239
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (416) 918-6987

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of class)

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).þ Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

As of April 14, 2011, the aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant was $74,898,921 based on the latest transaction price as reported on the OTC Bulletin Board on such date. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purposes.

The number of shares of the registrant's common stock outstanding on April 14, 2011, was 99,865,228.

DOCUMENTS INCORPORATED BY REFERENCE

[NONE]

EXPLANATORY NOTE

First National Energy Corporation (the “Company”) is filing this Amendment No. 2 on Form 10-K/A to our annual report on Form 10-K for the year ended December 31, 2009, originally filed on April 19, 2010 (the “Original Form 10-K”), and subsequently amended by Amendment No. 1 on Form 10-K/A (the "First Amendment"), filed on January 4, 2011, in order to restate our financial statements and corresponding financial information for the year ended December 31, 2009, in response to concerns expressed by our independent accounting firm and various comments from the Division of Corporate Finance of the Securities and Exchange Commission ("SEC").

The Company also intends to amend its Quarterly Reports on Form 10-Q for the periods subsequent to January 1, 2010. Please refer to those amended reports for further discussion of the revised information provided by the registrant for those respective periods.

This amendment incorporates various changes to Form 10-K which were not in the Original Form 10-K or the First Amendment filed by the Company, and restates certain financial information for the fiscal 2009 year which was not reflected in either the Original Form 10-K or the First Amendment filed by the Company. The Company is including currently dated Sarbanes-Oxley Act Section 302 and Section 906 certifications of the Chief Executive Officer and Chief Financial Officer that are attached to this Form 10-K/A as Exhibits 31.1, 31.2, 32.1 and 32.2.

Except as otherwise expressly set forth herein, all of the information in this Form 10-K/A is as of April 19, 2010, the date the Company filed the Original Form 10-K with the SEC. This Form 10-K/A continues to speak as of the date of the Original Form 10-K and does not reflect any subsequent information or events other than as expressly set forth otherwise in this Form 10-K/A. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Form 10-K, including any amendments to those filings. Among other things, forward-looking statements made in the Original Form 10-K have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Form 10-K, other than the First Amendment and this amendment.

For the convenience of the reader, this Form 10-K/A sets forth the Original Form 10-K in its entirety. No attempt has been made in this Form 10-K/A to modify or update the disclosures in the Original Form 10-K except as required to follow the proper format of the currently applicable Form 10-K and to address the concerns expressed in the comments from the Division of Corporate Finance of the SEC. However, changes have been made to the following items solely as a result of, and to reflect, the changes made by the registrant in response to concerns expressed by our independent accounting firm and comments from the Division of Corporate Finance of the SEC, and no other information in the Form 10-K/A is amended hereby as a result of such changes:

●	Part I, Item 1A - Risk Factors

●	Part II, Item 6 - Selected Financial Data

●	Part II, Item 5 - Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

●	Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

●	Part II, Item 8 - Financial Statements and Supplementary Data

●	Part II, Item 9A - Disclosure Controls and Procedures

●	Part III, Item 10 - Directors, Executive Officers and Corporate Governance

●	Part III, Item 11 - Executive Compensation

●	Part III, Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

●	Part III, Item 13 - Certain Relationships and Related Transactions, and Director Independence

●	Part IV, Item 15 - Exhibits and Financial Statement Schedules

●	Signatures

In the Original Form 10-K, the Company reported under Item 9A “Controls and Procedures,” that its Chief Executive Officer had evaluated and presented his conclusion on the effectiveness of the registrant's disclosure controls and procedures, but without disclosing such conclusions. The conclusions of the registrant's Chief Executive Officer discussed in the Original Form 10-K are included under Part II, Item 9A of this document.

TABLE OF CONTENTS

	PART I

Item 1.	Business	5
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	17
Item 3.	Legal Proceedings	17

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A.	Controls and Procedures	26
Item 9B.	Other Information	26

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	27
Item 11.	Executive Compensation	29
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30
Item 13.	Certain Relationships and Related Transactions, and Director Independence	31
Item 14.	Principal Accountant Fees and Services	31

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	32

Unless otherwise indicated, references in this Form 10-K/A to “First National”, “the Company”, the "registrant", “we”, “our” and “us” refer to First National Energy Corporation and its subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Annual Report that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Annual Report is filed with the SEC. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding: projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of management for future operations including statements relating to potential acquisitions, compensation plans, purchase commitments; developments, performance or industry or market rankings relating to products or services; future economic conditions or performance; the outcome of outstanding claims or legal; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” and similar expressions. These statements are based on assumptions and assessments made by our management in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the following:

●	risks associated with our international operations;

●	significant movements in foreign currency exchange rates;

●	changes in the general economy, including the current global economic downturn, as well as the cyclical nature of global alternative energy markets;

●	availability and cost of raw materials, parts and components that may be used in our products;

●	the competitive environment in our industry;

●	our ability to identify, finance, acquire and successfully integrate attractive installation targets;

●	our ability to manage and grow our business and the execution of our business and growth strategies;

●	loss of key management;

●	our ability and the ability of our strategic partners to access required capital at a reasonable cost;

●	our ability to expand our business in our targeted markets;

●	our financial performance;

●	our ability to identify, address and remediate any material weaknesses in our internal control over financial reporting; and

●	others risks and factors, listed in Item 1A. Risk Factors in Part I of this Form 10-K/A.

Any such forward-looking statements are not guarantees of future performance and actual results; future developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date the Original Form 10-K was filed with the SEC. We do not assume any obligation and do not intend to update any forward-looking statement except as required by law. See Item IA. Risk Factors in Part I of this Form 10-K/A for a further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.

PART I

ITEM 1. BUSINESS

Business Development

1. First National Energy Corporation (the “Registrant”) was incorporated as Capstone International Corporation on November 16, 2000, in the state of Delaware, and has a class of shares registered with the Securities and Exchange Commission on Form SB-2 as SEC File No. 333-62588, filed on June 8, 2001. The Registrant’s name was changed to “First National Power Corporation” on January 28, 2004, and was changed again to “First National Energy Corporation” on February 12, 2009, at which time the Registrant effected a reverse stock split, adopted a holding company structure, and relocated its corporate charter from Delaware to Nevada as part of the reorganization described in the next succeeding paragraph.

As described in the definitive information statement on Form DEF 14-C filed with the Securities and Exchange Commission on December 22, 2009, and pursuant to the approval of the Registrant’s board of directors and a majority of its stockholders, on February 12, 2009, the Registrant effected a reorganization pursuant to that certain Agreement and Plan of Merger to Form Holding Company, dated as of December 10, 2009 (a true and complete copy of which is included in the Form DEF 14-C information statement described above), which had the effect of (1) implementing a reverse stock split of its issued and outstanding common shares at the rate of 100 to 1, thereby reducing the number of issued and outstanding common shares from 76,522,760 to 765,228, with no effect on the number of authorized common shares; (2) merging the Registrant with and into First National Power Corporation, a Nevada corporation and a wholly-owned indirect (second tier) subsidiary of the Registrant, such that First National Energy Corporation, a Nevada corporation and a wholly-owned direct (first tier) subsidiary of the Registrant, succeeded the Registrant as a successor issuer of its registered securities, pursuant to Rule 12g-3 under the Securities Exchange Act of 1934, and continued the business of the Registrant for all purposes; (3) exchanging each issued and outstanding share of the Registrant (bearing CUSIP number 32113F 10 3) on the record date (and after giving effect to the reverse stock split described above) into one new common share of the successor issuer (bearing CUSIP number 321129 108); (4) shifting the Registrant’s charter from the State of Delaware to the State of Nevada; (5) increasing the authorized capital of the Registrant from 100 million common shares to 300 million common shares; (6) changing the Registrant’s name from “First National Power Corporation” to “First National Energy Corporation”; and (7) changing the Registrant’s stock symbol from FNPR to FNEC.

2. The Registrant has not at any time been the subject of any bankruptcy, receivership or similar proceeding.

3. On April 20, 2009, the Registrant acquired a territorial license to certain rights in alternative wind energy technology in exchange for 98,800,000 newly issued common shares of the Registrant, which resulted in a change in control of the Registrant, all as more particularly described in the definitive information statement on Form DEF 14-C filed with the Securities and Exchange Commission on May 4, 2009. The Registrant has valued the technology license received in such transaction at $1,855,605 after consulting with an outside valuation expert. As a result of such transaction, the Registrant was after such date no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934. On April 18, 2011, the Registrant entered into a Novation Agreement (the "Novation") with all of the stockholders of Boreas Research Corporation (“Boreas”), a Florida corporation, revising the structure of the April 20, 2009 transaction by which the Company acquired a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The Novation amended the Technology License and Stock Purchase Agreement (the “Original Agreement”) to substitute the stockholders of Boreas as the licensor under the Original Agreement.

4. Business of Issuer

(i) Principal products or services and their markets.

Since acquiring the technology license described above, management of the Registrant has expended significant time seeking sources of capital to implement its business plan, which is primarily designed to exploit the licensed technology throughout the United States and Canada for commercial gain by building, installing and operating its proprietary supplemental wind generation devices. The Registrant is also evaluating other alternatives in order to improve the Registrant's financial condition, including merger and acquisition opportunities. There is no assurance that the Registrant will be successful in raising capital or closing any such merger or acquisition transactions.

(ii) Distribution methods of the products or services.

The Registrant intends to market and distribute its licensed proprietary supplemental wind generation devices by achieving strategic alliances with wind industry participants operating construction and maintenance enterprises in the licensed territories.

(iii) Status of any publicly announced new product or service.

The publicly announced licensed proprietary supplemental wind generation devices of the Registrant are the subject of intense research and development efforts by the Registrant, with the object of achieving optimum performance, facilitating large scale manufacturing at multiple locations, and protecting the Registrant's unique product designs.

(iv) Competitive business conditions and the smaller reporting company's competitive position in the industry and methods of competition.

For a discussion of competitive business conditions and the Registrant's competitive position in the industry and methods of competition, please see "Risk Factors - RISKS RELATED TO WIND ENERGY INDUSTRY" below.

(v) Sources and availability of raw materials and the names of principal suppliers.

The Registrant has identified ready sources and availability of raw materials and multiple suppliers of the materials and components to be incorporated in its licensed proprietary supplemental wind generation devices, and does not foresee any dependence on any sole source or supplier for such materials and components.

(vi) Dependence on one or a few major customers.

The Registrant does not foresee any likely dependence on one or a few major customers.

(vii) Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration.

For a description of the license agreement held by the Registrant, the reader is referred to the definitive information statement on Form DEF 14-C filed by the Registrant with the Securities and Exchange Commission on May 4, 2009.

(viii) Need for any government approval of principal products or services.

No government approval is required for the Registrant's principal products, but certain certifications may be necessary to obtain liability insurance for the products in order to satisfy the contractual requirements of potential customers.

(ix) Effect of existing or probable governmental regulations on the business.

For a discussion of the effect of existing or probable governmental regulations on the business of the Registrant, please see "Risk Factors-RISKS RELATED TO WIND ENERGY INDUSTRY" below.

(x) Estimate of the amount spent during each of the last two fiscal years on research and development activities.

Research and development activities for the fiscal year ending December 31, 2008 incurred expenses of $45,236; such activities for the fiscal year ending December 31, 2009 are included in general and administrative expenses of $81,136, as such activities were carried out by the Registrant's management.

(xi) Costs and effects of compliance with environmental laws (federal, state and local).

Such costs are unknown, but are not considered by the Registrant to be material.

(xii) Number of total employees and number of full-time employees.

The Registrant has no paid employees nor any full-time employees, as the directors and offices of the Registrant are currently performinig their services without compensation.

5. Reports to Security Holders

The Registrant is a reporting entity and files annual, quarterly and special event reports with the Securities and Exchange Commission, as well as proxy and information statements.

The Registrant will voluntarily make available to security holders upon request a copy of this amended annual report on Form 10-K/A, including audited financials.

The public may read and copy any materials filed by the registrant with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1–800–SEC–0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission at its web site (http://www.sec.gov).

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K/A and other documents we file with the SEC. If any of the following risks actually occur, our business, financial condition or operating results could suffer. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us and we caution that this list of risk factors may not be exhaustive. Our business is also subject to general risks and uncertainties that affect many other companies, such as overall U.S. and non-U.S. economic and industry conditions, a global economic slowdown, geopolitical events, changes in laws or accounting rules, fluctuations in interest rates, terrorism, international conflicts, natural disasters or other disruptions of expected economic or business conditions. We operate in a continually changing business environment, and new risk factors emerge from time to time which we cannot predict. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.

FIRST NATIONAL ENERGY COMPANY IS A DEVELOPMENT STAGE COMPANY WITH A LIMITED OPERATING HISTORY THAT MAKES IT IMPOSSIBLE TO RELIABLY PREDICT FUTURE GROWTH AND OPERATING RESULTS.

The Company has not demonstrated that it can:

·	manufacture products in a manner that will enable it to be profitable;

·	establish many of the business functions necessary to operate, including sales, marketing, manufacturing, administrative and financial functions;

·	establish appropriate financial controls;

·	respond effectively to competitive pressures; or

·	raise the capital necessary to implement its business plan.

FIRST NATIONAL ENERGY COMPANY HAS INCURRED OPERATING LOSSES SINCE INCEPTION.

Since its inception in 2000, the Company has incurred losses every quarter. The extent of the Company’s future operating losses and the timing of profitability are highly uncertain, and it may never achieve or sustain profitability. The Company has incurred a net loss for the year ended December 31, 2009 of ($81,131). At December 31, 2009 , the Company had an accumulated deficit of ($866,012). The Company anticipates that it will continue to incur operating loses for the foreseeable future and it is possible that the Company will never generate substantial revenues from its products.

THE COMPANY’S FUTURE CAPITAL NEEDS ARE UNCERTAIN. THE COMPANY WILL NEED TO RAISE ADDITIONAL FUNDS NOW AND IN THE FUTURE AND THESE FUNDS MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS OR AT ALL.

The Company believes that its current cash will not be sufficient to meet projected operating requirements for at least the next 3 months and it is therefore necessary that the Company will need to seek additional funds from public and/or private stock offerings, borrowings under credit lines or other sources. The Company’s capital requirements will depend on many factors, including:

·	the revenues generated by products that it manufactures;

·	the costs required to develop its manufacturing processes;

·	the expenses it incurs in manufacturing and placing its products;

·	the costs associated with any expansion of its business;

·	the costs associated with capital expenditures; and

·	the number and timing of any acquisitions or other strategic transactions.

As a result of these factors, the Company will need to raise additional funds, and these funds may not be available on favorable terms, or at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, its existing shareholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of its existing shareholders. If the Company cannot raise funds on acceptable terms, it may not be able to develop or enhance its products, execute its business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated counterparty requirements.

THE COMPANY’S SUCCESS WILL DEPEND ON ITS ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL AND TECHNICAL STAFF.

The Company believes future success will depend on its ability to manage its growth successfully, including attracting and retaining skilled personnel for its manufacturing and site maintenance operations. Hiring qualified management and technical personnel may be difficult. If the Company fails to attract and retain personnel, particularly management and technical personnel, it may not be able to succeed in its planned operations.

Our executive officers, board of directors and key employees are crucial to our business, and we may not be able to recruit, integrate and retain the personnel we need to succeed.

Our success will depend upon a number of key management, sales, technical and other critical personnel, including our executive officers, our board of directors and key employees with expertise in the industry. The loss of the services of any key personnel, or our inability to attract, integrate and retain highly skilled technical, management, sales and marketing personnel could result in significant disruption to our operations, including our inability or limited success in locating new sites, effectiveness of sales efforts, quality of customer service, and completion of our initiatives, including growth plans and the results of our operations. Any failure by us to find suitable replacements for our key senior management may be disruptive to our operations. Competition for such personnel in the technology industries is intense, and we may be unable to attract, integrate and retain such personnel successfully.

We may have to depend on outside advisors for some of our primary business operations.

To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers and attorneys or engage other consultants or advisors. The selection of any such advisors will be made by our directors and officers without any input from shareholders. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us. In the event management considers it necessary to hire outside advisors, they may elect to hire persons who are affiliates, if they are able to provide the required services.

IF THE COMPANY DOES NOT EFFECTIVELY MANAGE ITS GROWTH, ITS BUSINESS RESOURCES MAY BECOME STRAINED AND ITS RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED.

The Company expects to rapidly increase its employee base proportionate to expansion of its manufacturing capabilities. This may provide challenges to the Company’s organization and may strain its management and operations. The Company may misjudge the amount of time or resources that will be required to effectively manage any anticipated or unanticipated growth in its business or it may not be able to attract, hire and retain sufficient personnel to meet its needs. If the Company cannot scale its business appropriately, maintain control over expenses or otherwise adapt to anticipated and unanticipated growth, its business resources may become strained, it may not be able to deliver contracted products in a timely manner and its results of operations may be adversely affected

THE COMPANY MAY BE SUBJECT TO POTENTIAL PRODUCT LIABILITY AND OTHER CLAIMS AND IT MAY NOT HAVE THE INSURANCE OR OTHER RESOURCES TO COVER THE COSTS OF ANY SUCCESSFUL CLAIM.

Defects in the Company's products could subject it to potential product liability claims for damage to property or personal injuries. The Company’s product liability insurance, if available at reasonable cost, may not be adequate to cover future claims. Product liability insurance is expensive and, in the future, may not be available on terms that are acceptable to the Company, if it is available to it at all. Plaintiffs may also advance other legal theories supporting their claims that the Company's products or actions resulted in some harm. A successful claim brought against the Company in excess of its insurance coverage could significantly harm its business and financial condition.

RISKS RELATED TO CAPITAL STRUCTURE

THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET.

Although the Company's common stock trades on the OTC Bulletin Board, a regular trading market for the securities may not be sustained in the future. The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than other exchanges. Quotes for stocks included on the OTC Bulletin Board are not listed in the financial sections of newspapers as are those for other major exchanges. Therefore, prices for securities traded solely on the OTC Bulletin Board may be difficult to obtain and holders of common stock may be unable to resell their securities at or near their original offering price or at any price. Market prices for the Company's common stock will be influenced by a number of factors, including:

·	the issuance of new equity securities pursuant to its recent issuance of shares for a technology license, or a future offering;

·	changes in interest rates;

·	competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

·	variations in quarterly operating results;

·	changes in financial estimates by securities analysts;

·	the depth and liquidity of the market for the Company's common stock;

·	investor perceptions of the Company and the alternative energy industry generally; and

·	general economic and other national conditions.

THE COMPANY'S COMMON STOCK IS CONSIDERED A "PENNY STOCK."

The Company's common stock is considered to be a "penny stock" since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a "recognized" national exchange; (iii) it is not quoted on the NASDAQ Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company with net tangible assets less than $2.0 million, if in business more than three years, or with average revenues of less than $6.0 million for the past three years. The principal result or effect of being designated a "penny stock" is that securities broker-dealers cannot recommend the stock but must trade in it on an unsolicited basis.

BROKER-DEALER REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY.

Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.

Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of the Company's common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

FOLLOWING THE COMPANY’S RECENT TECHNOLOGY LICENSE TRANSACTION, THE PRINCIPAL SHAREHOLDERS OF THE LICENSOR WILL HAVE SIGNIFICANT INFLUENCE OVER THE COMPANY.

The officers, directors and insiders of the Company beneficially own, in the aggregate, 86.4% of the Company's outstanding voting stock. As a result, the principal shareholders of Boreas Research Corporation, the Company’s technology licensor, will possess significant influence over the Company, giving them the ability, among other things, to elect a majority of the Company's Board of Directors and to approve significant corporate transactions. Such stock ownership and control may also have the effect of delaying or preventing a future change in control of the Company, impeding an acquisition, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

THE COMPANY DOES NOT FORESEE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The Company has not paid any dividends since its inception.

ANTICIPATED LIQUIDITY AND CAPITAL RESOURCES

The Company’s management anticipates that substantial additional capital will be required to implement its business plan. However, there can be no assurance that management will be successful in raising such necessary additional capital. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders will be reduced, shareholders may experience additional dilution and such securities may have rights, preferences and privileges senior to those of our common stock. There can be no assurance that additional financing will be available on terms favorable to us or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan, fund expansion, take advantage of unanticipated acquisition opportunities, develop or enhance services or products or respond to competitive pressures. Such inability could harm the Company’s business, results of operations and financial condition.

RISKS RELATED TO WIND ENERGY INDUSTRY

We have a limited operating history and we have not demonstrated that we can develop, market, install and manage our licensed supplemental energy generating systems on a large scale.

We have a limited history of managing supplemental energy generating systems and limited data upon which you can evaluate our business. Our prospects for success must be considered in the context of a new company in a developing industry. The risks we face include developing and acquiring successful relationships with large scale wind farms, reliance on third parties, operating in a competitive environment in which electricity rates will be set by the operation of market forces and regulatory constraints, uncertain performance of our supplemental energy generating systems, financing our business and meeting the challenges of the other risk factors described herein. If we are unable to address all of these risks, our business, results of operations and financial condition may suffer.

The revenues generated by wind farms depend on market prices of energy in competitive wholesale energy markets. Market prices for both energy and capacity are volatile and depend on numerous factors outside our control including economic conditions, population growth, electrical load growth, government and regulatory policy, weather, the availability of alternate generation and transmission facilities, balance of supply and demand, seasonality, transmission and transportation constraints and the price of natural gas and alternative fuels or energy sources. The wholesale power markets are also subject to market regulation by the Federal Energy Regulatory Commission, independent system operators, and regional transmission operators which can impact market prices for energy and capacity sold in such markets, including by imposing price caps, mechanisms to address price volatility or illiquidity in the markets or system instability and market power mitigation measures. We cannot assure you that market prices will be at levels that enable us to operate profitably or as anticipated. A decline in electricity or capacity market prices below anticipated levels could have a material adverse impact on our revenues or results of operations. In markets where wind farms qualify to receive capacity payments, it is typical that only a portion of the wind farm’s capacity is eligible to receive capacity payments. This portion is typically based on the previous year’s average net capacity factor during peak periods. In addition, changes to regulatory policy or market rules regarding the qualification of wind generation as a capacity resource could limit or eliminate a wind farm’s ability to receive payments for its generating capacity.

The governments of the United States and Canada may not extend or may decrease existing tax incentives for renewable energy, including wind energy, which would have an adverse impact on our development strategy.

Tax incentives applicable to the wind energy industry currently in effect include the production tax credit (“PTC”) and accelerated tax depreciation for certain assets of wind farms. The current version of the PTC provides the owner of a wind turbine with a credit against its federal income tax obligations based on the amount of electricity generated by the wind turbine. The accelerated depreciation for certain assets of wind farms provides for a five-year depreciable life for these assets, rather than the 15 to 25 year depreciable lives of many non-renewable energy assets. We also cannot assure you that the tax laws providing for accelerated depreciation of wind farm assets will not be modified, amended or repealed in the future. If the current tax incentives are not extended or renewed, or are extended or renewed at a lower rate, financing options for wind farms may be reduced and development plans for additional wind farms could be adversely affected, thereby severely restricting the number of potential sites for the Company’s products.

Tax equity investors have limited funds, and wind energy producers compete with other renewable energy producers for tax equity financing. In the current rapidly expanding market, the cost of tax equity financing may increase and there may not be sufficient tax equity financing available to meet the total demand in any year. In addition, one or more current tax equity investors may decide to withdraw from this market thereby depleting the pool of funds available for tax equity financing. Alternative financing will be more expensive and there may not be sufficient liquidity in alternate financial markets. As a result, development of additional wind farms and the Company’s growth potential would both be adversely affected.

The performance of wind farms and, by extension, the Company’s products, is dependent upon meteorological and atmospheric conditions that fluctuate over time. The production of electricity generated by our supplemental wind energy systems will be the source of substantially all of our revenues. As a result, our results of operations will be highly dependent on meteorological and atmospheric conditions.

Operational factors may reduce energy production from the Company’s supplemental wind energy generation systems below projections, causing a reduction in revenue. The amount of electricity generated depends upon many factors in addition to the quality of the wind resources, including but not limited to turbine performance, aerodynamic losses resulting from wear on the wind turbine, degradation of other components, icing or soiling of the blades and the number of times an individual turbine or an entire wind farm may need to be shut down for maintenance or to avoid damage due to extreme weather conditions. In addition, conditions on the electrical transmission network can impact the amount of energy a wind farm can deliver to the network. We cannot assure you that any of our supplemental wind energy generation systems will meet energy production expectations in any given time period.

As with all power generation facilities, operation of our supplemental wind energy generation systems will involve operating risks, including:

·	our possible inability to achieve the output and efficiency levels for our supplemental wind energy generation systems that we have projected; and

shutdown due to a breakdown or failure of equipment or processes, violation of permit requirements (whether through operations or change in law), operator error or catastrophic events such as fires, explosions, floods or other similar occurrences affecting us, our supplemental wind energy generation systems or third parties upon which our business may depend.

The occurrence of one or more of these events could significantly reduce revenues expected to be produced by our supplemental wind energy generation systems or significantly increase the expenses of our supplemental wind energy generation systems, thereby adversely affecting our business, results of operations and financial condition.

Our financial projections assume that we will be able to operate our supplemental wind energy generation systems nearly continually and we may have trouble meeting our obligations if we are not successful.

We will need to achieve high levels of availability and dispatch for our supplemental wind energy generation systems to operate profitably. We operate under the assumption that we will achieve high levels of availability and dispatch in developing the revenue figures included in our financial projections. However, developments could affect the dispatch rate of our supplemental wind energy generation systems, including the following:

·	equipment problems or other problems which affect the ability of our supplemental wind energy generation systems to operate;

·	implementation of additional or more stringent environmental compliance measures; or

·	the market introduction of new and competing products which may be more efficient and cost effective than our supplemental wind energy generation systems.

Changes in energy laws or regulations or interpretations of these laws or regulations could result in increased compliance costs or result in additional expenditures for us. Failure by us to comply or failure to satisfy requirements could also subject us to the imposition of penalties and fines. Governmental laws, regulations and policies applicable to alternative energy sources are currently subject to modifications and are expected to continue to evolve. Resulting laws and policies may restrict the structuring of the sales of the power generated by wind farms. Federal law regulates wholesale sales of electricity and the transmission of electricity in interstate commerce by public utilities. We cannot predict whether federal or state governmental entities or regulatory authorities will adopt new laws or regulations or modify existing laws affecting the generation and/or transmission of electricity, or the ability of our counterparty wind farm operators to comply with them. Such new laws or regulations could have a material adverse impact on our business, results of operations or financial condition.

Various state governments may not extend or may decrease incentives for renewable energy, including wind energy, which would have an adverse impact on our development strategy.

Various types of incentives which support the sale of electricity generated from wind energy presently exist in regions where we plan to market, install and operate our products on existing wind farms. We cannot assure you that governmental support for alternative energy sources will continue at current levels or that the wind farms we partner with will qualify for such incentives. Any decrease in such state-level incentives could have an adverse impact on our development strategy.

We depend on our ability to locate and develop new sources of wind power in a timely and consistent manner, and failure to do so would adversely affect our operations and financial performance.

Our success in the industry requires additional and continuing development to become and remain competitive. We expect to continue to make substantial investments in development activities. Our future success will depend, in part, on our ability to continue to locate additional wind power sites. This development activity will require continued investment in order to maintain and grow our market position. We may experience unforeseen problems in our development endeavors. We may not achieve widespread market acceptance of our supplemental wind energy generation systems. These factors could materially affect our ability to forecast operations and negatively affect our stock price, results of operations, cash flow and financial condition.

The number of desirable sites available for successful wind farms is limited, and our inability to successfully negotiate for access with the owners and operators of such sites would limit our ability to implement our development strategy.

We are a small company, and we will be operating in a highly competitive market, and this competition may accelerate in the future. Potential competitors have, or may have, substantially greater financial, marketing or technical resources, and in some cases, greater name recognition and experience than we have. Such potential competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, and may also be able to devote greater resources to the development and promotion of supplemental wind energy generation systems than we can. Potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective counterparties. It is possible that new competitors or alliances among potential competitors may emerge and rapidly gain significant market share. This would in turn reduce our market share, reduce our overall revenues and require us to invest additional funds in new technology development. If we cannot compete successfully against competitors, this will have a negative impact on our business, financial condition, results of operations and cash flow.

We will depend on electric transmission facilities owned and operated by third parties to deliver the electricity that we sell. We will typically connect to transmission networks through the facilities owned and controlled by our counterparty wind farm owners and operators. The capacity of the local transmission network may be limited or constrained, and the owner of the network may not allow us to interconnect our supplemental wind energy system without first constructing any necessary system upgrades. Many wind farms are located in remote areas with limited transmission networks where intense competition exists for access to, and use of capacity on, the existing transmission facilities. We cannot assure you that we will obtain sufficient network connections for all future installations within planned timetables and budgetary constraints.

Our counterparty wind farm owners and operators are required to meet certain technical specifications in order to be connected to the transmission network. If any wind farm does not meet, or ceases to comply with, these specifications, we will not be able to connect, to or remain connected, to the transmission network. We may also incur liabilities and penalties, including disconnection from the network, if the transmission of electricity by one or more of such host wind farms does not comply with applicable technical requirements. In the interconnection agreements between wind farms and the applicable transmission owner or operator, the transmission owner or operator retains the right to interrupt or curtail transmission deliveries as required in order to maintain the reliability of the transmission network. We cannot assure you that the Company will not be adversely impacted by any such interruption or curtailment.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

The Company recently filed an amendment to its Annual Report on Form 10-K/A for the year ended December 31, 2009 to restate its consolidated financial statements in order to correct the valuation of the Company’s technology license acquired from Boreas Research Corporation (“Boreas”), a Florida corporation. The Company, after consulting with its independent registered public accounting firm, concluded that the Company should correct an error in the Company’s accounting and disclosure for the valuation of the technology license. This conclusion was reached following a thorough evaluation of the Company’s accounting treatment for the recording of the technology license in response to a comment letter from the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations in this Management’s Discussion and Analysis give effect to this restatement. Further information on the nature and impact of these adjustments is provided in Note 1 c), “Restatement of Financial Statements” under Notes to Consolidated Financial Statements included in Item 1, “Financial Statements” of this Annual Report on Form 10-K.

A restatement of the Registrant's fiscal 2009 financial statements results in the following changes:

	Original Presentation			Restatement Adjustment			Restated Amount
Balance Sheet:
License of SWEG technology – asset value		1,855,605			(1,855,505	)		100
License amortization		129,638			(129,638	)		-
License of SWEG technology – net of amortization		1,725,967			(1,725,867	)		100
Total Assets		1,762,697			(1,725,867	)		36,830
Additional Paid In Capital		2,185,801			(1,855,505	)		330,296
Total Stockholders’ Equity (Deficit)		1,489,816			(1,725,867	)		(236,051	)

Statement of Operations:

Amortization		129,638			(129,638	)		-
Net Loss and Comprehensive Loss		(210,769	)		129,638			(81,131	)
Net Loss per share, basic and diluted		(0.00	)		(0.00	)		(0.00	)

Changes in Stockholders’ Equity (Deficiency):
Purchase of SWEG license for shares		1,756,805			(1,855,505	)		(98,700	)
Net loss for the period		(210,769	)		129,638			(81,131	)
Total stockholders’ equity (deficit)		1,489,816			(1,725,867	)		(236,051	)

The restated quarterly and annual statements now reflect the following:

First National Energy Corporation

Comparative Balance Sheets before and after Restatement

	As at December 31, 2009			As at September 30, 2009			As at June 30, 2009			As at March 31, 2009
Balance Sheets prior to Restatement
	$			$			$			$
ASSETS
CURRENT ASSETS
Cash		36,730			40,546			49,396			65,314
		36,730			40,546			49,396			65,314

License for SWEG technology		1,725,967			1,778,288			1,824,678			-

		1,762,697			1,818,834			1,874,074			65,314

LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 5)		14,568			5,000			9,200			4,224
Payable to Boreas Research for SWEG license (Note 9)
Loans from stockholders (Note 7 ( c ) and Note 6)		258,313			258,313			258,313			258,313
		272,881			263,313			267,513			262,537

STOCKHOLDERS’ EQUITY

Capital Stock (Note 7)		99,665			99,665			99,665			765
Additional paid-in Capital		2,185,801			2,185,801			2,185,801			397,096
Deficit, accumulated during the development stage		(795,650	)		(729,945	)		(678,905	)		(595,084	)
Total FNEC Shareholders' Equity		1,489,816			1,555,521			1,606,561			(197,223	)
Non-controlling interest
		1,489,816			1,555,521			1,606,561			(197,223	)

		1,762,697			1,818,834			1,874,074			65,314

First National Energy Corporation

Comparative Balance Sheets before and after Restatement

	As at December 31, 2009			As at September 30, 2009			As at June 30, 2009			As at March 31, 2009
Balance Sheets after Restatement
	$			$			$			$
ASSETS
CURRENT ASSETS
Cash		36,730			40,546			49,396			65,314
		36,730			40,546			49,396			65,314

License for SWEG technology		100			100			100			-

		36,830			40,646			49,496			65,314

LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 5)		14,568			5,000			9,201			4,224
Payable to Boreas Research for SWEG license (Note 9)		-			-			-			-
Loans from stockholders (Note 7 ( c ) and Note 6)		258,313			258,313			258,313			258,313
		272,881			263,313			267,514			262,537

STOCKHOLDERS’ EQUITY

Capital Stock (Note 7)		99,665			99,665			99,665			765
Additional paid-in Capital		330,296			330,296			330,296			397,096
Deficit, accumulated during the development stage		(666,012	)		(652,628	)		(647,979	)		(595,084	)
Total FNEC Shareholders' Equity		(236,051	)		(222,667	)		(218,018	)		(197,223	)
Non-controlling interest
		(236,051	)		(222,667	)		(218,018	)		(197,223	)

		36,830			40,646			49,496			65,314

First National Energy Corporation

Comparative Statements of Income before and after Restatement

	Year Ended December 31, 2009			3-month period December 31, 2009			3-month period September 30, 2009			3-month period June 30, 2009			3-month period March 31 2009

Income Statements prior to Restatement
	$			$			$			$			$
Interest Income		(5	)		69			(10	)		(30	)		(34	)
Forgiveness of accounts payable and loans		-			-
General and Administrative expenses		81,136			13,315			4,659			52,925			10,237
Loss on Foreign Exchange		-			-			-
Amortization		129,638			52,321			46,390			30,927			-
Project development costs (Note 10)		-
Interest Expense		-												-
		(210,769	)		(65,705	)		(51,039	)		(83,822	)		(10,203	)
Net loss attributable to non-controlling interest		-			-			-			-
Net loss attributable to FNEC Shareholders		(210,769	)		(65,705	)		(51,039	)		(83,822	)		(10,203	)

Net loss per share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Weighted average common shares outstanding		60,645,228			60,645,228			99,665,228			40,969,624			765,228

Net Loss		(210,769	)		(65,705	)		(51,039	)		(83,822	)		(10,203	)
Other Comprehensive Loss		-						-			-
Comprehensive Loss		(210,769	)		(65,705	)		(51,039	)		(83,822	)		(10,203	)
Comprehensive Loss attributable to non-controlling interest		-						-			-
Comprehensive Loss attributable to FNEC Shareholders		(210,769	)		(65,705	)		(51,039	)		(83,822	)		(10,203	)

First National Energy Corporation

Comparative Statements of Income before and after Restatement

	Year Ended December 31, 2009			3-month period December 31, 2009			3-month period September 30, 2009			3-month period June 30, 2009			3-month period March 31, 2009

Income Statements after restatement
	$			$			$			$			$
Interest Income		(5	)		69			(10	)		(30	)		(34	)
Forgiveness of accounts payable and loans		-			-			-			-			-
General and Administrative expenses		81,136			13,315			4,659			52,925			10,237
Loss on Foreign Exchange		-			-			-			-			-
Amortization		-												-
Project development costs (Note 10)		-			-			-			-			-
Interest Expense		-			-			-			-			-
		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)
Net loss attributable to non-controlling interest		-			-			-			-
Net loss attributable to FNEC Shareholders		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)

Net loss per share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Weighted average common shares outstanding		60,645,228			60,645,228			99,665,228			40,969,624			765,228

Net Loss		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)
Other Comprehensive Loss		-						-			-
Comprehensive Loss		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)
Comprehensive Loss attributable to non-controlling interest		-						-			-
Comprehensive Loss attributable to FNEC Shareholders		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)

First National Energy Corporation

Comparative Cash Flows before and after restatement

Before Restatement	Year Ended December 31, 2009			3-month period December 31, 2009			3-month period September 30, 2009			3-month period June 30, 2009			3-month period March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(210,769	)		(65,705	)		(51,040	)		(83,821	)		(10,203	)
Adjustments for items not affecting cash
Amortization		129,638			52,321			46,390			30,927			-
Shares issued for services rendered		32,000			-			-			32,000			-
Forgiveness of accounts payable and loans		-			-			-			-			-
Increase (decrease) in accounts payable
and accrued liabilities		739			9,568			(4,200	)		4,976			(9,605	)

Net cash used in operating activities		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)

CASH FLOWS FROM FINANCING ACTIVITIES

Loans from Shareholders		-			-			-			-			-
Proceeds from sale of capital stock		-			-			-			-			-
Payment on the Note Payable to Boreas		-			-			-			-			-
Proceeds of sale of minority interest in subsidiary		-			-			-			-			-

Net cash provided by financing activities		-			-			-			-			-

NET INCREASE (DECREASE) IN CASH		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)

Cash, beginning of period		85,122			40,546			49,396			65,314			85,122

CASH, END OF PERIOD		36,730			36,730			40,546			49,396			65,314

First National Energy Corporation

Comparative Cash Flows before and after restatement

After Restatement		Year Ended December 31, 2009		3-month period December 31, 2009		3-month period September 30, 2009			3-month period June 30, 2009		3-month period March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES

	Net loss		-		-		-			-		-
	Adjustments for items not affecting cash
	Amortization		-		-		-			-		-
	Shares issued for services rendered		32,000		-		-			32,000		-
	Forgiveness of accounts payable and loans		-		-		-			-		-
	Increase (decrease) in accounts payable
	and accrued liabilities		739		9,568		(4,201	)		4,977		(9,605	)

	Net cash used in operating activities		32,739		9,568		(4,201	)		36,977		(9,605	)

CASH FLOWS FROM FINANCING ACTIVITIES

	Loans from Shareholders		-		-		-			-		-
	Proceeds from sale of capital stock		-		-		-			-		-
	Purchase of Indian License from Boreas into Pavana		-		-		-			-		-
	Proceeds of sale of minority interest in subsidiary		-		-		-			-		-

	Net cash provided by financing activities		-		-		-			-		-

NET INCREASE (DECREASE) IN CASH			32,739		9,568		(4,201	)		36,977		(9,605	)

	Cash, beginning of period		85,122		108,293		112,494			75,517		85,122

CASH, END OF PERIOD			117,861		117,861		108,293			112,494		75,517

First National Energy Corporation

Comparative Cash Flows before and after restatement

Before Restatement	Year Ended December 31, 2009			3-month period December 31, 2009			3-month period September 30, 2009			3-month period June 30, 2009			3-month period March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(210,769	)		(65,705	)		(51,040	)		(83,821	)		(10,203	)
Adjustments for items not affecting cash
Amortization		129,638			52,321			46,390			30,927			-
Shares issued for services rendered		32,000			-			-			32,000			-
Forgiveness of accounts payable and loans		-			-			-			-			-
Increase (decrease) in accounts payable
and accrued liabilities		739			9,568			(4,200	)		4,976			(9,605	)

Net cash used in operating activities		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)

CASH FLOWS FROM FINANCING ACTIVITIES
Loans from Shareholders		-			-			-			-			-
Proceeds from sale of capital stock		-			-			-			-			-
Payment on the Note Payable to Boreas		-			-			-			-			-
Proceeds of sale of minority interest in subsidiary		-			-			-			-			-
Net cash provided by financing activities		-			-			-			-			-

NET INCREASE (DECREASE) IN CASH		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)
Cash, beginning of period		85,122			40,546			49,396			65,314			85,122

CASH, END OF PERIOD		36,730			36,730			40,546			49,396			65,314

First National Energy Corporation

Comparative Cash Flows before and after restatement

After Restatement	Year Ended December 31, 2009			3-month period December 31, 2009			3-month period September 30, 2009			3-month period June 30, 2009			3-month period March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(81,131	)		(13,384	)		(4,649	)		(52,895	)		(10,203	)
Adjustments for items not affecting cash
Amortization		-			-			-			-			-
Shares issued for services rendered		32,000			-			-			32,000			-
Forgiveness of accounts payable and loans		-			-			-			-			-
Increase (decrease) in accounts payable
and accrued liabilities		739			9,568			(4,201	)		4,977			(9,605	)
Net cash used in operating activities		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)

CASH FLOWS FROM FINANCING ACTIVITIES
Loans from Shareholders		-			-			-			-			-
Proceeds from sale of capital stock		-			-			-			-			-
Purchase of Indian License from Boreas into Pavana		-			-			-			-			-
Proceeds of sale of minority interest in subsidiary		-			-			-			-			-

Net cash provided by financing activities		-			-			-			-			-

NET INCREASE (DECREASE) IN CASH		(48,392	)		(3,816	)		(8,850	)		(15,918	)		(19,808	)
Cash, beginning of period		85,122			40,546			49,396			65,314			85,122

CASH, END OF PERIOD		36,730			36,730			40,546			49,396			65,314

ITEM 2. PROPERTIES.

The Registrant maintains office space in Sarasota, Florida, at minimal cost. It currently does not own any equipment at that location.

ITEM 3. LEGAL PROCEEDINGS.

The Registrant is not a party to any pending or threatened legal proceedings.

ITEM 4. RESERVED.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information.

Our common stock is traded on the Over the Counter Bulletin Board (the “OTCBB”) under the symbol “FNEC”. The following table sets forth the high and low bid quotations for our common stock for each quarter during the past two fiscal years as reported by the OTCBB. The below quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

Year ended December 31, 2009 (1)	High		Low
1st quarter, ended March 31, 2009*	$	1.55	$	0.30
2nd quarter, ended June 30, 2009	$	1.02	$	0.31
3rd quarter, ended September 30, 2009	$	3.00	$	1.01
4th quarter, ended December 31, 2009	$	1.10	$	0.32
Year ended December 31, 2008 (1)
1st quarter, ended March 31, 2008*	$	4.50	$	1.50
2nd quarter, ended June 30, 2008*	$	9.90	$	0.40
3rd quarter, ended September 30, 2008*	$	5.00	$	0.50
4th quarter, ended December 31, 2008	$	2.00	$	0.31

(1) The Registrant's common stock only traded sporadically during this fiscal year.

(*) Adjusted for 100 to 1 reverse stock split effected on February 12, 2009.

Holders.

At December 31, 2009, there were approximately 65 holders of the Registrant's common stock.

Dividend Policy.

As of December 31, 2009, the Registrant has not paid any dividends to its shareholders and does not intend to pay dividends to its shareholders in the foreseeable future. However, there are no restrictions which would limit the ability of the Registrant to pay dividends in the future.

Securities authorized for issuance under equity compensation plans.

(1) The Registrant maintains a stock incentive plan, entitled “2005 Stock Incentive Plan for Employees and Consultants” and has registered 3 million of its common shares (1 million on February 25, 2005 and 2 million on April 11, 2005) for issuance under such stock incentive plan. To date, 830,000 shares have been issued under the stock incentive plan.

(2) The following information is provided in accordance with Item 201(d) (Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters) of Regulation S-K:

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensaton plans [excluding securities reflected in column (a)] (c)
Equity compensation plans approved by security holders	None	N/A	None
Equity compensation plans not approved by security holders	None	N/A	2,170,000 Common Shares
Total	None	N/A	2,170,000 Common Shares

(3) For a description of the material features of the Registrant's “2005 Stock Incentive Plan for Employees and Consultants”, a compensation plan under which equity securities of the Registrant are authorized for issuance that was adopted without the approval of security holders, the reader is referred to the registration statements filed with the SEC by the Registrant on Form S-8 on February 25, 2005 and April 11, 2005.

Please refer to “ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE,” and “ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”

(b) Report of Offering of Securities and Use of Proceeds Therefrom.

Not Applicable.

None.

Sales of Unregistered Securities

On April 20, 2009, the Registrant issued 98,800,000 newly issued common shares of the Registrant to acquire a territorial license to certain rights in alternative wind energy technology, all as more particularly described above.

ITEM 6. SELECTED FINANCIAL DATA

There are no financial data which, if selected, would highlight any significant trends in the registrant's financial condition and results of operations.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Plan of Operation in the Next Twelve Months

Product Development

Subject to our financial constraints, we intend to continue the development and refinement of our approach to the market. Our focus is on developing a single product line the Supplementary Wind Energy Generation Unit, and to bundle it with other services including installation and maintenance, to make the acquisition of the bundle more attractive than just an additional source of revenue.

We plan to hone the design of a unique supplemental new wind turbine system over the next nine to twelve months, by upgrading and finalizing our existing designs. The resulting cost of energy should, therefore, be significantly lower than traditional wind power systems. These design and performance features to be developed and utilized in production models of our supplemental wind energy systems should further enhance our leadership position in technology development in the small wind power industry.

We believe that there is currently no or limited competition in the markets we plan to pursue, and there is an increasing demand due to the rising levels of installed wind energy capacity worldwide.

We will strive to achieve rapid growth through strategic alliances with existing wind energy service providers, with a view to bundling our products with products and services already being provided to existing wind energy facilities by such potential strategic partners.

Locate Suitable Administrative and Assembly Facilities

We plan to move to a new facility within the next 90 to 120 days in order to accommodate our operations and plans for expansion. We are currently seeking office and assembly/test space where we can perform testing and final assembly of our supplemental wind energy systems. Our site selection criteria will include available tax credits and incentives.

We expect to rely on outside manufacturing partners for the manufacturing of all key system components. We plan to then perform final assembly, test, and packaging internally at our facilities. No one manufacturing partner will provide all components, thus allowing us to better ensure our protection of our intellectual property and trade secrets. We plan to create a highly efficient assembly facility with sufficient space to accommodate our expansion plans. We feel that our cost of manufacturing will decrease drastically as we utilize common processes and suppliers. We also intend to implement a quality assurance program and promote communication with design engineers to identify possible enhancements of our products as the manufacturing process evolves.

We further believe that with higher volume, better purchasing, and improved manufacturing outsourcing, we could significantly reduce our anticipated cost of goods. We view continuous improvement in quality and cost as a key priority for long term success.

Sales and Distribution Strategy

Our goal is for our supplemental wind energy systems to become leading products in the wind power marketplace in North America and internationally. In order to achieve our goal, we intend to increase awareness of our products with potential customers, who we anticipate will primarily be those who operate or are planning the development of significant wind energy resources. We expect that large industry participants will be a significant market.

Our goal is to retain ownership of our installed products, dividing the energy output with the host facility in return for a license to locate our turbine assemblies on their turbine poles and sell the power produced by our assemblies through the host’s interconnection and sale arrangements with transmission providers and power purchasers. However, we will also be seeking facilities that will do a sale-leaseback for the SWEG unit, allowing the lender to take advantage of any government incentives for investments in green energy products.

Our goal is to produce and ship 25 supplemental wind energy systems during the fiscal year ending December 31, 2010. At present we expect that it will take us approximately 8 weeks to build and ship a system after our design and specifications are finalized. Our goal is to reduce this time to 3 weeks from contract to installation

North America

North American revenues are expected to benefit from the increasing availability of incentive programs and higher energy costs. With a high-quality line of wind turbine assemblies and an aggressive program of industry affiliations and promotion, we plan to establish and then expand our North American network of revenue producing locations. This strategy offers the potential for rapid revenue growth with strategic partners which have well-established relationships with potential customers.

We intend to promote brand name recognition for our products in the industry. Initial advertising may occur through industry publications and attendance at targeted trade shows. We expect the message that our supplemental wind energy systems provide stable and reliable outputs, particularly if bundled with high quality maintenance and repair services, will receive a strong response.

Strategic partners are an important aspect in our sales and distribution strategy. Potential partners include companies that build and maintain large-scale wind energy farms throughout North America, who provide a vital link to potential end users of renewable energy equipment and are well placed to recommend our products, particularly if bundled with services already being provided by such partners to such end users.

We have identified several potential strategic partners that are interested in adding the marketing and possible bundling of our supplemental wind energy systems to their operations.

International - Beyond North America

We intend to develop our international marketing beyond North America in stages. The first stage will utilize an additional license of our proprietary technology for a specific foreign market with a vibrant and expanding wind energy market, to be followed by establishing a joint venture relationship with a strategic partner in the foreign market. The research, planning, and relationship-building to support the extension of our business to the first such foreign market will begin in the fiscal 2010 year. Over time, we expect to replicate this strategy sequentially in other foreign markets, and may possibly partner with manufacturers in such foreign markets to reduce costs.

Sales Personnel

At present our sales staff consists of our management. We expect to hire additional employees over the next twelve months, including a management level operations director.

Expenses

We estimate the costs to implement our business strategy over the following twelve months to be:

*	Product Research and Development, primarily related to refining wind turbine assembly system designs, and establishing a supply chain and production. We estimate product development related expenses for the next twelve months will be approximately $975,000.

*	Marketing, including efforts to present our products to potential end users, direct marketing and attendance at trade shows as discussed above. We estimate initial marketing expenses for the next twelve months will be approximately $300,000.

*	Research and Development costs consist of developing and testing our company website. We estimate that research and development costs for the next twelve months will be approximately $2,000.

*	Office, assembly and warehouse space, to accommodate our development and production plans as discussed above. We estimate that our facilities cost and utilities for the next twelve month will be approximately $100,000.

*	General working capital, materials, inventory, labor and consulting costs of approximately $1,750,000.

Significant Equipment

We plan to purchase approximately $75,000 in capital equipment in the first twelve months of operation, including various tenant improvements, a forklift to support our assembly operations, materials for assembly jigs, and various electronic and mechanical testing devices.

Results of Operations for the Years Ended December 31, 2009 and December 31, 2008

We only acquired the assets that comprise our current business on May 25, 2009. Therefore, the following financial information is of limited value in evaluating our history and prospects.

Income. We recorded $-0- in revenues for the year ended December 31, 2009, compared with $-0- in revenues for the year ended December 31, 2008.

Operating Expenses. Operating expenses were $81,136 as restated for the year ended December 31, 2009, compared to $78,645 for the year ended December 31, 2008. The largest component of expense for each of the last two fiscal years were general and administrative costs incurred to meet our reporting obligations as a public company, which were $81,136 and $35,027 for the years ending December 31, 2009 (restated) and December 31, 2008, respectively.

Amortization of Technology License

The Company is expensing as amortization each year a portion of the book value of the technology licenses acquired on May 25, 2009 ($-0- (as restated) and $-0- for the years ending December 31, 2009 and December 31, 2008 , respectively).

Development Costs.

As more particularly described in Note 9 of the accompanying financial statements, the Company is expensing development costs, rather than capitalizing them, until we have a reasonable expectation of revenues. This resulted in an expense for the years ending December 31, 2009 and December 3, 2008 of $-0- and $45,326, respectively.

Net Loss. We recorded a comprehensive loss of $81,131 for the year ended December 31, 2009 (restated), compared to $78,645 for the year ended December 31, 2008.

Liquidity and Capital Resources

At December 31, 2009, we had $36,730 in current assets and $272,881 in current liabilities, resulting in a working capital deficit of ($236,151). At December 31, 2008, we had $85,122 in current assets and $272,142 in current liabilities, resulting in a working capital deficit of ($187,020).

On May 25, 2009, we acquired technology license rights valued at $100 in exchange for 98,800,000 new restricted shares of our common stock, which were issued as more particularly described in Note 1 of the accompanying financial statements.

We do not anticipate paying dividends in the foreseeable future.

At present, we lack sufficient capital resources to fund our operations and business plan for the next twelve months. We intend to obtain business capital through the use of private equity fundraising or shareholder loans. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all. Our plan is that, in time, the primary source of capital for our business model will be revenue from the sale of power produced by our installed products.

Cash Flows from Operating Activities

Net cash provided used in operating activities was $48,392 for the twelve months ended December 31, 2009, compared to $73,191 for the twelve months ending December 31, 2008.

Cash Flows from Financing Activities

Cash provided by financing activities amounted to $-0- for the twelve months ended December 31, 2009, compared to $-0- for the twelve months ended December 31, 2008.

Risk Factors Associated with Plan of Operation

(A) LIMITED PRIOR OPERATIONS, HISTORY OF OPERATING LOSSES, AND ACCUMULATED DEFICIT MAY AFFECT ABILITY OF REGISTRANT TO SURVIVE.

The Registrant has had limited prior operations to date. Since the Registrant's principal activities recently have been limited to seeking new business ventures, it has no recent record of any revenue-producing operations. Consequently, there is only a limited operating history upon which to base an assumption that the Registrant will be able to achieve its business plans. In addition, the Registrant has only limited assets. As a result, there can be no assurance that the Registrant will generate significant revenues in the future; and there can be no assurance that the Registrant will operate at a profitable level. Accordingly, the Registrant's prospects must be considered in light of the risks, expenses and difficulties frequently encountered in connection with the establishment of a new business.

The Registrant has incurred net losses: ($81,131) for the fiscal year ended December 31, 2009 and ($78,645) for the fiscal year ended December 31, 2008. At December 31, 2009, the Registrant had an accumulated deficit of ($666,012). This raises substantial doubt about the Registrant's ability to continue as a going concern.

As a result of the fixed nature of many of the Registrant's expenses, the Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development of the Registrant's business or any capital raising or revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on the Registrants business, operations and financial condition.

(B) NEED FOR ADDITIONAL FINANCING MAY AFFECT OPERATIONS AND PLAN OF BUSINESS.

The working capital requirements associated with any adopted plan of business of the Registrant may be significant. The Registrant anticipates, based on currently proposed assumptions relating to its operations (including with respect to costs and expenditures and projected cash flow from operations), that it must seek financing to continue its operations (an amount which is as yet to be determined). However, such financing, when needed, may not be available, or on terms acceptable to management. The ability of the Registrant to continue as a going concern is dependent on additional sources of capital and the success of the Registrant's business plan. The Registrant's independent accountant audit report included in this Form 10-K includes a substantial doubt paragraph regarding the Registrant's ability to continue as a going concern.

If funding is insufficient at any time in the future, the Registrant may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on the Registrant's financial condition, which could require the Registrant to:

o curtail operations significantly;

o sell significant assets;

o seek arrangements with strategic partners or other parties that may require the Registrant to relinquish significant rights to products, technologies or markets;

o explore other strategic alternatives including a merger or sale of the Registrant.

To the extent that the Registrant raises capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Registrant's operations. Regardless of whether the Registrant's cash assets prove to be inadequate to meet the Registrant's operational needs, the Registrant may seek to compensate providers

of services by issuance of stock in lieu of cash, which will also result in dilution to existing shareholders.

The Registrant's success is dependent upon the hiring and retention of key personnel. None of the officers or directors has any employment or non-competition agreement with the Registrant. Therefore, there can be no assurance that these personnel will remain employed by the Registrant. Should any of these individuals cease to be affiliated with the Registrant for any reason before qualified replacements could be found, there could be material adverse effects on the Registrant's business and prospects.

In addition, all decisions with respect to the management of the Registrant will be made exclusively by the officers and directors of the Registrant. Investors will only have rights as stockholders to make decisions which affect the Registrant. The success of the Registrant, to a large extent, will depend on the quality of the directors and officers of the Registrant. Accordingly, no person should invest in the shares unless they are willing to entrust all aspects of the management of the Registrant to its officers and directors.

(D) POTENTIAL CONFLICTS OF INTEREST MAY AFFECT ABILITY OF OFFICERS AND DIRECTORS TO MAKE DECISIONS IN THE BEST INTERESTS OF REGISTRANT.

The officers and directors of the Registrant have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors, and each will continue to do so notwithstanding the fact that management time may be necessary to the business of the Registrant. As a result, certain conflicts of interest may exist between the Registrant and its officers and/or directors which may not be susceptible to resolution.

In addition, conflicts of interest may arise in the area of corporate opportunities which cannot be resolved through arm's length negotiations. All of the potential conflicts of interest will be resolved only through exercise by the directors of such judgment as is consistent with their fiduciary duties to the Registrant. It is the intention of management, so as to minimize any potential conflicts of interest, to present first to the board of directors of the Registrant, any proposed investments for its evaluation.

(E) LIMITATIONS ON LIABILITY, AND INDEMNIFICATION, OF DIRECTORS AND OFFICERS MAY RESULT IN EXPENDITURES BY REGISTRANT.

The Registrant's Articles of Incorporation contain provisions authorizing the Registrant to eliminate, to the fullest extent permitted by the Nevada Revised Statutes, as in effect from time to time, the personal liability of directors, officers and employees of the Registrant for monetary damages arising from claims of a breach of their fiduciary duties to the Registrant. Any limitation on the liability of any director, or indemnification of directors, officer, or employees could result in substantial expenditures being made by the Registrant in covering any liability of such persons or in indemnifying them.

(F) ABSENCE OF CASH DIVIDENDS MAY AFFECT INVESTMENT VALUE OF REGISTRANT'S STOCK.

The board of directors of the Registrant does not anticipate paying cash dividends on the common stock for the foreseeable future and intends to retain any future earnings to finance the growth of the Registrant's business. Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements and the general operating and financial conditions of the Registrant as well as legal limitations on the payment of dividends out of paid-in capital.

(G) NON-CUMULATIVE VOTING MAY AFFECT ABILITY OF SOME SHAREHOLDERS TO INFLUENCE MANGEMENT OF REGISTRANT.

Holders of the shares of common stock of the Registrant are not entitled to accumulate their votes for the election of directors or otherwise. Accordingly, the holders of a majority of the shares present at a meeting of shareholders will be able to elect all of the directors of the Registrant, and the minority shareholders will not be able to elect a representative to the Registrant's board of directors.

(H) NO ASSURANCE OF CONTINUED PUBLIC TRADING MARKET AND RISK OF LOW PRICED SECURITIES MAY AFFECT MARKET VALUE OF REGISTRANT'S STOCK.

There has been only a limited public market for the common stock of the Registrant. The common stock of the Registrant is currently quoted on the Over-The-Counter Bulletin Board. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of the Registrant's securities. In addition, the common stock is subject to the low-priced security or so called "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to regulations adopted by the Securities and Exchange Commission, any equity security that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing low-priced or penny stocks sometimes limit the ability of broker-dealers to sell the Registrant's common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.

(I) FAILURE TO MAINTAIN MARKET MAKERS MAY AFFECT VALUE OF REGISTRANT'S STOCK.

If the Registrant is unable to maintain National Association of Securities Dealers, Inc. member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Registrant will be able to maintain such market makers.

(J) SALE OF SHARES ELIGIBLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE MARKET PRICE.

If a substantial number of the shares of common stock of the Registrant that have been issued in reliance on

Rule 144 under the Securities Act of 1933 were sold under Rule 144 or a registered offering, the market price of the common stock could be adversely affected.

CRITICAL ACCOUNTING POLICIES.

The Securities and Exchange Commission has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Registrant's most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Registrant uses in applying these most critical accounting policies have a significant impact on the results the Registrant reports in its financial statements.

The preparation of these financial statements requires the Registrant to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Registrant evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Registrant bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

FORWARD LOOKING STATEMENTS.

The foregoing plan of operation contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. The words "believe," "expect," "anticipate," "intends," "forecast," "project," and similar expressions identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements as to the Registrant's estimates as to the adequacy of its capital resources, its need and ability to obtain additional financing, its operating losses and negative cash flow, and its critical accounting policies. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above. These forward-looking statements speak only as of the date hereof. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Restated financial statements as of and for the year ended December 31, 2009, and for the year ended December 31, 2008, are presented in a separate section of this report following Item 14.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

None

ITEM 9A. CONTROLS AND PROCEDURES

As of December 31, 2009, the Registrant carried out an evaluation of the effectiveness of the Registrant’s disclosure controls and procedures (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Registrant’s disclosure controls and procedures were not effective, due to a material weakness in our internal control over financial reporting, consisting of inadequate staffing within the accounting operations by employees who are responsible for accounting functions which prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

The Registrant also maintains a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with management’s authorization and properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel and an internal audit program to monitor its effectiveness. During the fiscal year ended December 31, 2009, there were no changes to this system of internal controls or in other factors that could significantly affect those controls.

ITEM 9A(T). CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of our Chief Financial Officer and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in connection with generally accepted accounting principles, including those policies and procedures that:

-	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

-	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

-	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of this Annual Report on Form 10-K for the year ended December 31, 2009, management, with the participation of our Chief Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting, pursuant to Rule 13a-15 under the Exchange Act. Management conducted its evaluation of the Registrant’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified one material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing within the accounting operations of our company. The small number of employees who are responsible for accounting functions (more specifically, one) prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. There were no changes in our internal controls over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

This Annual Report on Form 10-K does not include an attestation report of the Registrant’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

DOUG LINDEBLOM - Director, Chairman of the Board of Directors, Chief Executive Officer and President of the Company.

Mr. Lindeblom, age 53, is and for the past five years has served as Director of Economic Development and Tourism for the Regional Municipality of Durham, Province of Ontario, Canada. Doug has over 25 years experience in the economic development, marketing and real estate fields. His sector focus in Durham is in the energy sector, and he has been actively involved in the formation and administration of the Durham Strategic Energy Alliance, where he sits as the Board Secretary. Mr. Lindeblom has served as a director and officer of the Company since May 25, 2009.

Mr. Lindeblom's education, business experience and skills in working with infrastructure projects such as wind farms and power plants qualify him to serve as a director and officer of the Company.

PETER WANNER - Director, Treasurer, Chief Executive Officer and Chief Financial Officer.

Mr. Wanner, age 57, is a qualified accountant certified in Canada and Ontario and for the past 15 years has served as a business consultant to start-up companies, as well as companies in refinancing and turnaround. He also has 26 years of experience in financing accounting, including 2 years in public accounting as well as international experience working in Mexico, United Kingdom and United States. Mr. Wanner has served as a director since May 4, 2004. The term of office for any director is for a period of one year, or until the next annual meeting (or special meeting in lieu of an annual) of the shareholders. Mr. Wanner has served as a director and officer of the Company since May 4, 2004.

Mr. Wanner's education and accounting and work experience qualify him to serve as a director and officer of the Company.

GIANNI CAPUTO - Director, Vice President and Secretary of the Company.

For the past 5 years, Mr. Caputo, age 29, has served as Project and Kiosk Integration Manager of Aareas Interative, Inc. (www.aareas.com), a developer of technologies for real estate sales and marketing serving the building industry in the United States and Canada with annual revenues of approximately $4 million. Mr. Caputo supervises 17 Aareas employees. Mr. Caputo has served as a director and officer of the Company since May 25, 2009.

Mr. Caputo's technical skills and technology work experience qualify him to serve as a director and officer of the Company.

Significant Employees.

The Registrant has no employees.

Involvement in certain legal proceedings.

During the past ten years, none of the Registrant's directors and officers have been subject to any of the following events:

1. A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing.

2. A conviction in a criminal proceeding or being named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses).

3. Being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

ii.	Engaging in any type of business practice; or

iii.	Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

4. Being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

5. Being found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated.

6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

7. Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

i.	Any Federal or State securities or commodities law or regulation; or

ii.	Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

iii.	Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity.

8. the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

The Board of Directors includes Doug Lindeblom, Peter Wanner, and Gianni Caputo. Mr Lindeblom and Peter Wanner are the Registrant’s audit committee.

Compliance with Section 16(a) of the Exchange Act.

As of the date of filing this report, the Registrant is not aware of any person who, at any time during the year ended December 31, 2009, was a director, officer, beneficial owner of more than ten percent of any class of equity securities of the registrant that failed to file on a timely basis reports required by Section 16(a) during the most recent fiscal year or prior years.

Code of Ethics

As of the date of filing this report, the Registrant has not adopted a Code of Ethics, but has resolved to adopt a formal Code of Ethics prior to the end of the fiscal 2010 year. The delay has resulted from management's exclusive concentration of their efforts on business development and the inability thereby to devote the time required to get a code of ethics drafted, approved, and posted on its website.

ITEM 11. EXECUTIVE COMPENSATION.

Executive officers and directors of the Registrant do not currently receive and are not accruing any compensation:

SUMMARY COMPENSATION TABLE

Name and principal position	Year	Salary	Bonus	Stock awards	Option awards	Nonequity incentive plan compensation	Nonqualified deferred compensation earnings	All other compensation	Total
		($)	($)	($)	($)	($)	($)	($)	($)
Doug Lindeblom, President CEO	2009	$0	$0	$0	$0	$0	$0	$0	$0
Doug Lindeblom, President CEO
Peter Wanner, Chief Financial Officer	2009	$0	$0	$32,000 (1)	$0	$0	$0	$0	$32,000
Peter Wanner, Chief Financial Officer	2008	$0	$0	$0	$0	$0	$0	$0	$0
Gianni Caputo, Vice President	2009	$0	$0	$0	$0	$0	$0	$0	$0
Gianni Caputo, Vice President

(1)

Stock award to Peter Wanner consists of a one-time grant of 100,000 restricted common shares approved by the Board of Directors of the Registrant,with Mr. Wanner abstaining from the discussion and voting. The shares were not issued pursuant to any stock plan maintained by the Registrant, and are valued based on the closing price of the Registrant's common shares on the date of issuance.

The Registrant maintains a stock incentive plan, entitled “2005 Stock Incentive Plan for Employees and Consultants” and has registered 3 million of its common shares (1 million on February 25, 2005 and 2 million on April 11, 2005) for issuance under such stock incentive plan. To date, 830,000 shares have been issued under the stock incentive plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding the beneficial ownership of shares of the Registrant's common stock as of December 31, 2009 (99,665,228 common shares issued and outstanding) by (i) all stockholders known to the

Registrant to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all officers and directors of the Registrant, individually and as a group (each person has sole voting power and sole dispositive power as to all of the

shares shown as beneficially owned by them):

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)		Percent of Class
Common	Lubi Investments, Inc.(2) 1551 Second Street Sarasota, Florida 34236		85,462,000		85.84	%
Common	Doug Lindeblom 1551 Second Street Sarasota FL 34236		296,400		0.03	%
Common	Gianni Caputo 1551 Second Street Sarasota FL 34236		296,400		0.03	%
Common	Peter Wanner 44 Greystone Crescent Georgetown ONT L7G 1G9 Canada		165,000		0.17	%
Common	Directors and officers as a group		757,800		0.76	%

(1)

None of these security holders has the right to acquire any amount of shares within sixty days from options,warrants, rights, conversionprivilege, or similar obligations. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting orinvestment power with respect to securities. Shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days after the date indicated in the table are deemed beneficially ownedby the optionees. Subject to any applicable community property laws, the persons or entities named in the table above have sole voting andinvestment power with respect to all shares indicated as beneficially owned by them.

(2)	Lubi Investments Inc. was incorporated and is beneficially owned and controlled by Mr. Frank Cavicchia, of the same address.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Except as otherwise disclosed elsewhere herein, during the last two fiscal years there have not been any transactions between the Registrant and any of its officers, directors, and five percent or greater shareholders.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

(1) Audit Fees: Aggregate fees billed for each of the last two (2) fiscal years for professional services rendered by the principal accountant for the audit of the annual financial statements and review of financial statements included on Form 10-QSB:

2008: $15,166

2009: $14,363

(2) Audit-Related Fees: Aggregate fees billed in each of the last two (2) fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the financial statements and are not reported previously.

2008: $0

2009: $0

(3) Tax Fees: Aggregate fees billed in each of the last two (2) fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

2008: $0

2009: $0

(4) All Other Fees: Aggregate fees billed in each of the last two (2) fiscal years for products and services provided by the principal accountant, other than the services previously reported.

2008: $0

2009: $0

(5) Audit Committee Pre-Approval Procedures. The Board of Directors has not, to date, appointed an Audit Committee.

(6) Not applicable.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)	The following documents are filed as part of this report:

(1) Report of Independent Registered Public Accounting Firm

Restated Financial Statements covered by the Report of Independent Registered Public Accounting Firm

Balance Sheet as of December 31, 2009

Restated Statements of Operations for the Years ended December 31, 2009 and 2008

Restated Statements of Stockholders’ Equity Deficiency for the years ended December 31, 2009 and 2008

Restated Statements of Cash Flows for the years ended December 31, 2009 and 2008

Restated Notes to Consolidated Financial Statements for the years ended December 31, 2009 and 2008

(b)	Exhibits included or incorporated by reference herein are set forth in the following Exhibit Index. Exhibits referred to as "Previously Filed" are incorporated herein by reference.

Exhibit No.	Document	Location
3.1	Articles of Incorporation	Previously Filed
3.2	Bylaws	Previously Filed
4.1	S-8 Registration Filed 02/25/2005	Previously Filed
4.2	S-8 Registration Filed 04/11/2005	Previously Filed
19	DEF 14-C Information Statement	Previously Filed
21	Subsidiaries of the Registrant	Included
23.1	Consent - Ind. Reg. Pub. Accountant	Included
31.1	Sect. 302 Certification	Included
31.2	Sect. 302 Certification	Included
32.1	Sect. 906 Certification	Included
32.2	Sect. 906 Certification	Included

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act, the registrant has duly caused this second amended annual report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

	Registrant: FIRST NATIONAL ENERGY CORPORATION

Date: April 20, 2011	By:	/s/ Gregory Sheller
		Gregory Sheller
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: April 20, 2011	By:	/s/ Gregory Sheller
		Gregory Sheller Chief Executive Officer

Date: April 20, 2011	By:	/s/ Peter Wanner
		Peter Wanner Chief Financial Officer

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Financial Statements

Together with Report of Independent Registered Public Accounting Firm

December 31, 2009 (restated) and 2008

(Amounts expressed in US Dollars)

Index

Report of Independent Registered Public Accounting Firm			F-2

Independent accountant’s report			F-3

Consolidated Balance Sheets as at December 31, 2009 (restated) and December 31, 2008			F-4

Consolidated Statements of Operations and comprehensive loss for the years ended December 31, 2009 (restated) and December 31, 2008 and for the cumulative period (restated) since inception			F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2009 (restated) and December 31, 2008 and for the cumulative period (restated) since inception			F-6

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the period since inception			F-7/F-9

Notes to Consolidated Financial Statements			F-10 / F-20

F-1

Schwartz Levitsky Feldman llp

CHARTERED ACCOUNTANTS

LICENSED PUBLIC ACCOUNTANTS

TORONTO · MONTREAL

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of First National Energy Corporation (formerly First National Power Corporation) (the “Company”) (A Development Stage Company) as at December 31, 2009 (restated) and 2008 and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ equity (deficiency) for the years ended December 31, 2004 through 2009 (restated). These consolidated financial statements are the responsibility of the Company’s management. We did not audit the financial statements of the Company from November 16, 2000 (date of inception) to December 31, 2003, which statements reflect cumulative total assets of $Nil as of December 31, 2003 and cumulative expenses of $158,215 for the period from date of inception to December 31, 2003. Those statements were audited by another auditor whose report has been furnished to us, and our opinion, insofar as it relates to the cumulative financial information from date of inception to December 31, 2003, is based solely on the report of the other auditor.

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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The Company is not required to have nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.

1167 Caledonia Road

Toronto, Ontario M6A 2X1

Tel: 416 785 5353

Fax: 416 785 5663

F-2

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First National Energy Corporation as at December 31, 2009 (restated) and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 (restated) and 2008 and for the period from November 16, 2000 (date of inception) to December 31, 2009 (restated) in conformity with generally accepted accounting principles in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company is in the development stage, has a working capital deficiency, has yet to achieve profitable operations, has accumulated losses since its inception and expects to incur further losses in the development of its business. These conditions raise substantial doubt about its ability to continue as going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

As discussed in note 1(c) to the consolidated financial statements, the financial statements have been restated to correct the carrying value of the company’s purchased technology for the fiscal year ended December 31, 2009.

“SCHWARTZ LEVITSKY FELDMAN LLP”

Toronto, Ontario, Canada	Chartered Accountants
April 12, 2010, except for notes 1(c), 4, 7,	Licensed Public Accountants
8 and 13 which are as of May 11, 2011

	Initialed as read

F-3

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Balance Sheets

As of December 31, 2009 (restated) and December 31, 2008

(Amounts expressed in US Dollars)

		2009			2008
		(restated)
			$			$
ASSETS
	CURRENT ASSETS
	Cash		36,730			85,122
			36,730			85,122

	License for SWEG technology (Note 4)		100			-

			36,830			85,122


LIABILITIES
	CURRENT LIABILITIES
	Accounts payable and accrued liabilities (Note 5)		14,568			13,829
	Loans from shareholders (Note 6)		258,313			258,313
			272,881			272,142

Going Concern (Note 2)

STOCKHOLDERS’ EQUITY (DEFICIENCY)

	Capital stock (Note 7)		99,665			76,524
	Additional paid-in-capital		330,296			321,337
	Deficit, Accumulated during the devlopment stage		(666,012	)		(584,881	)
			(236,051	)		(187,020	)
			36,830			85,122

The Notes form an integral part of the Consolidated Financial Statements

F-4

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Loss

For the years ended December 31, 2009 (restated) and December 31, 2008 and the cumulative period (restated) since Inception

(Amounts expressed in US Dollars)

	Cumulative
	Since
	Inception			2009			2008
	(restated)			(restated)
		$			$			$
OPERATING EXPENSES

Interest Income		(6,904	)		(5	)		(1,999	)

Forgiveness of accounts payable and loans		(47,394	)
General and administrative expenses		443,647			81,136			35,027
Loss on Foreign Exchange		580			-			291
Amortization		-			-			-
Project development costs (Note 9)		272,857			-			45,326
Interest Expense		3,226			-			-
		666,012			81,131			78,645


NET LOSS AND COMPREHENSIVE LOSS		(666,012	)		(81,131	)		(78,645	)

Net loss per share, basic and diluted				$	(0.00	)	$	(0.10	)

Weighted average common shares outstanding (Note 11)					60,645,228			764,356

The Notes form an integral part of the Consolidated Financial Statements

F-5

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Cash Flows

For the years ended December 31, 2009 (restated) and December 31, 2008 and the cumulative period (restated) since inception

(Amounts expressed in US Dollars)

	Cumulative
	Since
	Inception			2009			2008
	(restated)			(restated)
		$			$			$
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(666,012	)		(81,131	)		(78,645	)
Adjustments for items not affecting cash
Amortization		-			-
Shares issued for services rendered		332,390			32,000			500
Forgiveness of accounts payable and loans		(47,394	)
Increase in accounts payable and accrued liabilities		18,567			739			4,954

Net cash used in operating activities		(362,449	)		(48,392	)		(73,191	)

CASH FLOWS FROM FINANCING ACTIVITIES

Loans from Shareholders		301,708			-
Proceeds from sale of capital stock		97,471

Net cash provided by financing activities		399,179			-			-

NET INCREASE (DECREASE) IN CASH		36,730			(48,392	)		(73,191	)

Cash, beginning of period		-			85,122			158,313

CASH, END OF PERIOD		36,730			36,730			85,122

INCOME TAXES PAID		-			-			-

INTEREST PAID		3,226			-			-

NON-CASH TRANSACTIONS - PURCHASE OF SWEG TECHNOLOGY FOR SHARES		1,855,605			1,855,605

The Notes form an integral part of the Consolidated Financial Statements

F-6

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

From Inception (restated) until December 31, 2009 (restated)

(Amounts expressed in US Dollars)

	Common stock - dollar amount at par value		Common stock - number of shares		Common stock subscribed		Additional paid-in capital		Deficit accumulated during the development stage			Total stockholders' equity (deficit) of the Company
				$		$		$		$			$

Balance at November 16, 2000
Issuance of common stock for cash		100		100,000				900					1,000
Net Loss for the Period										(968	)		(968	)

Balance as of December 31, 2000		100		100,000		-		900		(968	)		32

Issuance of stock for cash		400		400,000				3,600					4,000
Issuance of stock for cash		700		700,000				6,300					7,000
Issuance of stock for cash		850		850,000				7,650					8,500
Currency Translation								100					100
Net Loss for the Year										(23,954	)		(23,954	)

Balance as of December 31, 2001		2,050		2,050,000		-		18,550		(24,922	)		(4,322	)

Expiration of recission offer for sale of stock		64		63,536				6,290					6,354
Net Loss for the Year										(26,047	)		(26,047	)

Balance as of December 31, 2002		2,114		2,113,536		-		24,840		(50,969	)		(24,015	)

The Notes form an integral part of the Consolidated Financial Statements

F-7

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

From Inception (restated) until December 31, 2009 (restated)

(Amounts expressed in US Dollars)

	Common stock - dollar amount at par value		Common stock - number of shares		Common stock subscribed		Additional paid-in capital			Deficit accumulated during the development stage			Total stockholders' deficit of the Company
				$		$		$			$			$

Stock split 5:1		8,454		8,454,144				(8,454	)					-
Shares issued for services rendered		200		200,000				79,800						80,000
Net Loss for the Year											(107,245	)		(107,245	)

Balance as of December 31, 2003		10,768		10,767,680		-		96,186			(158,214	)		(51,260	)

Stock split 7:1		64,606		64,606,080				(64,606	)					-
Shares issued for services rendered		30		30,000				15,870						15,900
Shares subscribed						146		70,371						70,517
Shares issued for services rendered		44		43,000				9,956						10,000
Net Loss for the Year											(75,414	)		(75,414	)

Balance as of December 31, 2004		75,448		75,446,760		146		127,777			(233,628	)		(30,257	)

Shares issued for services rendered		830		830,000				193,160						193,990
Net Loss for the Year											(208,886	)		(208,886	)

Balance as of December 31, 2005		76,278		76,276,760		146		320,937			(442,514	)		(45,153	)

Net Loss for the Year											(32,962	)		(32,962	)

Balance as of December 31, 2006		76,278		76,276,760		146		320,937			(475,476	)		(78,115	)

The Notes form an integral part of the Consolidated Financial Statements

F-8

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

From Inception (restated) until December 31, 2009 (restated)

(Amounts expressed in US Dollars)

	Common stock - dollar amount at par value			Common stock - number of shares			Common stock subscribed			Additional paid-in capital			Deficit accumulated during the development stage			Total stockholders' deficit of the Company
					$			$			$			$			$

Net Loss for the Year														(30,760	)		(30,760	)
Issue shares bought under subscription		146			146,000			(146	)								-

Balance as of December 31, 2007		76,424			76,422,760			-			320,937			(506,236	)		(108,875	)


Shares issued for services rendered		100			100,000						400						500
Net Loss for the period														(78,645	)		(78,645	)

Balance as of December 31, 2008		76,524			76,522,760			-			321,337			(584,881	)		(187,020	)

Reverse Stock split 1:100		(75,759	)		(75,757,532	)					75,759						-
Shares issued for services rendered		100			100,000						31,900						32,000
Purchase of SWEG license for shares		98,800			98,800,000						(98,700	)					100
Net Loss for the Period														(81,131	)		(81,131	)

Balance as of December 31, 2009 - restated		99,665			99,665,228			-			330,296			(666,012	)		(236,051	)

The Notes form an integral part of the Consolidated Financial Statements

F-9

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

1 GENERAL

a) Description of the Business

First National Energy Corporation (the Company) was incorporated in the State of Delaware on November 16, 2000, with the name Capstone International Corporation. On March 28, 2004, the Company changed its name to First National Power Corporation. On February 12, 2009, the Company relocated its charter to the State of Nevada and changed its name to First National Energy Corporation. As part of reorganization, the Company increased its authorized capital to 300 million common shares and effected a 100 for 1 reverse stock split of its issued and outstanding shares of common stock. The accompanying financial statements reflect all share data based on the 100 for 1 reverse common stock split.

The Company’s business purpose is the provision of wind-driven solutions for power generation. Current projects for the Company are the completion of power generation projects from supplemental wind generation technologies.

b) Purchase of Technology License

On April 20, 2009, the Company entered into a preliminary letter of intent with Boreas Research Corporation (“Boreas”), an arm’s length Florida corporation, pursuant to which the Company would acquire a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The letter of intent was superseded by a Technology License and Stock Purchase Agreement (the “Agreement”) between the Company and Boreas that was consummated on May 25, 2009 (the “Closing”), at which time the Company issued to the stockholders of Boreas 98,800,000 new restricted and unregistered common shares of the Company and agreed to pay certain future royalties to Boreas from net revenues realized by the Company from the technology license.

The preliminary letter of intent was reported by the Company on form 8-K to the Securities and Exchange Commission (“SEC”) on April 21, 2009, and the Agreement was annexed to an information statement on form 14-C filed with the SEC in preliminary and definitive forms on April 22, 2009 and May 4, 2009, respectively. The definitive information statement was mailed to the Stockholders of the Company on May 4, 2009.

The Company obtained written consent to the Agreement and the transaction from the holders of 55.82% of its issued and outstanding shares of common stock in lieu of a meeting of stockholders.

On May 14, 2009, the Company and Boreas amended the Agreement by making and entering into a First Amendment of Technology License and Stock Purchase Agreement (the “Amendment”), pursuant to which (1) Boreas elected, as authorized by the Agreement, to cause the new restricted and unregistered common shares of the Company due to Boreas at the Closing to be issued to the stockholders of Boreas, and (2) the Company and Boreas agreed to reduce the number of new restricted and unregistered common shares of the Company to be issued at the closing of the transaction, from 98,915,000 shares to 98,800,000 shares.

F-10

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

In exchange for the Company acquiring the technology license from Boreas at the Closing pursuant to the Agreement (as amended by the Amendment), the Stockholders of Boreas received an aggregate of 98,800,000 new restricted and unregistered common shares of the Company's common stock. Accordingly, the Boreas Stockholders now own 99.13% of the Company's 99,665,228 outstanding shares. No finder’s fees were paid or consulting agreements entered into by the Company in connection with the transaction.

Prior to the transaction, there were no material relationships between the Company and Boreas, between Boreas and the Company’s affiliates, directors or officers, or between any associates of Boreas and the Company’s officers or directors. All of the Company’s transaction liabilities were settled on or immediately following the Closing.

Upon the Closing on May 25, 2009, the Company was no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Company filed an amended current report on Form 8-K/A with the SEC on May 26, 2009, setting forth the information that would be required if the Company were filing a general form for registration of securities on Form 10 under the Exchange Act.

Also upon the Closing, Mr. Peter Wanner, then the sole member of the Company’s board of directors, appointed Douglas Lindeblom and Gianni Caputo to vacant positions on the Company’s board of directors, and the new board of directors, as so constituted, elected the following officers:

Douglas Lindeblom - Chairman, Chief Executive Officer and President

Peter Wanner - Chief Operating Officer, Treasurer and Chief Financial Officer

Gianni Caputo - Vice President and Secretary

c) Restatement of 2009 Results

The Company has recently filed an amendment to its Annual Report on Form 10-K/A for the year ended December 31, 2009, to restate its consolidated financial statements in order to correct the valuation of the Company’s technology license acquired from Boreas Research Corporation (“Boreas”), a Florida corporation. Management concluded that the Company should correct an error in the Company’s accounting and disclosure for the valuation of the technology license, the effect of which would be to record the technology license acquired at the carrying amount on the licensor’s books since the ownership interest in the technology license prior to and subsequent to the transaction did not substantially change. This conclusion was reached following a review of the Company’s accounting treatment for the recording of the technology license in response to a comment letter from the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

F-11

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

The Company restated their consolidated balance sheet as at December 31, 2009, and consolidated statements of operations and comprehensive loss, cash flows and stockholders’ equity (deficit) for the year ended December 31, 2009, and the notes related thereto. The effect of the restatement is as follows:

	Original Presentation			Restatement Adjustment			Restated Amount
Balance Sheet
License of SWEG technology - asset value		1,855,605			(1,855,505	)		100
License amortization		129,638			(129,638	)		-
License of SWEG Technology - net of amortization		1,725,967			(1,725,867	)		100
Total Assets		1,762,697			(1,725,867	)		36,830
Additional Paid-in Capital		2,185,801			(1,855,505	)		330,296
Total Stockholders' Euqity (Deficit)		1,489,816			(1,725,867	)		(236,051	)

Statement of Operations
Amortization		129,638			(129,638	)		-
Net Loss and Comprehensive Loss		(210,769	)		129,638			(81,131	)
Net Loss per share, basic and diluted		(0.00	)		(0.00	)		(0.00	)

Changes in Stockholders Equity (Deficit)
Purchase of SWEG license for shares		1,756,805			(1,855,505	)		(98,700	)
Net loss for the period		(210,769	)		129,638			(81,131	)
Total Stockholders' equity (deficit)		1,489,816			(1,725,867	)		(236,051	)

2 GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not generated any revenues from its planned principal operations through December 31, 2009 has recorded losses since inception, has negative working capital, has yet to achieve profitable operations and expects further losses in the development of its business. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Consolidation

The consolidated financial statements include the accounts of First National Energy Corporation and its wholly-owned subsidiary First National Power Corporation. All material inter-company amounts have been eliminated.

F-12

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

b) Use of Estimates

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized below. Significant estimates include the recording of accruals, and the determination of the valuation allowance for deferred tax assets.

c) Financial Instruments

The carrying amounts of the Company’s accounts payable and accrued liabilities and loans from shareholders approximate their fair values, because of the short maturity of these instruments.

d) Income Taxes

Deferred income taxes are provided using the asset and liability method of accounting. Under the liability method, deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities.

Current income tax expense (recovery) is the amount of income taxes expected to be payable (recoverable) for the current year. A deferred tax asset and/or liability is computed for both the expected future impact of differences between the financial statement and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax losses. Valuation allowances are established when necessary to reduce the deferred tax asset to the amount expected to be "more likely than not" to be realized in future returns. Tax law and rate changes are reflected in income in the period such changes are enacted.

e) Earnings or Loss Per Share

Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average numbers of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.

f) Comprehensive Income (Loss)

Comprehensive income (loss) as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Comprehensive income (loss) is not presented separately in the Company's financial statements since there is no difference from net loss in any period presented.

F-13

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

g) Intangible Assets

Intangible assets, which include the technology license, are recorded at cost of acquisition or at the carrying value for a non-arm’s length acquisition and are amortized over the estimated useful life of 10 years on a straight line basis

h) Long Lived Assets

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicated that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicated possible impairment. If there are indications of impairment, the Company uses future undiscovered cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

i) Recent Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance now codified under Accounting Standards Codification (“ASC”) Topic 105-10, which establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with GAAP. ASC Topic 105-10 explicitly recognizes rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants. Upon adoption of this guidance under ASC Topic 105-10, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. References made to authoritative FASB guidance throughout the financial statements have been updated to the applicable Codification section.

On October 10, 2008, the FASB issued FASB ASC 820-10-35 (Previously known as FSP FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active.”) which was effective upon issuance, including periods for which financial statements have not been issued. It clarified the application of FASB ASC 820-10 in an inactive market and provided an illustrative example to demonstrate how the fair value of a financial asset is determined when the market for that financial asset is inactive. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

In April 2009, the FASB issued FASB ASC 820-10-65 (Previously known as FSP 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”). Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transaction or quoted prices may be necessary to estimate fair value in accordance with Statement of Financial Accounting Standards FASB ASC 820-10 (Prior authoritative literature: SFAS No. 157 “Fair Value Measurements”). This standard is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

F-14

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

In 2008, the FASB issued FASB ASC 815-40 (Previously known as EITF 07-05, Determining whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock). FASB ASC 815-40 provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in FASB ASC 810-10-15 (Prior authoritative literature: paragraph 11(a) of SFAS 133). The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative literature: SFAS No. 141(R) “Business Combinations”). FASB ASC 805-10 establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. FASB ASC 805-10 changes how business combinations are accounted for and impacts financial statements both on the acquisition date and in subsequent periods. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations although it may have a material impact on accounting for business combinations in the future which cannot currently be determined.

In April 2009, the FASB issued FASB ASC 805-10-05 (Previously known as Statement No. 141(R)-1 "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies"). For business combinations, the standard requires the acquirer to recognize at fair value an asset acquired or liability assumed from a contingency if the acquisition date fair value can be determined during the measurement period. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations although it may have a material impact on accounting for business combinations in the future which cannot currently be determined.

In April 2009, the FASB issued FASB ASC 825-10-50 (Previously known as FASB Staff Position No. 107-1) and FASB ASC 270-10-05 (Prior authoritative literature: APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,”) which requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This Staff Position is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

In January 2010, the FASB issued updated guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirements. For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities. This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. Other than requiring additional disclosures, the adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

F-15

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

In May 2009, the FASB issued FASB ASC 855-10 (Previously known as SFAS No. 165, “Subsequent Events”) FASB ASC 855-10 establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (“subsequent events”). More specifically, FASB ASC 855-10 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that should be made about events or transactions that occur after the balance sheet date. FASB ASC 855-10 provides largely the same guidance on subsequent events which previously existed only in auditing literature. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

In February 2010, FASB issued ASU 2010-09 Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. All of the amendments in ASU 2010-09 are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company has adopted this standard and as a result did not disclose the date through which subsequent events have been evaluated.

In June 2009, the FASB issued ASC 810, “Consolidation” (ASC 810), which changes the approach in determining the primary beneficiary of a variable interest entity (VIE) and requires companies to more frequently assess whether they must consolidate VIEs. ASC 810 is effective for annual periods beginning after November 15, 2009. The Company is evaluating the impact, if any, the adoption of ASC 810 will have on its financial statements.

In October 2009, the FASB issued new guidance for revenue recognition with multiple deliverables, which is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, although early adoption is permitted. This guidance eliminates the residual method under the current guidance and replaces it with the “relative selling price” method when allocating revenue in a multiple deliverable arrangement. The selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists, otherwise third-party evidence of selling price shall be used. If neither exists for a deliverable, the vendor shall use its best estimate of the selling price for that deliverable. After adoption, this guidance will also require expanded qualitative and quantitative disclosures. The Company is currently assessing the impact of adoption on its financial position and results of operations.

F-16

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

4 LICENSE FOR SWEG TECHNOLOGY

	2009				2008
	Cost (restated)		Accumulated Amortization (restated)		Net Book Value (restated)		Net Book Value

Technology License (Note 1)	$	100	$	-	$	100	$	-

Amortization for the next 5 years is estimated to be $-0- per year

5 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following

	2009		2008
Trade Payables	$	-	$	829
Accrued Professional Fees	$	14,568	$	13,000
	$	14,568	$	13,829

6 LOANS FROM SHAREHOLDERS

The loans are unsecured, non-interest bearing and are payable on demand.

7 CAPITAL STOCK

a) Authorized

300,000,000 Common shares with a par value of $0.001 per share

b) Issued

99,665,228 Common shares (in 2008 765,228 - 76,522,760 prior to reverse stock split effective February 10, 2009)

F-17

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

c) Changes to Issued Share Capital

During the year ended December 31, 2009, the Company had the following changes to its Issued Share Capital:

-	Issued 100,000 shares for officer fees. This was valued at $32,000 and is included in General and administrative expenses.

-	Issued 98,800,000 shares valued at $.001 par value per share for the purchase of the North American territorial license to the SWEG technology (See Note 1(b)).

During the year ended December 31, 2008, the Company had the following changes to its Issued Share Capital:

-	Issued 1,000 shares (100,000 shares prior to the reverse stock split effective February 10, 2009) valued at $500 in exchange for legal services provided to the Company.

8 INCOME TAXES

a) Deferred Income Taxes

The tax effect of significant temporary differences that gave rise to the benefit is as follows:

	2009			2008
	(restated)
Operating Losses Available to offset future taxes	$	243,587		$	190,070
Tax basis of license in excess of accounting basis		602,831			-
Valuation Allowance		(846,418	)		(190,070	)
Net Deferred Assets	$	-		$	-

The Company has determined that realization of a deferred tax asset is not likely and therefore a valuation allowance has been recorded against this deferred income tax asset.

b) Current Income Taxes

Current income taxes consist of

	2009			2008
	(restated)
Amounts calculated at statutory rates	$	(27,585	)	$	(25,560	)
Permanent differences		10,880
		(16,705	)		(25,560	)
Change in valuation allowances	$	16,705		$	25,560
	$	-		$	-

F-18

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

c) Income tax losses carried forward

The company has non-capital losses for tax purposes which can be applied against future taxable income. These losses expire as follows:

2029	$	131,602
2028	$	78,645
2027	$	30,760
2026	$	32,912
2025	$	208,887
2024	$	233,627
Total	$	716,433

The non-capital losses carried forward are subject to review by the Internal Revenue Service and may be limited due to change of control restrictions

9 PROJECT DEVELOPMENT COSTS

In accordance with generally accepted accounting principles, fees and expenses incurred while developing a project cannot be capitalized until there is a reasonable expectation of a revenue stream. As the Company is still in the very early stages of power generation projects, it was determined that costs incurred to date had to be expensed.

10 SEGMENTED INFORMATION

The Company operates in only one business segment, namely the development of alternative energy sources. All of the Company’s assets are located in the United States of America.

11 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

The weighted average shares outstanding has been adjusted to reflect a 100 to 1 reverse stock split effective February 10, 2009.

12 FAIR VALUE MEASUREMENTS

The Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC 820-10), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

F-19

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

(Amounts expressed in US Dollars)

● Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

● Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

● Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

At December 31, 2009 and 2008, the carrying values of cash, accounts payable and accrued liabilities, and loans from shareholders approximate their fair values due to the relatively short periods to maturity of these instruments.

13 SUBSEQUENT EVENTS

On March 22, 2010, First National Power Corporation (“Pavana”), a Nevada corporation which became the Company’s wholly-owned subsidiary as a result of the Company’s holding company reorganization completed on February 12, 2009, acquired an exclusive, territorial 25 year license for the Republic of India (“India”), from Boreas Research Corporation (“Boreas”), the stockholders of whom hold controlling interests in the Company), pursuant to which the Company’s subsidiary acquired technology rights for India in the technology of Boreas that maximizes the energy productivity of existing wind turbines by capturing energy that flows through and underneath existing wind turbine systems. The consideration due from the Company’s subsidiary to Boreas for the license is a deferred cash payment of $600,000. The Company further agreed to pay Boreas a future royalty equal to 5% of the subsidiary’s “EBITDA” (revenues before interest, taxes, depreciation and amortization) from exploitation of the acquired license.

On April 12, 2010, Pavana entered into a common stock and warrant purchase agreement whereby the purchaser subscribed for 1,000,000 units (consisting of one common share and one warrant) of Pavana at a price of $1 per unit. On April 14, 2010, payment of $100,000 was received pursuant to the subscription of these units.

On April 18, 2011, the Company entered into a Novation Agreement (the "Novation") with all of the stockholders of Boreas Research Corporation (“Boreas”), revising the structure of the May 25, 2009 transaction (see Note 1(b)) by which the Company acquired a territorial license to certain rights in alternative energy technology of Boreas, in exchange for the 98,800,000 newly issued common shares of the Company as disclosed in Note 1(b). The Novation amended the Technology License and Stock Purchase Agreement (the “Original Agreement”) to substitute the stockholders of Boreas as the licensor under the Original Agreement.

F-20

First National Energy Corp. - FORM 10-K/A - May 17, 2011

Attached files

First National Energy Corp. Reports