First National Energy Corp. - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - First National Energy Corp.	Financial_Report.xls
EX-19 - EXHIBIT 19 - First National Energy Corp.	fnec_ex19.htm
EX-31.1 - EXHIBIT 31.1 - First National Energy Corp.	fnec_ex311.htm
EX-21 - EXHIBIT 21 - First National Energy Corp.	fnec_ex21.htm
EX-32.2 - EXHIBIT 32.2 - First National Energy Corp.	fnec_ex322.htm
EX-31.2 - EXHIBIT 31.2 - First National Energy Corp.	fnec_ex312.htm
EX-32.1 - EXHIBIT 32.1 - First National Energy Corp.	fnec_ex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2011

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

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the Registrant was $10,281,246, with reference to the price at which the common equity was last sold as of June 30, 2011, the last business day of the Registrant’s most recently completed second fiscal quarter. Solely for the purpose of this computation, it has been assumed that executive officers and directors of the Registrant are “affiliates”.

The number of shares of the registrant's common stock outstanding on February 28, 2012, was 99,765,228.

DOCUMENTS INCORPORATED BY REFERENCE

[NONE]

TABLE OF CONTENTS

		PAGE
PART I

Item 1.	Business		4
Item 1A.	Risk Factors		6
Item 1B.	Unresolved Staff Comments		13
Item 2.	Properties		13
Item 3.	Legal Proceedings		13
Item 4.	Reserved
PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		14
Item 6.	Selected Financial Data		16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		23
Item 8.	Financial Statements and Supplementary Data		23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		23
Item 9A.	Controls and Procedures		23
Item 9A(T)	Controls and Procedures		24
Item 9B.	Other Information		24

PART III

Item 10.	Directors, Executive Officers and Corporate Governance		25
Item 11.	Executive Compensation		27
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		28
Item 13.	Certain Relationships and Related Transactions, and Director Independence		28
Item 14.	Principal Accountant Fees and Services		29

PART IV

Item 15.	Exhibits and Financial Statement Schedules		30

Unless otherwise indicated, references in this Form 10-K 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

•

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

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 this 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 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. 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 with all of the stockholders of Boreas Research Corporation ("Boreas"), the licensor under the May 20, 2009 transaction, revising the structure of the May 20, 2009 transaction to substitute the stockholders of Boreas, collectively, 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 continuing research and development efforts by the Registrant in conjunction with the licensor, 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, 2010 incurred expenses of $45,236; such activities for the fiscal year ending December 31, 2011 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 officers of the Registrant are currently performing 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, 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 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 CORPORATION 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 CORPORATION 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 twelve months ended December 31, 2011 of ($60,242). At December 31, 2011, the Company had an accumulated deficit of ($801,481). The Company anticipates that it will continue to incur operating losses 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 costs required to develop its manufacturing processes;
●	the revenues generated by products that it manufactures;
●	the revenues generated by products that it manufactures;
●	the revenues generated by products that it manufactures;
●	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 is quoted on the “OTC Pink Sheets”, a regular trading market for the securities may not be sustained in the future. The OTC Pink Sheets is an inter-dealer, over-the-counter market that provides significantly less liquidity than other exchanges. Quotes for stocks included on the OTC Pink Sheets 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 Pink Sheets 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.

AS A RESULT OF THE COMPANY’S TECHNOLOGY LICENSE TRANSACTION, THE PRINCIPAL SHAREHOLDERS OF THE LICENSOR 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, 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 any 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, since the uncertainty surrounding the federal tax incentives will result in fewer projects being financed and built in the near future.

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 PTC provides a 2.1 cent per kilowatt-hour corporate income tax credit for electricity generated by qualified energy projects, available during the first 10 years of a project’s operation. The PTC was most recently extended under the American Recovery and Reinvestment Act of 2009, but is set to expire at the end of 2012. 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 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 Registrant received comments from the Division of Corporation Finance of the SEC dated November 16, 2010, and again on February 18, 2011, pertaining to the Forms 10-K and 10-Q filed by the Registrant for fiscal 2009 and subsequent periods. The Registrant has endeavored to resolve each such comment by, among other things, filing an amended annual report and amendments of each subsequent quarterly report on Form 10-Q. The issues embodied in the comments are in three principal areas: (1) disclosures according to applicable regulations; (2) valuation of technology assets acquired by the Registrant and its subsidiary, Pavana Power Corporation; and (3) the accounting treatment of the Registrant's 2009 technology acquisition. The Registrant has revised its reporting procedures to ensure that all quarterly and annual reports comply with applicable disclosure regulations. The Registrant restated its financial 2009 results in its 2010 annual report to substantially reduce the carrying value of its acquired technology assets, and has continued those adjustments to the present. The Registrant has yet to follow up with the Division of Corporation Finance staff of the SEC to confirm that the actions it has taken adequately address all such comments. At such time as the Registrant has received such confirmation, it will amend this annual report to reflect any adjustments to the within and foregoing statements resulting from such confirmation.

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.

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 quoted on the Over the Counter Pink Sheets (the “OTC Pink sheets”) 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 OTC Pink Sheets; our common stock only traded sporadically during these periods. 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, 2011	High		Low
4th quarter, ended December 31, 2011	$	0.65	$	0.51
3rd quarter, ended September 30, 2011	$	0.75	$	0.65
2nd quarter, ended June 30, 2011	$	1.00	$	.05
1st quarter, ended March 31, 2011	$	.05	$	.05

Year ended December 31, 2010
4th quarter, ended December 31, 2010	$	.05	$	.05
3rd quarter, ended September 30, 2010	$	.51	$	.05
2nd quarter, ended June 30, 2010	$	1.01	$	0.04
1st quarter, ended March 31, 2010	$	1.01	$	0.04

Holders.

At December 31, 2011, there were approximately 549 holders of the Registrant's common stock.

Dividend Policy.

As of December 31, 2011, 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 compensation 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 March 31, 2010, the Registrant’s wholly-owned subsidiary, Pavana Power Corporation, issued 100,000 shares as part of a private placement to an arm’s length third party, in exchange for $100,000. The value per share was $1.00. Each share also carried a common stock purchase warrant for the purchase of 1 (one) additional share at a price of $.50. The warrants expired without being exercised on March 31, 2011.

On September 20, 2010, the Registrant issued 296,400 restricted common shares to a director for services to be performed on behalf of the Registrant.

On September 20, 2010, the retiring president of the Registrant returned to treasury 296,400 common shares for cancellation.

On December 12, 2010, the Registrant issued 100,000 shares as full payment of outstanding debts to an existing shareholder. The implied per-share value of the transaction was $2.58313 per share.

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 working with Boreas Research Corporation to finalize the development of a commercial version of our licensed technology product, and internally, to refine our approach to the North American market. Our focus is on developing a single product line of 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 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.

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 suitable facility 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. With sufficient capital we will create a highly efficient assembly facility with sufficient space to accommodate our expansion plans. Over time, our cost of manufacturing should decrease drastically as we utilize common processes and suppliers. We will 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. 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.

We intend to retain ownership of our installed products, dividing the energy output with the host facility in return for permission to locate our turbine assemblies on their sites and sell the power produced by our assemblies through the host’s interconnection and sale arrangements with transmission providers and power purchasers. However, we may also seek counterparties that for sale-leasebacks of the SWEG units, thereby enabling the counterparty 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, 2012. 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 will benefit from any extension and/or introductions of incentive programs, and also as the result of higher energy costs. With a high-quality line of wind turbine assemblies and an aggressive program of industry affiliations and promotion, we hope to establish and then expand a 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 hope to impart the message that our supplemental wind energy systems provide stable and reliable outputs, particularly if bundled with high quality maintenance and repair services.

Strategic partners are an important aspect of our contemplated 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.

Sales Personnel

At present our sales staff consists of our management. With the necessary capital, we will 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 $100,000.

*	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 $200,000.

*	Developing and testing our company website over the next twelve months will cost 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 over the next twelve months, 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, 2011 and December 31, 2010

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, 2011, compared with $-0- in revenues for the year ended December 31, 2010.

Operating Expenses. Operating expenses were $60,242 for the year ended December 31, 2011, compared to $75,263 for the year ended December 31, 2010. The largest components of expense items for each of the last two fiscal years were general and administrative expenses of $60,242 and $60,463 for the years ending December 31, 2011 and December 31, 2010, respectively.

Development Costs.

As more particularly described in Note 3(c) of the accompanying financial statements, the Company is expensing development costs, rather than capitalizing them, until the Company has a reasonable expectation of revenues. This resulted in an expense for the years ending December 31, 2011 and December 31, 2010 of $-0- and $-0, respectively.

Net Loss. The Company recorded a net loss and comprehensive loss of $60,242 for the year ended December 31, 2011, compared to $75,263 for the year ended December 31, 2010.

Liquidity and Capital Resources

At December 31, 2011, the Company had $4,563 in current assets and $603,086 in current liabilities, resulting in a working capital deficit of $(598,523). At December 31, 2010, the Company had $14,988 in current assets and $553,269 in current liabilities, resulting in a working capital deficit of ($538,281).

On May 25, 2009, the Company acquired technology license rights valued at $100 (as restated) in exchange for 98,800,000 new restricted shares of the Company’s common stock, which were issued as more particularly described in Note 1(b) of the accompanying consolidated financial statements.

On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, 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 was a deferred cash payment of $600,000, and 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 November 8, 2010, Pavana paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a cash consideration due of $540,000. The remaining debt is non-interest bearing and there are no fixed repayment terms.

In accordance with Codification Topic 850, Related Party Disclosures, Pavana recorded the acquisition of the SWEG technology license for the geographical territory of India, at the carrying amount of the license technology acquired which was $100 and the balance of the cash consideration of $599,900 was accounted for as additional paid in capital.

We have adopted a plan to distribute all our shares of Pavana Power Corporation to our stockholders upon completion of a pending registration statement covering the common shares of the subsidiary to be distributed to our stockholders.

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 used in operating activities was $10,425 for the twelve months ended December 31, 2011, compared to $320,055 for the twelve months ending December 31, 2010.

Cash Flows from Financing Activities

Cash provided by financing activities amounted to $-0- for the twelve months ended December 31, 2011, compared to $298,313 for the twelve months ended December 31, 2010.

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: ($60,242) for the fiscal year ended December 31, 2011 and ($75,263) for the fiscal year ended December 31, 2010. At December 31, 2011, the Registrant had an accumulated deficit of ($801,481). 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:

●	curtail operations significantly;

●	sell significant assets;

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

●	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 service providers with stock issuances 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 Pink Sheets. 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.

Financial statements as of and for the year ended December 31, 2011, and for the year ended December 31, 2010, 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, 2011, 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, 2011, 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, 2011, 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 year ended December 31, 2011 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.

GREGORY SHELLER - Director, Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Age 52, is and for the past five years has been principally employed as a real estate consultant with Re/Max Alliance Group, a real estate firm headquartered in Sarasota, Florida.

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

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

Mr. Wanner, age 59, is a qualified accountant certified in Canada and Ontario and for the past 21 years has served as a business consultant to start-up companies, as well as companies in refinancing and turnaround. He also has 30 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 31, 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:

i.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 Gregory Sheller, Peter Wanner, and Gianni Caputo. Mr Sheller and Peter Wanner are members of 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, 2011, 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

The Registrant has adopted a Code of Business Conduct and Ethics, which is set out in full as Exhibit 14 of this annual report and will also be posted on the Registrant’s 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
		($)		($)		($)		($)		($)		($)		($)		($)
Gregory Sheller,	2011	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
President CEO	2010

Peter Wanner,	2011	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Chief Financial Officer	2010	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Gianni Caputo,	2011	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Vice President	2010	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

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, 2011 (99,765,228 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 Enterprises Inc.(2) 2000 Webber Street Sarasota, Florida 34239	85,462,000	85.66%
Common	Gregory Sheller 2000 Webber Street Sarasota FL 34239	296,400	0.3%
Common	Gianni Caputo 2000 Webber Street Sarasota FL 34239	298,500	0.3%
Common	Peter Wanner, 44 Greystone Crescent, Georgetown, ON Canada L7G1 G9	165,000	0.17%
Common	Directors and officers as a group	759,900	0.76%

(1) None of these security holders has the right to acquire any amount of shares within sixty days from options, warrants, rights, conversion privilege, or similar obligations. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment 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 owned by the optionees. Subject to any applicable community property laws, the persons or entities named in the table above have sole voting and investment power with respect to all shares indicated as beneficially owned by them.

(2) Lubi Enterprises 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-K:

2011:	$18,450
2010:	$15,750

(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.

2011:	$0
2010:	$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.

2011:	$0
2010:	$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.

2011:	$0
2010:	$0

(5) Audit Committee Pre-Approval Procedures.

Under the Sarbanes-Oxley Act of 2002, the Registrant's Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent auditor. As part of this responsibility, the Audit Committee is required to pre-approve audit and non-audit services provided by the independent auditor in order to ensure the services do not impair the auditor's independence. The Securities and Exchange Commission (SEC) has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the Audit Committee's responsibility for administering the engagement of the independent auditor, including pre-approval of fees. Accordingly, the Registrant's Audit Committee has adopted a Pre-approval Policy and Procedure for Audit, Audit-Related, and Tax services which sets forth procedures and conditions whereby all permissible services provided by the independent auditor will be pre-approved. Under this approach, an annual program of work will be approved for each of the following categories of services: Audit, Audit-related, and Tax. Engagement-by-engagement pre-approval will not be required, except for exceptional or ad hoc incremental engagements with fees resulting in the fee category exceeding the aggregate pre-approved program of work for that category. In general, a work program for each category of services can be supplemented with additional pre-approved amounts after appropriate review of the additional services with the Audit Committee. The Audit Committee may consider specific engagements in the All Other Services category on an engagement-by-engagement basis. For all services obtained from the independent auditor, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will consider the level of Audit and Audit-related fees in relation to all other fees obtained from the independent auditor, and will review such level each year.

(6) Not applicable.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

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

Report of Independent Registered Public Accounting Firm;

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

Consolidated Balance Sheets as of December 31, 2011 and 2010;

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2011 and 2010;

Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2011 and 2010;

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010; and

Notes to Consolidated Financial Statements for the years ended December 31, 2011 and 2010.

(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
14	Code of Business Conduct and Ethics	Included
19	DEF 14-C Information Statement	Previously Filed
21	Subsidiaries of the Registrant	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 annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:	FIRST NATIONAL ENERGY CORPORATION

Date: March 16, 2012	By:	/s/ Gregory Sheller
		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: March 16, 2012	By:	/s/ Gregory Sheller
		Gregory Sheller
		Chief Executive Officer

Date: March 16, 2012	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

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

Index

Report of Independent Registered Public Accounting Firm			1

Consolidated Balance Sheets as at December 31, 2011 and 2010			2

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2011 and 2010 and for the cumulative period since inception			3

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010 and for the cumulative period since inception			4

Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2011 and 2010 and for the period since inception			5 - 8

Notes to Consolidated Financial Statements			9 - 21

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) (A Development Stage Company) as at December 31, 2011 and 2010 and the related consolidated statements of operations and comprehensive loss, stockholders’ deficiency and cash flows for the years ended December 31, 2011 and 2010 and for the period November 16, 2000 (date of inception) to December 31, 2011. 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. 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 November 16, 2000 (date of inception) to December 31, 2003, is based solely on the report of the other auditor. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First National Energy Corporation (formerly first National Power Corporation) as at December 31, 2011 and 2010 and the results of its operations and its cash flows for the years ended December 31, 2011 and 2010 and for the period from November 16, 2000 (date of inception) to December 31, 2011 in conformity with US generally accepted accounting principles.

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 the Company’s ability to continue as going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

	“SCHWARTZ LEVITSKY FELDMAN LLP”

Toronto, Ontario, Canada March 15, 2012	Chartered Accountants Licensed Public Accountants 2300 Yonge Street, Suite 1500 Toronto, Ontario M4P 1E4 Tel: 416 785 5353 Fax: 416 785 5663

F-1

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Balance Sheets

As of December 31, 2011 and 2010

(Amounts expressed in US Dollars)

	December 31 2011			December 31 2010

	$			$
ASSETS
CURRENT ASSET
Cash		4,563			14,988

LONG TERM ASSET
License for SWEG technology (Note 4)		200			200

TOTAL ASSETS		4,763			15,188


LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 5)		63,086			13,269
Loan payable to Boreas Research Corporation (Note 6)		540,000			540,000
TOTAL CURRENT LIABILITIES		603,086			553,269

Going Concern (Note 2)
Related Party Transaction (Note 9)
Other Contingent Liabilities (Note 12)

STOCKHOLDERS’ DEFICIENCY

Capital Stock (Note 7)		99,765			99,765
Additional paid-in Capital		103,329			103,329
Deficit accumulated during the development stage		(801,481	)		(741,249	)

Total Stockholders' Deficiency		(598,387	)		(538,155	)

Non-controlling interest		64			74

		(598,323	)		(538,081	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		4,763			15,188

The accompanying notes form an integral part of these consolidated financial statements

F-2

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, 2011 and 2010 and the cumulative period since inception

(Amounts expressed in US Dollars)

	Cumulative Since Inception			2011			2010

	$			$			$
OPERATING EXPENSES

Interest Income		(6,924	)		-			(20	)
Forgiveness of accounts payable and loans		(47,394	)		-			-
General and administrative expenses		564,352			60,242			60,463
Loss on foreign exchange		580			-			-
Project development costs		287,677			-			14,820
Interest Expense		3,226			-			-
NET LOSS		801,517			60,242			75,263

Net loss attributable to non-controlling interest		(36	)		(10	)		(26	)

Net loss attributable to the Company		801,481			60,232			75,237

Net loss per share, basic and diluted				$	0.00		$	0.00

Weighted average common shares outstanding, basic and diluted					99,865,228			99,746,598

COMPREHENSIVE LOSS
NET LOSS		801,517			60,242			75,263

Other Comprehensive Loss		-			-			-

Comprehensive Loss		801,517			60,242			75,263

Comprehensive Loss attributable to non-controlling interest		(36	)		(10	)		(26	)

Comprehensive Loss attributable to the Company		801,481			60,232			75,237

The accompanying notes form an integral part of these consolidated financial statements

F-3

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Cash Flows

For the year ended December 31, 2011 and 2010 and the cumulative period since inception

(Amounts expressed in US Dollars)

	Cumulative Since Inception			2011			2010

	$			$			$
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(801,517	)		(60,242	)		(75,263	)
Adjustments for items not affecting cash
Shares issued for services rendered		347,210			-			14,820
Shares issued for debt forgiveness		(258,313	)		-			(258,313	)
Forgiveness of accounts payable and loans		(47,394	)		-			-
Increase (decrease) in accounts payable and accrued liabilities		67,085			49,817			(1,299	)

Net cash provided by operating activities		(692,929	)		(10,425	)		(320,055	)

CASH FLOWS FROM FINANCING ACTIVITIES

Loan from Stockholders		301,708			-
Proceeds from issuance of capital stock		355,784			-			258,313
Acquisition of India technology license		(600,000	)		-			(600,000	)
Loan from Boreas Research Corporation, net		540,000						540,000
Proceeds of sale of non-controlling interest in subsidiary		100,000			-			100,000

Net cash provided by financing activities		697,492			-			298,313

NET INCREASE (DECREASE) IN CASH		4,563			(10,425	)		(21,742	)

Cash, beginning of year		-			14,988			36,730

CASH, END OF YEAR		4,563			4,563			14,988

SUPPLEMENTARY CASH FLOW DISCLOSURE:

INCOME TAXES PAID		-			-			-

INTEREST PAID		3,226			-			-

The accompanying notes form an integral part of these consolidated financial statements

F-4

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

For the period since inception to December 31, 2011

(Amounts expressed in US Dollars)

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

			$		$		$		$			$			$		$

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

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

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

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

Expiration of recission offer for sale of stock		63,536		64				6,290					6,354					6,354

Net Loss for the Year										(26,047	)		(26,047	)				(26,047	)

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

The accompanying notes form an integral part of these consolidated financial statements

F-5

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)

For the period since inception to December 31, 2011

(Amounts expressed in US Dollars)

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

			$		$		$			$			$			$		$

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

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

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

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

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

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

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

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

The accompanying notes form an integral part of these 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)

For the period since inception to December 31, 2011

(Amounts expressed in US Dollars)

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

				$			$			$			$			$			$		$

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

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

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

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

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

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

The accompanying notes form an integral part of these 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)

For the period since inception to December 31, 2011

(Amounts expressed in US Dollars)

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

				$			$		$			$			$			$			$

Shares issued in exchange for debt forgiveness		100,000			100					258,213						258,313						258,313
Return of shares for cancellation		(296,400	)		(296	)				296												-
Shares issued for services rendered		296,400			296					14,524						14,820						14,820
Sale of non-controlling interest in subsidiary		100,000								99,900						99,900			100			100,000
Purchase of SWEG technology license										(599,900	)					(599,900	)					(599,900	)
Net Loss for the Year													(75,237	)		(75,237	)		(26	)		(75,263	)

Balance as of December 31, 2010		99,865,228			99,765			-		103,329			(741,249	)		(538,155	)		74			(538,081	)

Net Loss for the Period													(60,232	)		(60,232	)		(10	)		(60,242	)

Balance as of December 31, 2011		99,865,228			99,765			-		103,329			(801,481	)		(598,387	)		64			(598,323	)

The accompanying notes form an integral part of these consolidated financial statements

F-8

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

GENERAL

a)	Description of the Business

First National Energy Corporation (the Company) was incorporated in the State of Delaware on November 16, 2000, under 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 consolidated 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”), a 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 consideration issued in the transaction was determined as a result of arm’s-length negotiations between the parties.

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-9

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

1.	GENERAL (cont’d)

b)	Purchase of Technology License (cont’d)

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 99,765,228 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.

On April 18, 2011, First National Energy Corporation (the “Company”) 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 May 25, 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.

c)	Further Purchase of Technology License

On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, 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, and a future royalty equal to 5% of the subsidiary’s “EBITDA” (revenues before interest, taxes, depreciation and amortization) from exploitation of the acquired license.

The transaction between related corporations was valued at the amount of the monetary consideration that was provided to Boreas.

F-10

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

1.	GENERAL (cont’d)

d)	Restatement of 2009 Results

The basis of the initial valuation of the North American license acquired from Boreas was reviewed at the time of the 2009 transaction, and the valuation was based on the results of an independent appraisal. Subsequently, and as a result of the lack of revenues from the technology, the Company has determined and revised its valuation of the license, as of the date of acquisition, to $100. The Company also reviewed the terms of Topic 12 of the SEC Financial Reporting Manual, dealing with reverse mergers and reverse recapitalizations, and has determined that the specific terms of that section are not applicable to the transaction by which the Company acquired the license from Boreas for the issuance of shares.

As noted in Note 1 (b), the original license and stock purchase agreement was amended in a novation transaction, which had the result of substituting the Boreas Stockholders for Boreas Research Corporation as the licensor.

2.	GOING CONCERN

The Company’s consolidated 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, 2011 and 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. There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

Management has plans to raise cash through debt offerings once the sales of the technologies begin. The personnel, facilities and equipment required for successfully completing the business model have been identified but until the resources are available, have not been acquired or engaged. In the period prior to the onset of operations, the Company will undertake to raise further cash through further capital offerings. There is no assurance that the Company will be successful in raising additional capital.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)	Basis of Consolidation

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

F-11

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

b)	Use of Estimates

These consolidated 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 consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These consolidated 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, the useful life of intangible assets, shares issued for services, and the determination of the valuation of allowances for deferred tax assets.

c)	Project Development Costs

In accordance with generally accepted accounting principles in the United States of America, 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.

d)	Financial Instruments

The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loan payable. Unless otherwise noted, it is of management’s opinion that the Company is not exposed to significant interest, or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the relatively short period to maturity for these instruments.

The Company’s financial assets and liabilities are generally classified and measured as follows;

Assets / Liabilities	Classification	Measurement
Cash	Held for trading	Fair Value
Accounts Payable and Accrued Liabilities	Other liability	Amortized Cost
Loan Payable to Boreas Research	Other liability	Amortized cost

F-12

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

e)	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.

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 (loss), which are excluded from net income, include foreign currency translation adjustments for self-sustaining foreign operations and unrealized gains and losses on available-for-sale securities.

g)	Intangible Assets

Intangible assets include the technology licenses which are amortized over the estimated useful life of 10 years on a straight line basis.

h)	Impairment and Disposal of Long-Lived Assets

The carrying values of long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted future cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.

i)	Development Stage Company

The Company complies with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915 (SFAS 7) for its characterization of the Company as a development stage company.

F-13

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

j)	Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, (ASU 2011-04). ASU 2011-04 amends ASC 820, Fair Value Measurements, (ASC 820), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 will be effective for the Company’s fiscal year beginning January 1, 2012. The adoption of ASU 2011-04 is not expected to have a material effect on the Company’s consolidated financial statements, but may require certain additional disclosures.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, (ASU 2011-05), which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this standard do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU 2011-05 are effective for our interim and annual periods beginning January 1, 2012 and are to be applied retrospectively. The adoption of the provisions of ASU 2011-05 is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In September 2011, the FASB issued an amendment to ASC 350, Intangibles—Goodwill and Other (ASC 350), which simplifies how entities test goodwill for impairment. Previous guidance under ASC 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under ASC 350. The amendments are effective for us for annual and interim goodwill impairment tests performed for fiscal years beginning January 1, 2012, and early adoption is permitted. The adoption of the provisions of ASC 350 is not expected to have a material impact on the Company’s consolidated financial position or 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, 2011 and 2010

(Amounts expressed in US Dollars)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

j)	Recent Accounting Pronouncements (cont’d)

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20), which amends FASB ASC 310, Receivables. This ASU requires disclosures related to financing receivables and the allowance for credit losses by portfolio segment. The ASU also requires disclosures of information regarding the credit quality, aging, non-accrual status and impairments by class of receivable. Trade accounts receivable with maturities of one year or less are excluded from the disclosure requirements. The company does not have any financing receivables as of the end of March 31, 2011.

On April 1, 2010, the Company adopted FASB ASU 2010-06, Fair Value Measurements and Disclosures (ASU 2010-06). ASU 2010-06 updates FASB ASC 820, Fair Value Measurements. ASU 2010-06 requires additional disclosures about fair value measurements including transfers in and out of levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. There was no material impact on the Company’s consolidated financial statements related to the adoption of this guidance.

On April 1, 2010, the Company adopted updated guidance included in FASB ASC 860-10, Transfers and Servicing — Overall. This guidance requires additional disclosures about the transfer and de-recognition of financial assets and eliminates the concept of qualifying special-purpose entities. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

On April 1, 2010, the Company adopted updated guidance included in FASB ASC 810, Consolidation (ASC 810), related to the consolidation of variable interest entities. This guidance requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. In addition, this updated guidance amends the quantitative approach for determining the primary beneficiary of a variable interest

entity. ASC 810 amends certain guidance for determining whether an entity is a variable interest entity and adds additional reconsideration events for determining whether an entity is a variable interest entity. Further, this guidance requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements.

In December 2010, the FASB issued ASU 2010-28, Intangibles — Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (ASU 2010-28). ASU 2010-28 clarifies the requirement to test for impairment of goodwill. ASC Topic 350 has required that goodwill be tested for impairment if the carrying amount of a reporting unit exceeds its fair value. Under ASU 2010-28, when the carrying amount of a reporting unit is zero or negative an entity must assume that it is more likely than not that a goodwill impairment exists, perform an additional test to determine whether goodwill has been impaired and calculate the amount of that impairment. The modifications to ASC Topic 350 resulting from the issuance of ASU 2010-28 are effective for fiscal years beginning after December 15, 2010 and interim periods within those years. Early adoption is not permitted. The adoption of ASU 2010-08 is not expected to have an impact on the financial statements of the Company.

F-15

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

4.	LICENSE FOR SWEG TECHNOLOGY

	December 31, 2011						December 31, 2010
	Cost		Accumulated Amortization		Net Book Value		Net Book Value

North American Technology License	$	100	$	-	$	100	$	100
Indian Technology License		100		-		100		100
	$	200	$	-	$	200	$	200

Also see note 1 (b).

5.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following;

	December 31, 2011		December 31, 2010
Professional fees payable and accrued	$	23,125	$	13,269
Advances from Company director		39,961		-

	$	63,086	$	13,269

Also see note 9.

6.	LOAN PAYABLE TO BOREAS RESEARCH CORPORATION

On March 22, 2010, the Company acquired an exclusive territorial 25 year SWEG Technology license for the Republic of India (“India”), from Boreas Research Corporation (‘Boreas”). The stockholders of Boreas hold a controlling interest in the Company through their controlling interest in First National Energy Corporation. The technology of Boreas 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 to Boreas for the license was a deferred cash payment of $600,000, and 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 November 8, 2010, the subsidiary paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a balance of cash consideration due of $540,000. The remaining debt is non-interest bearing and is without any fixed repayment terms.

F-16

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

6.	LOAN PAYABLE TO BOREAS RESEARCH CORPORATION (cont’d)

In accordance with Topic ASC 850, Related Party Disclosures, the subsidiary recorded the acquisition of the SWEG technology license for the geographical territory of India, at the carrying amount of the license technology acquired which was $100 and the balance of the cash consideration of $599,900 was accounted for as additional paid in capital.

7.	CAPITAL STOCK

a)	Authorized

300,000,000 Common shares with a par value of $0.001 per share (2010: 300,000,000)

Issued

December 31, 2011 and 2010:

99,765,228 Common shares

c)	Changes to Issued Share Capital

On April 14, 2010, the Company issued 100,000 units in a subsidiary Pavana Power Corporation, at a value of $1.00 per unit for gross proceeds of $100,000 as part of a private placement. Each unit consisted of one common share and common stock purchase warrant at exercised price of $.50 per share. The Units were exercisable until March 31, 2011. The holder did not exercise the warrant and the units were expired as at that date.

Except for the above, there were no further changes to the Company’s Issued Share Capital.

During the year ended December 31, 2010, the Company had the following changes to its Issued Share Capital;

-	Issued 100,000 shares in full settlement of an outstanding debt to an existing Stockholder. The implied per share value of the settlement was $2.58313 per share.

The Company issued 100,000 units in a subsidiary Pavana Power Corporation, at a value of $1.00 per unit for gross proceeds of $100,000 as part of a private placement. This resulted in the subsidiary having a non-controlling interest holding of .1% of the outstanding shares with First National Energy Corporation holding the balance of the shares. Each unit consists of one common share and common stock purchase warrant entitling the holder to purchase one warrant share at an exercise price of $.50 per share. The warrants are exercisable on the date of the issuance of the units. The Units are exercisable for a period of 1 year until March 31, 2011.

-	A retiring president of the Company asked that upon his retirement, his 296,400 shares be returned to treasury for cancellation.

-	The Company issued 296,400 shares to a consultant that has been working on further development of the SWEG technology. The service was valued at $14,820 and is included in project development costs.

F-17

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

8.	INCOME TAXES

a)	Deferred Income Taxes

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

	2011			2010

Operating losses available to offset future taxes	$	369,761		$	307,218
Tax basis of license in excess of accounting basis		536,765			580,117
		906,526			887,335
Valuation allowance		(906,526	)		(887,335	)
Net deferred tax assets	$	-		$	-

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

b)	Current Income Taxes

Current income taxes consist of

	2011			2010

Amounts calculated at statutory rates - 34% (34% in 2010)	$	(19,122	)	$	(27,289	)
Permanent differences		(69	)		5,039
		(19,191	)		(22,250	)
Change in valuation allowance		19,191			22,250
	$	-		$	-

c)	Income tax losses carried forward

As at December 31, 2011, the company has non-capital losses of $1,087,532 ($903,583 – 2010) for tax purposes which can be applied against future taxable income. These losses expire as follows:

2031	$	183,949
2030		187,150
2029		131,602
2028		78,645
2027		30,760
2026		32,912
2025		208,887
2024		233,627
Total	$	1,087,532

F-18

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

9.	RELATED PARTY TRANSACTION

In 2010, the Company’s majority owned subsidiary Pavana Power Corporation, purchased the Indian license to the SWEG technology from Boreas Research Corporation, who is related by virtue of common control. (see Note 1 (c)).

A director of the Company has advanced monies to the Company to pay certain expenses. The advances have no interest rate and no date for the repayment has been set. The amount owing to the director was $39,961 (Nil in 2010). Also see note 5.

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.	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:

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

Fair valued assets that are generally included in this category are cash and cash equivalents comprised of money market funds, restricted cash and short-term investments.

● 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, 2011 and 2010, the only assets measured at fair value using level 1 of the three fair value hierarchy tiers described above was cash of $4,563 ($14,988 – 2010) and accounts payable of $63,086 ($17,269 – 2010). The Company did not have any fair value assets or liabilities classified as level 2 or 3.

F-19

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

12.	OTHER CONTINGENT LIABILITIES

Pursuant to Note 1(c), under the Technology License purchased by Pavana, the Company has a contingent liability for royalties at the rate of 5% for all revenues derived by Pavana using this technology.

13.	CAPITAL MANAGEMENT

The Company’s capital management objective is to secure the ability to continue as a going concern and to optimize the cost of capital in order to enhance value to shareholders. As part of this objective the Company seeks to maintain access to loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group on a regular basis.

Capital structure and debt capacity are taken into account when deciding new investments. Practical tools to manage capital include application of dividend policy, share buybacks and share issuances. Debt capital is managed considering the requirement to secure liquidity and the capability to refinance maturing debt.

The Group’s internal capital structure is reviewed on a regular basis with an aim to optimize the structure e.g. by applying internal dividends and equity adjustments. Net investment in foreign entities is monitored and the Company has the intent to hedge related translation risk.

On December 31, 2011, the Company had no interest-bearing debt.

14.	FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK FACTORS

The fair value of a financial instrument is the estimated amount that the Company would receive or pay to settle the financial assets and financial liabilities as at the reporting date. The book value of sundry assets and other receivables, deposits and other assets, accounts payable and accrued liabilities, and due to related party approximate fair values at the balance sheet dates. The fair value of the long-term debt has been estimated by discounting future cash flows at a rate offered for debt of similar maturities and credit quality. All financial instruments except for derivative financial instruments and cash and cash equivalent are classified as level 3. Both cash and cash equivalents and derivative financial instruments are classified as level 1.

	2011				2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
	$		$		$		$
Assets/Liabilities
Cash		4,563		4,563		14,988		14,988
Accounts payable and accrued liabilities		63,086		63,086		13,269		13,269
Loan Payable to Boreas		540,000		540,000		540,000		540,000

F-20

First National Energy Corporation

(Formerly First National Power Corporation)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

(Amounts expressed in US Dollars)

14.	FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK FACTORS (cont’d)

Liquidity risk:

The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned commitments on its alternative energy technology or viable options are available to fund such commitments from new equity issuance or alternative sources such as debt financing. However, as a development stage company and without significant internally generated cash flow, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. The Company has so far been able to raise the required financing to meet its obligations on time.

15.	OTHER CONTINGENCY

The Company’s board of directors has approved a distribution (the “Distribution” or the “spin-off”) by the Company to its shareholders of all the shares of Common Stock, par value $0.001 per share (the “Pavana Common Stock”), of its majority-owned subsidiary, Pavana Power Corporation (“Pavana”) held by the Company immediately prior to the spin-off. Immediately prior to the time of the Distribution, the Company will hold 99.9% of all of Pavana’s outstanding shares of Common Stock which, at the time of the Distribution, will represent approximately 99.9% of the general voting power of Pavana’s outstanding capital stock. At the time of the Distribution, which is anticipated to occur shortly after the effectiveness of a pending registration statement filed by Pavana for its Pavana Common Stock, will distribute all of the outstanding shares of Pavana Common Stock on a pro rata basis to holders of the Company’s common stock. Every one (1) share of the Company’s common stock outstanding as of the close of business on the record date for the spin-off (the “record date”), will entitle the holder thereof to receive one (1) share of Pavana Common Stock. The Distribution will be made by the transfer agent for both Pavana and the Company, which will issue and distribute physical certificates to the Company’s stockholders as of the record date, evidencing the shares of Pavana Common Stock to be distributed on the distribution date. It is not anticipated that any fractional shares of Pavana Common Stock will need to be distributed. The Company expects that the spin-off will be tax-free to the Company’s shareholders for U.S. federal income tax purposes. Immediately after the Distribution is completed, Pavana will be a publicly traded company independent from the Company. From and after the Distribution, certificates representing the Company’s common stock will continue to represent the Company’s common stock, which at that point will include the remaining business of the Company.

F-21

Attached files

First National Energy Corp. Reports

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