SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-K








Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





December 31, 2009





FIRST
NATIONAL ENERGY CORPORATION


(Exact
name of registrant as specified in its charter)





Nevada
            
            333-62588
            
            66-0349372(State
      of other jurisdictionof incorporation or organization)
            
            (CommissionFile
      Number)
            
            (IRS
      EmployerIdentification No.)





1551
Second Street, Sarasota, Florida 34236


(Address
of principal executive offices)





(416)
918-6987





FIRST
NATIONAL POWER CORPORATION (Delaware)


(Former
Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)







(Mark
One)


þ
            Annual
      report pursuant to Section 13 or 15(d) of the securities exchange act of
      1934 for the fiscal year ended December 31,
  2009.





o
            Transition
      report under Section 13 or 15(d) of the securities exchange act of
      1934









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





Securities
registered under Section 12(g) of the Exchange Act:  Common Stock Par
Value $.001





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.  þYes     oNo





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)   Yes o No þ





State
issuer’s revenues for its most recent fiscal year: None





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity, as of March 3, 2010: $4,188,233





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: As of March 31, 2010, there were
99,665,228common
shares issued and outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE




















CAUTIONARY
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION





Certain
statements in this annual report on Form 10-K contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to consummate a merger or
business combination, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S. and
global competition, and other factors. Most of these factors are difficult to
predict accurately and are generally beyond our control. You should consider the
areas of risk described in connection with any forward-looking statements that
may be made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
report.  Readers should carefully review this annual report in its
entirety, including but not limited to our financial statements and the notes
thereto.  Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. For any
forward-looking statements contained in any document, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.





PART
I





Item
1.                      Description
of Business





Business
Development





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.





On April
20, 2009, the Registrant acquired a territorial license to certain rights in
alternative wind energy technology in exchange for 98,800,000 newly issued
common shares of the Registrant, which resulted in a change in control of the
Registrant, all as more particularly described in the definitive information
statement on Form DEF 14-C filed with the Securities and Exchange Commission on
May 4, 2009. The Registrant has valued the technology license received in such
transaction at $1,855,605 after consulting with an outside valuation expert. As
a result of such transaction, the Registrant was after such date no longer
deemed to be a "shell company" as defined in Rule 12b-2 under the Securities
Exchange Act of 1934.








1


Business
of Issuer





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. 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.





Except as
described above and as more particularly described in the Registrant’s
accompanying interim financial statements, there have been no other material
changes in the registrant’s financial condition from the end of the preceding
fiscal year to the date of the interim balance sheet provided herein, nor have
there been any other material changes in the registrant’s financial condition
during the period ending on the date of the interim balance sheet provided
herein and commencing on the corresponding interim date of the preceding fiscal
year.





Except as
described above and as more particularly described in the Registrant’s
accompanying interim financial statements, there have been no material changes
in the registrant's results of operations with respect to the most recent fiscal
year-to-date period for which an income statement is provided and the
corresponding year-to-date period of the preceding fiscal year.





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 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
2.                      Description
of Property





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





Item
3.                      Legal
Proceedings





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





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





The
Registrant incorporates by reference its definitive information statements filed
with the Securities and Exchange Commission on Form DEF 14-C on December 22,
2008, and May 4, 2009.






2





PART
II





Item
5.  Market for Common Equity and Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities





Market
Information





During
the Registrant’s fiscal year ending December 31, 2009, its common stock traded
on the Over-the Counter Bulletin Board (OTCBB) under the symbol
FNPR.  Subsequently, as a consequence of the reorganization described
elsewhere in this annual report, the Registrant’s stock symbol changed on
February 13, 2009 to FNEC.  During 2008 and 2009, the high and low
trading price for each quarter was as follows:





Year
      ended December 31, 2009 (1)
              
              High
              
              
              Low1st
      quarter, ended March 31, 2009*
              
              $
              1.55
              
              
              $
              3.002nd
      quarter, ended June 30, 2009
              
              $
              1.02
              
              
              $
              0.313rd
      quarter, ended September 30, 2009
              
              $
              3.00
              
              
              $
              1.014th
      quarter, ended December 31, 2009
              
              $
              1.10
              
              
              $
              0.32Year
      ended December 31, 2008 (1)1st
      quarter, ended March 31, 2008*
              
              $
              4.50
              
              
              $
              1.502nd
      quarter, ended June 30, 2008*
              
              $
              9.90
              
              
              $
              0.403rd
      quarter, ended September 30, 2008*
              
              $
              5.00
              
              
              $
              0.504th
      quarter, ended December 31, 2008*
              
              $
              2.00
              
              
              $
              3.13


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


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





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.





Holders
of Common Equity





As of
December 31, 2009, the Registrant had sixty-five (65) shareholders of record of
its common stock.





Dividend
Information





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





Sales of
Unregistered Securities





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





Item
6.                      Selected
Financial Data





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





3





Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





Forward-Looking
Statements





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





Plan
of Operation in the Next Twelve Months





Product
Development





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





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





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





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





Locate
Suitable Administrative and Assembly Facilities





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





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





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







4


Sales
and Distribution Strategy





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





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





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





North
America





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





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





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





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





International
- Beyond North America





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





Sales
Personnel





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









5


Expenses





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





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





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





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





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





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





Significant
Equipment


We plan
to purchase approximately $75,000 in capital equipment 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, 2009 and December 31,
2008





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





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





Operating
Expenses. Operating expenses were $210,769 for the year ended December
31, 2009, compared to $78,645 for the year ended December 31, 2008. The
largest components of expense items for each of the last two fiscal years were
amortization (see Amortization of Technology License, below) of $129,638 and
$-0- for the years ending December 31, 2009 and December 31, 2008, respectively;
and general and administrative costs incurred to meet our reporting obligations
as a public company, which were $81,136 and $35,027 for the years ending
December 31, 2009 and December 31, 2008, respectively.





Amortization
of Technology License





We are
expensing as amortization each year a portion of our book value of the
technology license acquired on May 25, 2009 ($129,638 and $-0- for the years
ending December 31, 2009 and December 31, 2008, respectively).





Development
Costs.





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





Net
Loss.  We recorded a comprehensive loss of $210,769 for the
year ended December 31, 2009, compared to $78,645 for the year ended December
31, 2008.







6




Liquidity
and Capital Resources





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





On May
25, 2009, we acquired technology license rights valued at $1,855,605 in exchange
for 98,800,000 new restricted shares of our common stock, which were issued as
more particularly described in Note 1 of the accompanying financial
statements.





We do not
anticipate paying dividends in the foreseeable future.





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





Cash
Flows from Operating Activities





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





Cash
Flows from Financing Activities





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


Risk
Factors Associated with Plan of Operation





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





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





The
Registrant has incurred net losses: ($210,769) for the fiscal year ended
December 31, 2009 and ($78,645) for the fiscal year ended December 31,
2008  At December 31, 2009, the Registrant had an accumulated deficit
of ($795,650). 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.









7





(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; 
 ●
                  explore
      other strategic alternatives including a merger or sale of the
      Registrant.


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


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





(C)  LOSS
OF ANY OF CURRENT MANAGEMENT COULD HAVE AN ADVERSE IMPACT ON BUSINESS AND
PROSPECTS OF THE REGISTRANT.





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.






8




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





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





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





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





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





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





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





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





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





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





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





9





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
8.                      Financial
Statements and Supplementary Data





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











10





Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.





None





Item
9A.  Disclosure Controls and Procedures





As of
December 31, 2009, the Registrant carried out an evaluation of the effectiveness
of the Registrant’s disclosure controls and procedures (as defined by Rule
13a-15(e) under the Securities Exchange Act of 1934) under the
supervision and with
the participation of the Chief Financial Officer. Based on and as of the date of
such evaluation, the aforementioned officers have concluded that the
Registrant’s disclosure controls and procedures were not effective.





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





Item
9A(T). Controls and Procedures





Management’s Report on Internal Control
over Financial Reporting





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





●
            Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;●
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and●
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on our consolidated financial
  statements.





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






11


In
connection with the preparation of this Annual Report on Form 10-K for the year
ended December 31, 2009, management, with the participation of our Chief
Financial Officer, has evaluated the effectiveness of our internal controls over
financial reporting, pursuant to Rule 13a-15 under the Exchange Act. Management
conducted its evaluation of the Registrant’s internal control over financial
reporting based on the framework in Internal Control – Integrated
Framework,issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). In the course of making our assessment of the
effectiveness of internal controls over financial reporting, we identified one
material weakness in our internal control over financial reporting. This
material weakness consisted of inadequate staffing within the accounting
operations of our company. The small number of employees who are responsible for
accounting functions (more specifically, one) prevents us from segregating
duties within our internal control system. The inadequate segregation of duties
is a weakness because it could lead to the untimely identification and
resolution of accounting and disclosure matters or could lead to a failure to
perform timely and effective reviews. There were no changes in our internal
controls over financial reporting that occurred during the fourth fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.
 
 This
Annual Report on Form 10-K does not include an attestation report of the
Registrant’s independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit us to provide only
management’s report in this Annual Report on Form 10-K. Item
9B.  Other Information





The
Registrant reported the following current events required to be reported on Form
8K during the fiscal year ended December 31, 2009:





(a)
            Reorganization
      on February 12, 2009, more particularly described above;
    and


(b)
            Acquisition
      of technology license on May 25, 2009, described
  above.









12


PART
III





Item
10.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act





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





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





Peter
Wanner, Director, Treasurer, Chief Executive Officer and Chief Financial
Officer.





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





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





Mr.
Caputo, age 29, has for the past five years 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.





Significant
Employees.





The
Registrant has no employees.





No
officer or director of the Registrant has been, within the past five years,
involved in any legal proceedings, including bankruptcy, criminal proceedings or
civil, nor are they subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of an court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking
activities.





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





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





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





Code of
Ethics





As of the
date of filing this report, the Registrant has not adopted a Code of
Ethics









13


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
      in-centive plan compensation
              Nonqualified
      deferred compensation earnings
              All
      other compensation
              Total($)
              ($)
              ($)
              ($)
              ($)
              ($)
              ($)
              ($)Doug
      Lindeblom, President CEO
              2009
              $0
              $0
              $0
              $0
              $0
              $0
              $0
              $0Peter
      Wanner, Chief Financial Officer
              2009
              $0
              $0
              $32,000
              $0
              $0
              $0
              $0
              $32,0002008
              $0
              $0
              $0
              $0
              $0
              $0
              $0
              $0Gianni
      Caputo, Vice President2009
              $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.





The
following table sets forth information regarding the beneficial ownership of
shares of the Registrant's common stock as of December 31, 2009 (99,665,228common
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 ClassCommon
              Lubi Investments, Inc.(2) 1551 Second StreetSarasota,
      Florida 34236
              85,462,000
              85.84%Common
              Doug
      Lindeblom1551 Second Street
                Sarasota
      FL 34236
              296,400
              0.3%Common
              Gianni
      Caputo
                1551
      Second Street
                Sarasota
      FL 34236
              296,400
              0.3%Common
              Peter
      Wanner
              165,000
              0.17%44
      Greystone CrescentGeorgetown
      ONT L7G 1G9 CanadaCommon
              Directors
      and officers as a group
              757,800
              0.76%
  (1)
            None
      of these security holders has the right to acquire any amount of shares
      within sixty days from options, warrants, rights, 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 stockwhich
      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 aredeemed
      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 powerwith
      respect to all shares indicated as beneficially owned by
      them.  (2)
              Lubi
      Investments Inc. was incorporated and is beneficially owned and controlled
      by Mr. Frank Cavicchia, of the same
address.





14


Item 13.  Certain
Relationships and Related Transactions.





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 Accountant Fees and Services





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


2008:           $15,166


2009:           $14,363





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


2008:           $0


2009:           $0





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


2008:           $0


2009:           $0





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





2008:           $0


2009:           $0





5. Audit
Committee Pre-Approval Procedures.  The Board of Directors has not, to
date, formally chartered an Audit Committee.







15





Item
15.  Exhibits





(a)
            Documents
      filed as part of this report:




(1)
              Report of
      Independent Registered Public Accounting FirmConsolidated
      Financial Statements covered by the Report of Independent Registered
      Public Accounting FirmConsolidated Balance
      Sheets as of December 31, 2009 and December 31, 2008Consolidated
      Statements of Operations for the Years ended December 31, 2009 and
      2008
                and for the cumulative period since inceptionStatements of
      Stockholders’ Equity Deficiency for the years ended December 31, 2009 and
      2008Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and
      2008
                and for the cumulative period since inceptionConsolidated Notes
      to Financial Statements for the years ended December 31, 2009 and
      2008


(b)
            Exhibits
      included or incorporated by reference herein are set forth in the
      following Exhibit Index.





Exhibit
      No.
            
            Document
            Location3.1
            
            Articles
      of Incorporation
            Previously
      Filed3.2
            
            Bylaws
            Previously
      Filed3.3
            
            DEF
      14-C Information Statement
            Previously
      Filed31.1
            
            Sect.
      302 Certification
            Included31.2
            
            Sect.
      302 Certification
            Included32.1
            
            Sect.
      906 Certification
            Included







16





Signatures





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







FIRST
      NATIONAL ENERGY CORPORATIONDate:
      April 15, 2010/s/
      Doug LindeblomDoug
      LindeblomChief
      Executive Officer/s/
      Peter WannerPeter
      WannerChief
      Financial Officer




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






FIRST
      NATIONAL ENERGY CORPORATIONDate: 
      April 15, 2010/s/
      Doug LindeblomDoug
      LindeblomChief
      Executive Officer/s/
      Peter WannerPeter
      WannerChief
      Financial Officer
    17


































First
National Energy Corporation




(Formerly
First National Power Corporation)




(A
Development Stage Company)




Consolidated
Financial Statements




Together
with Report of Independent Registered Public Accounting Firm




December
31, 2009 and 2008




(Amounts
expressed in US Dollars)

















Index




Report
      of Independent Registered Public Accounting Firm
            
            3Independent
      auditors’ report
            
            4Consolidated
      Balance Sheets as at December 31, 2009 and December 31, 2008
            
            5Consolidated
      Statements of Operations and comprehensive loss for the years ended
      December 31, 2009 and December 31, 2008 and for the cumulative period
      since inception
            
            6Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and
      December 31, 2008 and for the cumulative period since
      inception
            
            7Consolidated
      Statements of Changes in Stockholders’ Equity (Deficiency) for the period
      since inception
            
            8 –
      10Notes
      to Consolidated Financial Statements
            
            11
      - 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) (incorporated in
Delaware) as at December 31, 2009 and 2008 and the related consolidated
statements of operations and comprehensive loss, cash flows and stockholders’
equity (deficiency) for the years ended December 31, 2004 through
2009.  These consolidated financial statements are the responsibility
of the Company’s management.  We did not audit the financial
statements of the Company from the date of inception to December 31, 2003, which
statements reflect cumulative total assets of $Nil as of December 31, 2003 and
cumulative expenses of $158,215 for the period from 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 inception to December 31, 2003, is based
solely on the report of the other auditor.





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





In our
opinion, based on our audits and the report of the other auditor, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of First National Energy Corporation
as at December 31, 2009 and 2008 and the results of its operations and its cash
flows for the years ended December 31, 2009 and 2008 and for the period from
inception to December 31, 2009 in accordance with generally accepted accounting
principles in the United States of America.





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.





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










“SCHWARTZ
      LEVITSKY FELDMAN LLP”Toronto, Ontario,
      Canada
            Chartered
      AccountantsApril 12,
    2010
            Licensed
      Public Accountants




F-3


David E.
      Coffey
                  Certified
      Public Accountant
                6767 West Tropicana Ave., Suite 216, Las Vegas, Nevada 89103
 INDEPENDENT
ACCOUNTANT'S REPORT
 
 To the
Board of Directors and Stockholders
 of First
National Power Corporation
 Surrey,
BC, Canada
 
 I have
audited the accompanying balance sheets of First National Corporation (a
development stage company) as of December 31, 2003 and December 31, 2002 and the
related statements of operations, cash flows, and changes in stockholders'
equity for the periods then ended, as well as the cumulative period from
November 16, 2000 (date of inception) to December 31, 2003. These statements are
the responsibility of First National Corporation's management. My responsibility
is to express an opinion on these financial statements based on my
audit.
 
 I
conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
 
 In my
opinion, the accompanying financial statements present fairly, in all material
respects, the financial position of First National Power Corporation as of
December 31, 2003 and December 31, 2002 and the results of operations, cash
flows, and changes in stockholders' equity for the periods then ended, as well
as the cumulative period from November 16, 2000, in conformity with accounting
principles generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has not generated revenues from
operations, which raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
 
 
 David E.
Coffey, C.P.A.
 Las
Vegas, Nevada
 April 13,
2004


F-4











FIRST
      NATIONAL ENERGY CORPORATION
                (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Balance SheetsAs
      of December 31, 2009 and December 31, 2008(Amounts
      expressed in US Dollars)December
      31
                2009
              
              
              December
      31
                2008ASSETSCURRENT
      ASSETSCash
              
              $
              36,730
              
              
              $
              85,12236,730
              
              
              
              85,122License
      for SWEG technology, net of amortization (Note 4)
              
              
              1,725,9671,762,697
              
              
              
              85,122LIABILITIESCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities (Note 5)
              
              
              14,568
              
              
              
              13,829Loans
      from shareholders (Note 6)
              
              
              258,313
              
              
              
              258,313272,881
              
              
              
              272,142Going
      Concern (Note 2)STOCKHOLDERS’
      EQUITY (DEFICIENCY)CAPITAL
      STOCK (Note 7)
              
              
              99,665
              
              
              
              76,524ADDITIONAL
      PAID-IN-CAPITAL
              
              
              2,185,801
              
              
              
              321,337DEFICIT,
      ACCUMULATED DURING THE DEVELOPMENT STAGE
              
              
              (795,650
              )
              
              
              (584,881
              )1,489,816
              
              
              
              (187,020
              )1,762,697
              
              
              
              85,122
  The Notes
form an integral part of the Consolidated Financial
Statements
 F-5


FIRST
      NATIONAL ENERGY CORPORATION
                  (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Statements of Operations and Comprehensive LossFor
      the years ended December 31, 2009 and December 31, 2008and
      the cumulative period since Inception(Amounts
      expressed in US Dollars)Year
                
                
                YearCumulative
                
                
                ended
                
                
                endedSince
                
                
                December
      31
                
                
                December
      31Inception
                
                
                2009
                
                
                2008OPERATING
      EXPENSESInterest
      Income
                
                $
                (6,904
                )
                
                $
                (5
                )
                
                $
                (1,999
                )Forgiveness
      of accounts payable and loans
                
                
                (47,394
                )General
      and administrative expenses
                
                
                443,647
                
                
                
                81,136
                
                
                
                35,027Loss
      on Foreign Exchange
                
                
                580
                
                
                
                -
                
                
                
                291Amortization
                
                
                129,638
                
                
                
                129,638Project
      development costs (Note 9)
                
                
                272,857
                
                
                
                -
                
                
                
                45,326Interest
      Expense
                
                
                3,226
                
                
                
                -
                
                
                
                -795,650
                
                
                
                210,769
                
                
                
                78,645NET
      LOSS AND COMPREHENSIVE LOSS
                
                
                (795,650
                )
                
                
                (210,769
                )
                
                
                (78,645
                )Net
      loss per share, basic and diluted
                
                
                
                
                
                $
                (0.00
                )
                
                $
                (0.10
                )Weighted
      average common shares outstanding (Note 11)
                
                
                
                60,645,228
                
                
                
                764,356





The Notes
form an integral part of the Consolidated Financial
Statements
 F-6





FIRST
      NATIONAL ENERGY CORPORATION
              (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Statements of Cash FlowsFor
      the years ended December 31, 2009 and December 31, 2008and
      the cumulative period since Inception(Amounts
      expressed in US Dollars)Year
            
            
            YearCumulative
            
            
            ended
            
            
            endedSince
            
            
            December
      31
            
            
            December
      31Inception
            
            
            2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            $
            (795,650
            )
            
            $
            (210,769
            )
            
            $
            (78,645
            )Adjustments
      for items not affecting cashAmortization
            
            
            129,638
            
            
            
            129,638Shares
      issued for services rendered
            
            
            332,390
            
            
            
            32,000
            
            
            
            500Forgiveness
      of accounts payable and loans
            
            
            (47,394
            )Increase
      (decrease) in accounts payableand
      accrued liabilities
            
            
            18,567
            
            
            
            739
            
            
            
            4,954Net
      cash used in operating activities
            
            
            (362,449
            )
            
            
            (48,392
            )
            
            
            (73,191
            )CASH
      FLOWS FROM FINANCING ACTIVITIESLoans
      from Shareholders
            
            
            301,708
            
            
            
            -Proceeds
      from sale of capital stock
            
            
            97,471Net
      cash provided by financing activities
            
            
            399,179
            
            
            
            -
            
            
            
            -NET
      INCREASE (DECREASE) IN CASH
            
            
            36,730
            
            
            
            (48,392
            )
            
            
            (73,191
            )Cash,
      beginning of period
            
            
            -
            
            
            
            85,122
            
            
            
            158,313CASH,
      END OF PERIOD
            
            
            36,730
            
            
            
            36,730
            
            
            
            85,122INCOME
      TAXES PAID
            
            
            -
            
            
            
            -
            
            
            
            -INTEREST
      PAID
            
            
            3,226
            
            
            
            -
            
            
            
            -NON-CASH
      TRANSACTIONS - PURCHASE OF SWEG TECHNOLOGY FOR SHARES
            
            
            1,855,605
            
            
            
            1,855,605
            
            
            
            -





The Notes
form an integral part of the Consolidated Financial
Statements
 F-7


FIRST
      NATIONAL ENERGY CORPORATION
                (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated Statements
      of Changes in Stockholders’ Equity (Deficiency)From
      Inception until December 31, 2009(Amounts
      expressed in US Dollars)DeficitCommon
              
              
              
              
              
              Additional
              
              
              accumulatedCommon
              
              
              Stock
              
              
              Common
              
              
              Paid-In
              
              
              during
      the
              
              
              TotalStock
              
              
              Number
      of
              
              
              Stock
              
              
              Capital
              
              
              development
              
              
              ShareholderAmount
              
              
              Shares
              
              
              Subscribed
              
              
              (Discount)
              
              
              stage
              
              
              EquityBalance
      at November 16, 2000Issuance
      of common stock for cash
              
              $
              100
              
              
              
              100,000
              
              
              $
              
              
              
              $
              900
              
              
              $
              
              
              
              $
              1,000Net
      Loss for the Period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (968
              )
              
              
              (968
              )Balance
      as of December 31, 2000
              
              
              100
              
              
              
              100,000
              
              
              
              -
              
              
              
              900
              
              
              
              (968
              )
              
              
              32Issuance
      of stock for cash
              
              
              400
              
              
              
              400,000
              
              
              
              
              
              
              
              3,600
              
              
              
              
              
              
              
              4,000Issuance
      of stock for cash
              
              
              700
              
              
              
              700,000
              
              
              
              
              
              
              
              6,300
              
              
              
              
              
              
              
              7,000Issuance
      of stock for cash
              
              
              850
              
              
              
              850,000
              
              
              
              
              
              
              
              7,650
              
              
              
              
              
              
              
              8,500Currency
      Translation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              100
              
              
              
              
              
              
              
              100Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (23,954
              )
              
              
              (23,954
              )Balance
      as of December 31, 2001
              
              
              2,050
              
              
              
              2,050,000
              
              
              
              -
              
              
              
              18,550
              
              
              
              (24,922
              )
              
              
              (4,322
              )Expiration
      of recission offer forsale
      of stock
              
              
              64
              
              
              
              63,536
              
              
              
              
              
              
              
              6,290
              
              
              
              
              
              
              
              6,354Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (26,047
              )
              
              
              (26,047
              )Balance
      as of December 31, 2002
              
              
              2,114
              
              
              
              2,113,536
              
              
              
              -
              
              
              
              24,840
              
              
              
              (50,969
              )
              
              
              (24,015
              )


The Notes
form an integral part of the Consolidated Financial
Statements
 F-8





FIRST
      NATIONAL ENERGY CORPORATION
                (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Statements of Changes in Stockholders’ Equity (Deficiency)From
      Inception until December 31, 2009(Amounts
      expressed in US Dollars)Stock
      split 5:1
              
              
              8,454
              
              
              
              8,454,144
              
              
              
              
              
              
              (8,454
              )
              
              
              
              
              
              -Shares
      issued for services rendered
              
              
              200
              
              
              
              200,000
              
              
              
              
              
              
              79,800
              
              
              
              
              
              
              80,000Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (107,245
              )
              
              
              (107,245
              )Balance
      as of December 31, 2003
              
              
              10,768
              
              
              
              10,767,680
              
              
              
              -
              
              
              
              96,186
              
              
              
              (158,214
              )
              
              
              (51,260
              )Stock
      split 7:1
              
              
              64,606
              
              
              
              64,606,080
              
              
              
              
              
              
              
              (64,606
              )
              
              
              
              
              
              
              -Shares
      issued for services rendered
              
              
              30
              
              
              
              30,000
              
              
              
              
              
              
              
              15,870
              
              
              
              
              
              
              
              15,900Shares
      subscribed
              
              
              
              
              
              
              
              
              
              
              146
              
              
              
              70,371
              
              
              
              
              
              
              
              70,517Shares
      issued for services rendered
              
              
              44
              
              
              
              43,000
              
              
              
              
              
              
              
              9,956
              
              
              
              
              
              
              
              10,000Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (75,414
              )
              
              
              (75,414
              )Balance
      as of December 31, 2004
              
              
              75,448
              
              
              
              75,446,760
              
              
              
              146
              
              
              
              127,777
              
              
              
              (233,628
              )
              
              
              (30,257
              )Shares
      issued for services rendered
              
              
              830
              
              
              
              830,000
              
              
              
              
              
              
              
              193,160
              
              
              
              
              
              
              
              193,990Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (208,886
              )
              
              
              (208,886
              )Balance
      as of December 31, 2005
              
              
              76,278
              
              
              
              76,276,760
              
              
              
              146
              
              
              
              320,937
              
              
              
              (442,514
              )
              
              
              (45,153
              )Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (32,962
              )
              
              
              (32,962
              )Balance
      as of December 31, 2006
              
              
              76,278
              
              
              
              76,276,760
              
              
              
              146
              
              
              
              320,937
              
              
              
              (475,476
              )
              
              
              (78,115
              )Net
      Loss for the Year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (30,760
              )
              
              
              (30,760
              )Issue
      shares bought under subscription
              
              
              146
              
              
              
              146,000
              
              
              
              (146
              )
              
              
              
              
              
              
              
              
              
              
              -Balance
      as of December 31, 2007
              
              
              76,424
              
              
              
              76,422,760
              
              
              
              -
              
              
              
              320,937
              
              
              
              (506,236
              )
              
              
              (108,875
              )





The Notes
form an integral part of the Consolidated Financial
Statements
 F-9





FIRST
      NATIONAL ENERGY CORPORATION
                (Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Statements of Changes in Stockholders’ Equity (Deficiency)From
      Inception until December 31, 2009(Amounts
      expressed in US Dollars)Shares
      issued for services rendered
              
              
              100
              
              
              
              100,000
              
              
              
              
              
              
              400
              
              
              
              
              
              
              500Net
      Loss for the period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (78,645
              )
              
              
              (78,645
              )Balance
      as of December 31, 2008
              
              
              76,524
              
              
              
              76,522,760
              
              
              
              -
              
              
              
              321,337
              
              
              
              (584,881
              )
              
              
              (187,020
              )Reverse
      Stock split 1:100
              
              
              (75,759
              )
              
              
              (75,757,532
              )
              
              
              
              
              
              
              75,759
              
              
              
              
              
              
              
              -Shares
      issued for services rendered
              
              
              100
              
              
              
              100,000
              
              
              
              
              
              
              
              31,900
              
              
              
              
              
              
              
              32,000Purchase
      of SWEG license for shares
              
              
              98,800
              
              
              
              98,800,000
              
              
              
              
              
              
              
              1,756,805
              
              
              
              
              
              
              
              1,855,605Net
      Loss for the Period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (210,769
              )
              
              
              (210,769
              )Balance
      as of December 31, 2009
              
              
              99,665
              
              
              
              99,665,228
              
              
              
              -
              
              
              
              2,185,801
              
              
              
              (795,650
              )
              
              
              1,489,816


The Notes
form an integral part of the Consolidated Financial
Statements
 F-10





First National Energy
Corporation


(Formerly
First National Power Corporation)


(A
Development Stage Company)


Notes
to the Consolidated Financial Statements


December
31, 2009 and 2008


(Amounts
expressed in US Dollars)














1         GENERAL





a)
            Description of the
      Business





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





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





b)
            Purchase of
      Technology License





On April
20, 2009, the Company entered into a preliminary letter of intent with Boreas
Research Corporation (“Boreas”), 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. Such 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 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
shareholders 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-11
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)








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





The
Company has valued the technology license received from Boreas at the Closing on
the books of the Company at $1,855,605 after consulting with an outside
valuation expert.





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





Douglas
Lindeblom - Chairman, Chief Executive Officer and President


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


Gianni
Caputo - Vice President and Secretary





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.








2         GOING
CONCERN





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




















F-12
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





3         SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





a)
            Basis
      of Consolidation





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





b)
            Use
      of Estimates





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





c)
            Financial
      Instruments





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





d)
            Income
      Taxes


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





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





e)
            Earnings or Loss Per
      Share





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














F-13
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)







f)
            Comprehensive
      Income





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





g)
            Intangible
      Assets





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





h)
            Long
      Lived Assets





The
Company reviews long-lived assets to he held and used for impairment whenever
events of changes in circumstances indicated that the carrying amount may not be
recoverable





i)
            Recent
      Pronouncements





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





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





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





F-14
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)




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





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





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





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





In
January 2010, the FASB issued updated guidance to amend the disclosure
requirements related to recurring and nonrecurring fair value measurements. This
update requires new disclosures on significant transfers of assets and
liabilities between Level 1 and Level 2 of the fair value hierarchy (including
the reasons for these transfers) and the reasons for any transfers in or out of
Level 3. This update also requires a reconciliation of recurring Level 3
measurements about purchases, sales, issuances and settlements on a gross basis.
In addition to these new disclosure requirements, this update clarifies certain
existing disclosure requirements. For example, this update clarifies that
reporting entities are required to provide fair value measurement disclosures
for each class of assets and liabilities rather than each major category of
assets and liabilities. This update also clarifies the requirement for entities
to disclose information about both the valuation techniques and inputs used in
estimating Level 2 and Level 3 fair value measurements. Other than requiring
additional





F-15
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





disclosures,
the adoption of this standard did not have a material impact on the Company’s
financial position and results of operations.





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





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





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





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


.




















F-16
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





4              LICENSE
FOR SWEG TECHNOLOGY


2009
              
              2008Cost
              
              
              Accumulated Amortization
              
              Net Book Value
              
              Net Book ValueTechnology
      License (Note 1)
              
              $
              1,855,605
              
              
              $
              129,638
              
              $
              1,725,967
              
              $
              -


Amortization
for the next 5 years is estimated to be $185,561 per year








5              ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities are comprised of the following





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


6              LOANS
FROM SHAREHOLDERS





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








7              CAPITAL
STOCK





a)              Authorized





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





b)              Issued





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





c)              Changes
to Issued Share Capital





During
the year ended December, 31, 2009, the company issued 100,000 shares for officer
fees. This was value at $32,000 and  is included in Administration
Costs





F-17
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





As well,
the Company issued 98,800,000 shares valued at $1,756,805 for the purchase of
the SWEG technology (See Note 1).





During
the year ended December 31, 2008, the Company issued 1,000 shares (100,000
shares prior to the reverse stock split effective February 10, 2009) valued at
$500 in exchange for legal services provided to the Company,








8              INCOME
TAXES





a)              Deferred
Income Taxes





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




2009
              
              
              2008Operating
      Losses Available to offset future taxes
              
              $
              232,841
              
              
              $
              190,070Tax
      basis of license in excess of accounting basis
              
              $
              15,329Valuation
      Allowance
              
              $
              (248,170
              )
              
              $
              (190,070
              )Net
      Deferred Assets
              
              $
              -
              
              
              $
              -


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




b)             Current Income
Taxes





Current
income taxes consist of




2009
              
              
              2008Amounts
      calculated at statutory rates
              
              $
              (68,500
              )
              
              $
              (25,560
              )Permanent
      differences
              
              
              10,400
              
              
              
              -(58,100
              )
              
              
              (25,560
              )Change
      in valuation allowance
              
              
              58,100
              
              
              
              25,560$
              -
              
              
              $
              -


F-18
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





c)              Income tax losses carried
forward





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





2029
              
              $
              131,6022028
              
              $
              78,6452027
              
              $
              30,7602026
              
              $
              32,9122025
              
              $
              208,8872024
              
              $
              233,627Total
              
              $
              716,433


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





9              PROJECT
DEVELOPMENT COSTS





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














10              SEGMENTED
INFORMATION





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











11              WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING





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











12              FAIR
VALUE MEASUREMENTS





The
Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC
820-10), which among other things, defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure for each major asset
and liability category measured at fair value on either a recurring
or





F-19
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





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 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.





At
December 31, 2009 and 2008, the Company did not have any fair valued assets or
liabilities classified as Level 2.





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





At
December 31, 2009 and 2008, the Company did not have any fair valued assets or
liabilities classified as Level 3.





Assets
measured at fair value as of December 31, 2009 and 2008 are classified below
based on the three fair value hierarchy tiers described above (in
thousands):





-
      - Fair Value Measurement Using - -Carrying
      Value
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3December
      31, 2009Cash
              
              $
              36,730
              
              
              $
              -
              
              
              $
              -December
      31, 2008Cash
              
              $
              85,122
              
              
              $
              -
              
              
              $
              -


13              SUBSEQUENT
EVENT





On March
22, 2010, First National Power Corporation, a Nevada corporation which became
the Company’s wholly-owned subsidiary as a result of the Company’s holding
company reorganization completed on February 12, 2009, acquired an exclusive,
territorial 25 year license for the Republic of India (“India”), from
Boreas





F-20
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2009 and 2008
 (Amounts
expressed in US Dollars)





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.





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








F-21